Since Maha Krishnapillai announced that he was leaving Optus everyone has been wondering "where is he going?" We were only told it was a commercial role in a non-competing organisation. Today it has been revealed in CommsDay that he is off to Australia Post.
It was an interesting way to find out - given that the only other news coverage in the AFR and The Register seems to also have been sourced from Comms Day.
The only direct quote from Maha in the story is;
I’m genuinely excited by the transformation opportunity at Australia Post, and the opportunity as part of that in terms of their communications products and services strategy. The thing that really appealed was that [Australia Post CEO] Ahmed Fahour is a really interesting character.
I know the opportunity sounds counter-intuitive to some, because that’s what a lot of people have said to me… ‘are you going back to the public service, is this going back to PMG’? But it’s actually none of those things. It’s a pure commercial role, and that’s what appeals… [to] explore the potential for Australia Post in communications products.
So all we are really told is that the role is "to explore the potential for Australia Post in communications products", to which Maha's new colleagues might say they already do "communications" and what you mean is "telecommunications".
Comms Day goes on to speculate that Post's new strategy will encompass three areas - but how much of this is speculation versus information from Maha is hard to know. But I suggest that if Post was a listed company the CEO and company secretary would be having conniptions right now about the way strategy was being briefed to the market. I suspect (as I mention further below) that the shareholding Ministers in Australia Post might be having them anyway.
But let's assume for a moment that CommsDay is accurately describing the strategy. They say it has three elements;
1. Develop strengths in e-commerce….linked to parcel delivery.
2. Adding to the financial service and banking portfolio.
3. Opportunity to become an SP leveraging “massive distribution, trusted brand, logistics advantages and easy-to-use payment systems”
The first two of these are really better described as Digital Economy initiatives - they are how Post needs to respond to the overall economic transformation that is spurred by the fourth phase (telegraph, telephone, network computing, broadband IP) of the communications revolution. (also see below on history).
I've actually heard from elsewhere that there already is an Australia Post manager who has worked on the model for leveraging posts parcels business and looking for an executive sponsor. Hopefully he and Maha will hook up (and the person who told me that reads this blog so hopefully he'll make sure it happens).
The second area is a bit vague, and there are plenty of reasons why Post should not build its own bank - just as there were when the idea was raised in 1910. The Kiwi post office would also have a view. More importantly why cut off all that agency revenue just to try to make some margin between borrowing and lending.
Australia Post is an interesting case for the whole strategy thing - do you diversify or do you stick to your knitting. I think I've written previously about the strategy bit that said "the railways thought they were in the train business but they are in the transport business" - this is the stuff Telstra has grappled with, are they in the telco biz or the comms biz or in the converged "media comms biz".
Post is in the collecting and delivering business. To do that they've had to have shopfronts. They have leveraged the shopfronts to generate agency fee revenue and to sell products to create demand for the collecting and delivering business - presents, stationary etc. These activities bear some of the fixed and common costs incurred in running stores. The agency business in part grew by accident - as the collection of telephone bill payment went from core PMG business to agency Australia Post business.
There is a great deal of value that AP can add to e-commerce by providing an identification certification business - that could extend to providing to individuals encoded USB sticks that could be used by Centrelink recipients to establish their online credentials.
However it is in the area of actually getting into comms and perhaps seriously considering being a retail Service Provider of the NBN that is a worry. There are plenty of consu;tants (notably Ovum and Venture) promoting the idea of non-telcos getting into the NBN service biz. They all cite Tesco in the UK as a model. But Tesco is a service brand, post is a delivery brand. The bigger value for AP is getting large scale delivery business as part of NBN Co - creating drop points for collection of hardware by installers for example, or guaranteeing delivery of the hardware through offering the kind of "where is my package" service.
But the bigger issue is that AP has two shareholding Ministers who happen to be the shareholding Ministers of NBN Co. To allow AP to get into the RSP business would blow the whole separation plan out of the water.
But, all we really have is CommsDay's speculation that this might be the AP strategy. My sense is that it won't be for long.
