Telco price war fails to eventuate

Australian enterprises are still paying above the odds for telecommunications carrier services, according to a Gartner Group analyst.

Geoff Johnson, research director, Gartner Group Pacific, said that a price war between Telstra, Cable & Wireless Optus Ltd. and more than 25 new carriers has so far failed to eventuate despite deregulation in the Australian telecom market.

"This has failed to emerge due to the comfortable duopoly created by Telstra and Optus. Telstra's margin remains near its highest levels of return on investment achieved under monopoly pricing -- arguably at duopoly pricing levels, which almost ignores the effect of the many small carriers that have entered the market," Johnson said.

He believes that prices will be driven down over the next five years as enterprises change their buying patterns.

"By 2004, we believe aggressive carrier bidding behaviour by Australian enterprises will develop into patterns and expectations seen in other areas of IT procurement, such as PCs," Johnson said. "This will drive prices downward, functionality rapidly upwards, and negotiation on price, terms and conditions will be intense."

According to Gartner, 30 per cent of Australia's top 200 buyers negotiate solely with Telstra to supply carrier services. "Telstra now conducts custom negotiations, but most enterprises achieve less than their potential savings using this technique," Johnson commented.

To supply their network services, 65 per cent of the top 200 buyers have instituted competitive bidding. And 5 per cent of the 200 use a facilities manager.

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