Floored by competitive flaws

I read with interest an opinion by Julian Bajkowski about Telstra [Our hamstrung national carrier?] (CW March 15, 2004 CW p19).

The only policy failure was when the telecomms marketplace was supposedly deregulated. Over many years in the industry with companies [mostly start-ups] trying to find a niche in the market, I have worked with many which were the original architects of privatisation.

The challenge as an operator is that your biggest competitor is also your biggest supplier. Even still, albeit Telstra would vehemently deny it, wholesale services are uncompetitive and don’t provide a platform for competition.

Consider the electricity market where the generation and transmission are two totally separate entities. The competitive capabilities are far more evident in the electricity market then in telecomms. Interestingly many of the same people were involved in that strategy also, but had learnt from experience.

If Telstra Wholesale were a separate company from Telstra Retail, answering to a different board, or the government, and charged with the responsibility to provide connectivity services to every household, business, outpost, entity in the country, the requirement for any support would be clear and defined. It would be possible to charge the same access price from and to every destination in the country and any support mechanism would be applied directly to where needed by the government [or other body]; the issue of services in the bush would be a non-entity. Then the retail group could compete on an almost level playing field, and I assure you that the business would be far more evenly spread.

Telstra’s marketing practices are fundamentally flawed and it can’t get its head around how to sell more. It has wrung all the possible returns from staff cuts and now needs to find some way to generate revenue, not just cut costs [someone has to be left to run the business]. It is now in the position its competitors have been in for years: how to turn a profit. There is 'drug' money to be made from the telecomms market but Telstra can’t see it.

I take issue with its blowing billions of dollars on failed ventures, trying to expand into other markets for revenue [Trading Post] whilst selectively dumping services into the wholesale market through Reach, that otherwise wouldn’t get any business. Have you tried pricing an STM4 to Broken Hill? I’ll give you one guess as to who owns the only capacity.

It has ‘run’ the entire market for years and allowed competitors large and small to eat off the table [or the crumbs around it]. I have absolutely no sympathy for the telco whatsoever and the worst thing that could happen is to remove any possible leash from it. Imagine if Rupert Murdoch owned power generation, transmission and last-mile reticulation? It would become a cash cow, with the money flow in one direction only, into the hands of the shareholders.

I have no problem with privatisation at all, but it was handed the network on a platter. Please don’t give me this ‘cry poor’ rubbish about no one wants to supply services to outlying areas. Many companies are making money out of areas where customers can’t get decent services from Telstra.

As for your comment about grinding the value down for a fire sale…. Please Julian, you are joking? Explain to me how Nextgen [et al] end up in the fire sale bucket and who was quick to the trough. What’s that?? That’s business, you’re right, so let Telstra face the same rough and tumble as we have all had to at its hands.

It was only three years ago when an STM1 Sydney to Melbourne was 70 percent of the cost of a Telstra STM1 last-mile Sydney [city] to Lane Cove, and an E1 Sydney to Brisbane cost less than buying Telstra tail across town to the customer's premises. Competition? Not likely, certainly not in my lifetime.

Rex Wood
Wholesale sales
ComGlobal Telecommunications

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