(see below)
A history note:
Both Maha and Grahame Lynch in CommsDay touched on the history note of the fact that as the PMG telecoms and post were integrated and whether this is a logical step. They get a bit of the history wrong.
The PMG that was formed in 1901 was simply the amalgamation of pre-existing state based PMGs that existed prior to Federation. The model of an integrated post - telegraph - telephone behemoth dates from the middle of the preceding century. How the PTT model evolved in the European countries and their colonies varies from place to place - but Eli Noam in Telecommunications in Europe proposes the position that revenue from the monopoly "royal mail" in all European states was one source of revenue that was not subject to Parliamentary approval. Preservation of that monopoly was paramount and extending the post office role to the telegraph and then telephone was a process of preserving the monopoly and its rents.
In the Australian context the newly Federated Post Office did not operate at all well in its initial years (a position that in part was built on interstate rivalries that remained in Telecom until the Divisionalisation move of 1987). This resulted in a Royal Commission that reported in 1910. The report and its record of evidence make interesting reading, not least because the issue faced was that the PMG was restricted to be able to spend only as much on capital as it could raise from revenue in each year - there were no "taxpayers funds" employed.
The other was that it was the postal service that was profitable. Indeed within the two loss making services the Director-General of the Service Robert Townley Scott revealed in his evidence;
Q:Then the telegraph and telephone systems are non-payable?
A:I do not think the telephones are non-payable. Sometimes a very considerable profit is made on the lines run on the condenser system.
Q: Generally speaking, the telephone system is a payable one?
A: Yes, with regard to the trunk lines and condenser system.
Q: what is to stop the Department from further reducing the telephone rates?
A: I think that would be a mistaken policy. Take a case in point. One can speak by telephone over a distance for 2 [pennies] for three minutes, which would cost one [shilling = 12 pennies] by telegram. (Paragraphs 358-360 Interestingly the evidence at this point goes into Scott's proposal for a Post Office Savings Bank).
The Post Office never received much taxpayer money, and from 1959 on it only received Government funds as loans. When the Post Office was split into Australia Post and Telecom Australia in 1975 a basis of it was that the former was a labour intensive business while the latter was a capital intensive one.
{This para has been amended} Grahame Lynch writes that "international services were excluded" when telecom and post were formed in 1975. This construction could give the impression that the international services were part of the PMG at that time. Instead the history of overseas telecommunications is far richer. OTC was formed in 1946 when the previously privately held assets of AWA and Cable & Wireless were nationalised. It was a recommendation of the Vernon Commission into the Post Office in 1974 that OTC be merged with Telecom, but OTC saw off that threat. The story of the final merger of Telecom and OTC has really only been half told - Professor Steve Burdon at UTS threatens to write a tell all book one day.
Finally the carrying value - that is cumulative unrecovered funds - invested in Telstra before it was privatised for some $60B was precisely zero.
For avoidance of doubt, I think CommsDay did a brilliant job in getting this scoop. I have referred to the AP strategy as being "speculation" on CommsDay's part since they preceded it "CommsDay understands". However, I assume, like every other reader would, that CommsDay actually got this from Maha. I do think that that is a strange way for AP to brief its strategy to the media, and I do wonder what the shareholding Ministers would think of AP being an RSP.
Also the history note says that CommsDay gets the history "wrong". While there was one specific error (since amended) the import of this note is that the relevant history is far more interesting and richer than the potted version provided by CommsDay would suggest.
Novae Meridianae Demetae Dexter delenda est
Showing posts with label Telstra. Show all posts
Showing posts with label Telstra. Show all posts
Wednesday, November 23, 2011
Tuesday, October 25, 2011
The Sorry State of Telco Regulatory Affairs
I probably need to do a longer piece on this, but saying as I do there is a sorry state in Telco regulatory affairs will win me no friends. Indeed, it might even find a few people ready to hurl personal accusations about me as being "bitter" over some imagined slight.
