Trujillo concedes Telstra’s defeat.
It’s official.
Telstra is looking for a new CEO.
There was simply no other solution. It has become clear that the company has lost its battle with the government and with the country. Change is obviously going to take place in Australia and open networks, cooperation and a less greedy business culture will be the way forward.
Sol Trujillo has fought hard to maintain Telstra’s iron grip on the Australian telecoms market and on its lucrative monopoly to print money for the benefit of the company, but to the detriment of ordinary Australians who have to pay for it through high telecoms charges, less competition and less innovation.
Sol’s legacy will certainly be his uncompromising stand on issues such as government policies and regulation, as well as his position on high bonuses – and globe-trotting.
Nevertheless one of his more positive legacies will be that he began the transformation of the company.
While he recently claimed that this was completed that is, in fact, far from correct. There are still many more years ahead of hardship and pain for the national carrier; but without Sol the process would not have been started, and it would not have reached its present stage.
His other great legacy is the mobile network that he has established in record time and which has spearheaded mobile broadband into the market – Australia is one of the world leaders in this market. But it will not be the alternative to the fixed broadband network.
It is also interesting to see in this context the comments of Ad Scheepbouwer, the CEO of the Dutch incumbent telco. He announced his company’s participation in the further rollout of Amsterdam’s open access FttH network. He admitted in an interview that he also had hoped that mobile broadband would be an alternative to fixed, but conceded that this would not be the case and he stated that he is now putting the full weight of his company behind FttH.
You may recall that last year I helped to arranged for a representative from KPN to come to Australia to show us that open networks can be introduced without legislation. Unfortunately Telstra was not interested in hearing about this.
The Dutch CEO also made some revealing comments to Vincent Dekker, senior editor at one of the Netherland’s leading newspapers Trouw, and he has kindly allowed me to quote these in my article.
Excerpts from Vincent’s interview with Ad Scheepbouwer (translation ‘shipbuilder’ – how appropriate):
In hindsight KPN made a mistake back in 1996. We did not react too enthusiastically on the obligation of allowing competitors on our old wireline network. That turned out not to be very wise. If you allow all your competitors on your network, all services will come onto your net, and that results in the lowest cost possible per service – which, in turn, attracts more customers for those services. So your network grows much faster. An open network is not charity on our part. In the long run it simply works best for everybody.
As far as KPN is concerned, services are the future of telecom. We’re happy to invest in the network, but we don’t want to be only bitsellers. The market for services is much bigger.
Here is a summary of the key points of Vincent’s article.
•after losing subs for years to cable, in the first few towns where KPN now actively sells FttH it is regaining market share.
•its arpu for FttH is 58 euro excluding VAT, where arpu for old ADSL plus VOIP is only 30 euro. Part of the extra 28 euro is for TV, which KPN could not really offer on ADSL.
•penetration is growing rapidly now that KPN is actively selling FttH. After ten weeks or so it now stands at 20% to 30%, according to KPN.
•Penetration is the number of homes that really use FttH as a percentage of homes passed/connected in a house-to-house rollout.
•remember that Reggefiber rolled out FttH in two ways:
oin some towns rollout only started if 40% had signed up. In the Netherlands penetration is now growing to 70% and more, according to Reggefiber.
oin other towns it rolled out FttH without prior sign-ups. This turned out to be a tougher sell.
•But now that KPN has joined Reggefiber it is far easier. KPN can promise its pots-subs a switch to FttH without any hassle. ‘Nothing changes. You only get much faster Internet, free phone calls to the entire country and much better picture quality for your TV. And it will cost you about the same as, or even less than, top-speed ADSL-Internet, phone and TV-from-cable combined cost you now.’
•KPN has taken its time to get everything worked out. According to Vincent they’re ready now and the next few months must prove that FttH is an easy sell.
Scheepbouwer also gave his support to some of Vincent’s own arithmetic.
For those of you who think FttH is expensive for KPN, think again:
•Rolling out FttH costs, on average, 1000 euro per home passed.
•FttH for the whole of the Netherlands will need some 600,000 homes connected per year, which will cost E600 million a year.
•But the joint venture of KPN and Reggefiber will get 60% (360 million a year) from bank loans and 40% (240 million) from the shareholders.
•KPN owns 41% of the jv so has to put up 100 million euro a year.
•For a company that has a free cash flow of 2.5 billion a year that is not too much of a problem.
For my analysis on the global importance of the developments in Amsterdam see:
http://www.buddeblog.com.au/open-networks-delivering-the-goods-for-all/
Paul Budde
February 10th, 2009 at 2:04 pm
Australian Governments installed our power and phone networks over many decades all off the back of our parents and grandparents taxes and then Telstra comes along and tries to claim ownership of our phone networks all just to increase there profits. Forcing up the price of phone lines and Internet connectivity. Australian Governments need to show some balls and stop placating these greedy corporates and start thinking of Australia’s future.
February 10th, 2009 at 7:05 pm
Trujillo and his three amigos and McGechie represent the ugly face of capitalism and are totally discredited. T & McG should now admit they are wrong and apologise.