The reality is that the state of affairs I describe is one which is driven by the same set of issues that drove the GFC (the corporate focus on the short-term outcome) and the political values of Grahame Richardson (whatever it takes).
My first case is the Mobile Terminating Access Service (MTAS) and the ACCC's process for reaching a Final Access Determination (or FAD).
The process of the ACCC setting Access Determinations was the final abandonment of the approach that initially promoted self regulation (through the TAF) and "guided" market mechanisms (negotiate-arbitrate). The experience with both of these is worthy of analysis of their own on another occasion.
The position we now have is of a central price setting regulator with limited opportunity for judicial review of decisions. The first ACCC guidance on MTAS pricing principles was to utilise a retail benchmarking approach, that access fees had to decline at the same rate as retail prices. The consequence was actually a temporary stall on price competition, as the effect of a price decline for an operator were magnified.
The Commission's next approach was based on top-down cost models from two operators. These models in one case included a highly fanciful claim for a recovery of a notional fixed line externality through a "Rohlfs-Griffin" effect, and a claim for Ramsey-Boiuteux recovery of common costs. I say fanciful because the first exercise relied upon a number of parameters that had to be guessed, not just because they hadn't been estimated but because there is no methodology to measure them. It was also fanciful because it only introduced half the externalities present in the market. The R-B pricing was fanciful because instead of estimating an Australian set of own price elasticities they used the average of various studies from other markets. They then applied these - which had been estimated using a constant elasticity assumption - to a model with a linear demand curve (where the elasticity varies along the curve).
The Commission then commissioned a bottom-up model from WIK. As I wasn't actively engaged at that time I never analysed the WIK model.
The Commission commenced its current inquiry with a radical discussion paper that considered (1) the prospect of moving to LRIC rather than TSLRIC+ pricing, (2) the option of pricing mobile-to-mobile termination differently from fixed-to-mobile and (3) the option for a "pass through" mechanism of declining MTAS rates on fixed-to-mobile calling.
A consequence of the appeal to LRIC (which really takes common costs out of the equation) is an erroneous presumption that in the long run the cost of terminating a call is zero. The most egregious part of this is the error of assuming that as a curve approaches zero then it eventually reaches it, but the zero line is an asymptote of the curve and really is never reached. The per call cost approaches zero because, in part, of increasing volumes. If calls cost 0.001 cent per minute but there are billions (or trillions) of minutes then the payment owed is still positive and significant.
The draft decision thankfully walked away from all three "radical" endeavours, but in doing so has inadequately supported the prices it has determined. This creates the image of the ACCC as a capricious regulator.
Nowhere is this more apparent than in the F2M pass though argument, where Telstra has provided evidence to the Commission that its net take on fixed calling after costs has declined not increased. The ACCC could have done that investigation itself using its investigatory powers but has declined to do so. They also seem to have declined to even acknowledge the point Telstra has made. Mind you, Telstra seems to have insisted on keeping these details Commercial-In-Confidence even though they probably don't meet the formal definition (i.e. there is nothing in the data which would aid Telstra's competitors). (Note I provided a very simple version of Telstra's argument using publicly available data).
Meanwhile, Optus and Vodafone who both complain MTAS reduction without F2M pass through is a free kick to Telstra have not explained why if it is such easy money they haven't entered the market (in Vodas case a very simple F2M product by override code for existing Voda mobile customers would be relatively inexpensive to create, in Optus case add an F2M only override product).
Macquarie Telecom goes to a whole other plane of idiocy. They carefully argue that they don't actually acquire the MTAS (because they are a switchless reseller) and that the product they buy costs more than the sum of PSTN originating access (0.95c/min) and MTAS (9c/min). They don't seem to acknowledge that there is obviously a cost incurred in turning the two access components into a call, they also don't seem to contemplate the obvious answer - if you believe the cost of doing that is less than the difference between the sum of the access fees and what you pay for an FTM call, then bloody well just build the infrastructure.
The complete flip-side of that is Lycamobile pointing out that as an MVNO they are paying their wholesale provider an "airtime" rate for originating and terminating calls and that they are recipients of MTAS fees, so the decision results in a price squeeze on them. Well hello, whatever made you think MTAS wouldn't decline in the future? Have you got a regulatory events clause in your contract to trigger a renegotiation right? If not, go sue your lawyers and leave the ACCC alone.
The submissions are all the classic worst case of self-interest submissions that are not framed on the basis of an established view of how the market should operate, but instead focus on the specific "ask" of their business. These reflect the operation of the regulatory craft as something that takes instruction "from the business" rather than is intimately involved as the expert on the external environment on the development of strategy.
The ACCC deserves to be resoundly criticised for the way it has handled the MTAS determination thus far, but equally the submissions from industry players do little to handle the ACCC to account.
Nowhere, however, is the sorrt state of affairs more apparent than in the bleating by Internode (among others) of wanting to be "compensated" for the stranded asset of their DSLAM investments. The assets were not deployed like an HFC network with a thirty year or more life expectancy, more likely 2 to 3 years. None of them need to be retired immediately. The "exchange exit cost" has always been something they need to consider as a future liability.
Novae Meridianae Demetae Dexter delenda est
The reality is that the state of affairs I describe is one which is driven by the same set of issues that drove the GFC (the corporate focus on the short-term outcome) and the political values of Grahame Richardson (whatever it takes).
My first case is the Mobile Terminating Access Service (MTAS) and the ACCC's process for reaching a Final Access Determination (or FAD).
The process of the ACCC setting Access Determinations was the final abandonment of the approach that initially promoted self regulation (through the TAF) and "guided" market mechanisms (negotiate-arbitrate). The experience with both of these is worthy of analysis of their own on another occasion.
The position we now have is of a central price setting regulator with limited opportunity for judicial review of decisions. The first ACCC guidance on MTAS pricing principles was to utilise a retail benchmarking approach, that access fees had to decline at the same rate as retail prices. The consequence was actually a temporary stall on price competition, as the effect of a price decline for an operator were magnified.
The Commission's next approach was based on top-down cost models from two operators. These models in one case included a highly fanciful claim for a recovery of a notional fixed line externality through a "Rohlfs-Griffin" effect, and a claim for Ramsey-Boiuteux recovery of common costs. I say fanciful because the first exercise relied upon a number of parameters that had to be guessed, not just because they hadn't been estimated but because there is no methodology to measure them. It was also fanciful because it only introduced half the externalities present in the market. The R-B pricing was fanciful because instead of estimating an Australian set of own price elasticities they used the average of various studies from other markets. They then applied these - which had been estimated using a constant elasticity assumption - to a model with a linear demand curve (where the elasticity varies along the curve).
The Commission then commissioned a bottom-up model from WIK. As I wasn't actively engaged at that time I never analysed the WIK model.
The Commission commenced its current inquiry with a radical discussion paper that considered (1) the prospect of moving to LRIC rather than TSLRIC+ pricing, (2) the option of pricing mobile-to-mobile termination differently from fixed-to-mobile and (3) the option for a "pass through" mechanism of declining MTAS rates on fixed-to-mobile calling.
A consequence of the appeal to LRIC (which really takes common costs out of the equation) is an erroneous presumption that in the long run the cost of terminating a call is zero. The most egregious part of this is the error of assuming that as a curve approaches zero then it eventually reaches it, but the zero line is an asymptote of the curve and really is never reached. The per call cost approaches zero because, in part, of increasing volumes. If calls cost 0.001 cent per minute but there are billions (or trillions) of minutes then the payment owed is still positive and significant.
The draft decision thankfully walked away from all three "radical" endeavours, but in doing so has inadequately supported the prices it has determined. This creates the image of the ACCC as a capricious regulator.
Nowhere is this more apparent than in the F2M pass though argument, where Telstra has provided evidence to the Commission that its net take on fixed calling after costs has declined not increased. The ACCC could have done that investigation itself using its investigatory powers but has declined to do so. They also seem to have declined to even acknowledge the point Telstra has made. Mind you, Telstra seems to have insisted on keeping these details Commercial-In-Confidence even though they probably don't meet the formal definition (i.e. there is nothing in the data which would aid Telstra's competitors). (Note I provided a very simple version of Telstra's argument using publicly available data).
Meanwhile, Optus and Vodafone who both complain MTAS reduction without F2M pass through is a free kick to Telstra have not explained why if it is such easy money they haven't entered the market (in Vodas case a very simple F2M product by override code for existing Voda mobile customers would be relatively inexpensive to create, in Optus case add an F2M only override product).
Macquarie Telecom goes to a whole other plane of idiocy. They carefully argue that they don't actually acquire the MTAS (because they are a switchless reseller) and that the product they buy costs more than the sum of PSTN originating access (0.95c/min) and MTAS (9c/min). They don't seem to acknowledge that there is obviously a cost incurred in turning the two access components into a call, they also don't seem to contemplate the obvious answer - if you believe the cost of doing that is less than the difference between the sum of the access fees and what you pay for an FTM call, then bloody well just build the infrastructure.
The complete flip-side of that is Lycamobile pointing out that as an MVNO they are paying their wholesale provider an "airtime" rate for originating and terminating calls and that they are recipients of MTAS fees, so the decision results in a price squeeze on them. Well hello, whatever made you think MTAS wouldn't decline in the future? Have you got a regulatory events clause in your contract to trigger a renegotiation right? If not, go sue your lawyers and leave the ACCC alone.
The submissions are all the classic worst case of self-interest submissions that are not framed on the basis of an established view of how the market should operate, but instead focus on the specific "ask" of their business. These reflect the operation of the regulatory craft as something that takes instruction "from the business" rather than is intimately involved as the expert on the external environment on the development of strategy.
The ACCC deserves to be resoundly criticised for the way it has handled the MTAS determination thus far, but equally the submissions from industry players do little to handle the ACCC to account.
Nowhere, however, is the sorrt state of affairs more apparent than in the bleating by Internode (among others) of wanting to be "compensated" for the stranded asset of their DSLAM investments. The assets were not deployed like an HFC network with a thirty year or more life expectancy, more likely 2 to 3 years. None of them need to be retired immediately. The "exchange exit cost" has always been something they need to consider as a future liability.
Novae Meridianae Demetae Dexter delenda est
Thursday, October 20, 2011
On tablets and brands
Language is a funny thing. I recall working with an American consultant in 1991. Just as we were about to go into a meeting he looked at me and said "I know this isn't the word you use, but do you have a tablet I could use?"
Luckily I was able to interpret that he was after a writing pad and not some kind of pill.
Today there is news that Telstra is abandoning the marketing of the Telstra T-Touch. This was their own branded tablet - but it was a white-labelled Huawei device.
Huawei has been an active provider of white labelled modems - if you have a 3G wireless dongle there is a very good chance that it is a Huawei device. But they have not been making big moves into the direct consumer branded device market yet.
Telstra has discovered the limitation of their brand - in quite an interesting way. Where the device is clearly identified as being integral to the operation of the network - the dongle - Telstra branding works. However where the device is largely independent of the network then other branding is potentially more useful.
This is an important lesson for Telstra as it continues to think of its growth opportunities in media and applications. It should form an important consideration in its approach to partnering and co-operation - issues I've recently written about and had echoed by other execs.
Brand has always been a challenge for telcos. For example I can recall one case where a service provider could not reach agreement for resale of a mobile network's offering, even though the service provider's parent owned a big hunk of the mobile operator. Each party insisted on its own brand being on the mobile service. I couldn't understand why the SP (who I worked for) didn't agree. We only wanted to sell it in a bundle, the MO didn't sell bundles. We had no "brand" in mobiles, the MO had invested a lot in brand.
And I looked at my laptop, which was branded IBM (at the time), the software was Windows and the processor was Intel - the latter had their brands proudly attached to the case of the laptop with stickers (as they both do on the HP machine I'm on now). Each of those parties benefits by being associated with a leading brand in the related field.
Telcos have learnt this with phones. They need to learn it about content and applications.
Novae Meridianae Demetae Dexter delenda est
Luckily I was able to interpret that he was after a writing pad and not some kind of pill.
Today there is news that Telstra is abandoning the marketing of the Telstra T-Touch. This was their own branded tablet - but it was a white-labelled Huawei device.
Huawei has been an active provider of white labelled modems - if you have a 3G wireless dongle there is a very good chance that it is a Huawei device. But they have not been making big moves into the direct consumer branded device market yet.
Telstra has discovered the limitation of their brand - in quite an interesting way. Where the device is clearly identified as being integral to the operation of the network - the dongle - Telstra branding works. However where the device is largely independent of the network then other branding is potentially more useful.
This is an important lesson for Telstra as it continues to think of its growth opportunities in media and applications. It should form an important consideration in its approach to partnering and co-operation - issues I've recently written about and had echoed by other execs.
Brand has always been a challenge for telcos. For example I can recall one case where a service provider could not reach agreement for resale of a mobile network's offering, even though the service provider's parent owned a big hunk of the mobile operator. Each party insisted on its own brand being on the mobile service. I couldn't understand why the SP (who I worked for) didn't agree. We only wanted to sell it in a bundle, the MO didn't sell bundles. We had no "brand" in mobiles, the MO had invested a lot in brand.
And I looked at my laptop, which was branded IBM (at the time), the software was Windows and the processor was Intel - the latter had their brands proudly attached to the case of the laptop with stickers (as they both do on the HP machine I'm on now). Each of those parties benefits by being associated with a leading brand in the related field.
Telcos have learnt this with phones. They need to learn it about content and applications.
Novae Meridianae Demetae Dexter delenda est
Tuesday, October 18, 2011
Is it weird?
Four resolutions were voted on at the Telstra AGM; the NBN transaction, the re-appointment of the Chair and another Director and the remuneration report.
99.45% supported the NBN agreements. Is it weird that it received the biggest majority of the four votes?
As the Telstra meeting was going on the Prime Minister announced the release by NBNCo of the twelve month schedule.
Was it weird that the Government blurred the message? By waiting a day it could have been messaged as either "good news we can release the schedule with more confidence the agreement with Telstra will come into effect" or, if the result had been bad, "we continue regardless."
Was it also weird that the Prime Minister announced anything? This is NBN Co's schedule, it is their job to do it. The Government should be not politicising the schedule so much - save its moment to stand in the sunshine when there are more services and an election is looming.
I've also said before that the PM has got to stop wanting to announce everything. Let Ministers announce without her. Maybe even go back to the Whitlam-esque once weekly press conference and do a weekly sweep of "all the good things our Government ids doing" - build the image of a team of achieving Ministers.
So I think the answer to all of the above is - yes it is weird.
Novae Meridianae Demetae Dexter delenda est
99.45% supported the NBN agreements. Is it weird that it received the biggest majority of the four votes?
As the Telstra meeting was going on the Prime Minister announced the release by NBNCo of the twelve month schedule.
Was it weird that the Government blurred the message? By waiting a day it could have been messaged as either "good news we can release the schedule with more confidence the agreement with Telstra will come into effect" or, if the result had been bad, "we continue regardless."
Was it also weird that the Prime Minister announced anything? This is NBN Co's schedule, it is their job to do it. The Government should be not politicising the schedule so much - save its moment to stand in the sunshine when there are more services and an election is looming.
I've also said before that the PM has got to stop wanting to announce everything. Let Ministers announce without her. Maybe even go back to the Whitlam-esque once weekly press conference and do a weekly sweep of "all the good things our Government ids doing" - build the image of a team of achieving Ministers.
So I think the answer to all of the above is - yes it is weird.
Novae Meridianae Demetae Dexter delenda est
Telstra AFR
Very pleased with my first ever Op Ed piece run in the AFR this morning. (Behind paywall).
As 99% of proxies voted for the resolution it didn't really matter, but it was important to inject a dose of reality into the conversation given the politically motivated campaign to derail the deal.
Novae Meridianae Demetae Dexter delenda est
As 99% of proxies voted for the resolution it didn't really matter, but it was important to inject a dose of reality into the conversation given the politically motivated campaign to derail the deal.
Novae Meridianae Demetae Dexter delenda est
Thursday, September 29, 2011
More on the ABS Internet Activity Statistics
The old adage referred to in my earlier post on these statistics was the "lies, damned lies and statistics" line. The point being that popularity wasn't just based on subscriber numbers but also on downloads.
The other interesting thing to do is to compare the ABS stats to other data sources.
This release is the first time in a while that the stats have actually given a distribution of all the ISPs by size. The interesting thing is to compare this to the number of service providers that are members of the TIO that claim to be ISPs or TISPs (the latter meaning they provide telephone and Internet services - like Telstra).
The chart below shows that the ABS numbers are well below the total number of merely ISPs let alone those service providers who are either ISPs or TISPs.
The chart might suggest significant under-counting by the ABS. Another comparison we can do is between the ABS fixed broadband number and the total fixed broadband services on either Optus HFC network or Telstra's HFC or copper network. The latter appear in Telstra's results as part of their retail SIOs with HFC, as the fixed BB wholesale, the ULL and the SSS numbers.
The closeness between the two data series is probably not really a good thing as the Telstra+Optus data leaves out Transact and others. But still - the gap is not terribly massive.
Understanding DSL is a little bit harder as you need to estimate how much of Telstra's Fixed BB SIOs are DSL and how many cable. I've used the crude approach of subtracting the Optus HFC number from the ABS total cable and fibre number to get a Telstra retail estimate. The Optus data is their on-net and off-net DSL base. The Telstra and Optus numbers are stacked, the ABS line is their total DSL.
A similar analysis can be done of broadband mobile wireless. Once again the Optus number is stacked on the Telstra one, while the ABS line is total market. The remainder is essentially Vodafone, resellers (except Virgin which is consolidated in the Optus number I believe) and the vividwireless base.
Finally the narrowband data can be compared, as it is below using the same approach.
Adding other providers is problematic as some don't release a lot of data, but I will expand the data set. I might not republish till after the ABS releases the December 2011 data in about April next year.
Novae Meridianae Demetae Dexter delenda est
The other interesting thing to do is to compare the ABS stats to other data sources.
This release is the first time in a while that the stats have actually given a distribution of all the ISPs by size. The interesting thing is to compare this to the number of service providers that are members of the TIO that claim to be ISPs or TISPs (the latter meaning they provide telephone and Internet services - like Telstra).
The chart below shows that the ABS numbers are well below the total number of merely ISPs let alone those service providers who are either ISPs or TISPs.
The chart might suggest significant under-counting by the ABS. Another comparison we can do is between the ABS fixed broadband number and the total fixed broadband services on either Optus HFC network or Telstra's HFC or copper network. The latter appear in Telstra's results as part of their retail SIOs with HFC, as the fixed BB wholesale, the ULL and the SSS numbers.
The closeness between the two data series is probably not really a good thing as the Telstra+Optus data leaves out Transact and others. But still - the gap is not terribly massive.
Understanding DSL is a little bit harder as you need to estimate how much of Telstra's Fixed BB SIOs are DSL and how many cable. I've used the crude approach of subtracting the Optus HFC number from the ABS total cable and fibre number to get a Telstra retail estimate. The Optus data is their on-net and off-net DSL base. The Telstra and Optus numbers are stacked, the ABS line is their total DSL.
A similar analysis can be done of broadband mobile wireless. Once again the Optus number is stacked on the Telstra one, while the ABS line is total market. The remainder is essentially Vodafone, resellers (except Virgin which is consolidated in the Optus number I believe) and the vividwireless base.
Finally the narrowband data can be compared, as it is below using the same approach.
Adding other providers is problematic as some don't release a lot of data, but I will expand the data set. I might not republish till after the ABS releases the December 2011 data in about April next year.
Novae Meridianae Demetae Dexter delenda est
Monday, September 19, 2011
Telstra and branding
Well, Telstra is going multi-coloured.
I want to discuss the three themes in the clip in reverse order, being mission, promise and brand.
Telstra's advertising strap line "It's how we connect" is explained with the video saying "Connection is important to every single one of us. After all we can't be human on our own." This is going to be very powerful for Telstra if they can simply get across the line on actually making this corporate value number 1 - rather than the creation of shareholder value.
I was part of an exercise at AAPT/TCNZ that crafted a really powerful vision that was based on exactly the ame theme - the purpose of Telecom NZ was to satisfy human beings need to communicate. It is remarkable how motivational that can be. That doesn't mean return to shareholders doesn't count - you have to manage all stakeholder interests to achieve the goal. But as John Kay points out in 'Obliquity' often the best way to achieve a goal is to not work on it directly.
Telstra also seems prepared to step up its own communications saying "We sound different to how we used to as well. It's all about taking complicated subjects and talking about them in uncomplicated ways. And concentrating on talking like human beings not like machine."
It is nice to see the acknowledgement that they need to do better. But saying they need to talk about complicated subjects in simple ways is a cop-out. They need to say simpler things! It is not enough to try to explain complicated plans better - the goal should be to simplify the plans.
And if they want to talk like people not machines will they turn off the voice recognition on their queues - or at least give customers the choice between using "grunt" or their keypad. Go one better and put the menu tree for the IVRs up online so a customer can skip right through and just key in the answers at once!
But the real issue is this is dangerous customer service territory. A customer evaluates service as the gap between their expectation and the delivery. Saying you will get better makes the expectation go up, increasing the amount of experience improvement you need to actually shift the satisfaction score.
Finally swe get to the brand itself. No change in the shape of the logo that I can see just the move to six different two colour representations.
The video says of this;
We now live in full colour, because we know you do. It helps make us more relevant to you and your life.
The way we now look is all about representing the way we connect with you, the way you connect with our products and of course how you connect to the people in your life.
This just opens up so many questions. Firstly, did Telstra really live in two colours before just because their logo was? What does it mean to live in full colour? Exactly how does the colours of a logo make anyone more or less relevant?
More interestingly is Telstra going to register all twelve shades and maybe go one better than Cadbury and argue that it now owns the rights to the rainbow? It certainly makes it very hard for others choosing colours.
The overall shift to so many colours reflects the shift to online rather than print for so much copy. Colour is cheap online - it is more expensive (and tiresome) in print. (but see this advice)
The unanswered question is whether the six separate colour pairings will be used to represent different aspects of the way we connect with Telstra, their products or each other, or whether there will be a free-for-all or whether everything comes in different colours.
Finally for the history buffs. The original Telstra yellow and blue logo was created to accommodate the merger between OTC and Telecom Australia.
The merged entity was initially known by its official name - the Australian and Overseas Telecommunications Corporation (AOTC). A logo existed for letterheads and business cards for a few execs in corporate roles but little else (and I couldn't find a copy on Google Images - I'll have to find an old AOTC business card of mine to scan).
The rebranding came up with a new name "Telstra" - to get away from the generic "Telecom". The logo combined the OTC and Telecom Australia colours. It was introduced in two stages. For the first two years the new logo was used with the words "Telecom Australia" for the domestic business, for the overseas business the new logo and name wre used, but "OTC AUSTRALIA" appeared beneath it.
No one, of course, was happy. A lot of OTC guys complained that Asian customers would struggle to pronounce the name. Others were concerned about the confusion between Telstra and Telstar.
But the best of the lot was a story Frank Blount told me. He'd just announced the brand change and received an e-mail from a person who'd come in from the Telecom Australia part. The e-mail told Frank that he thought the decision was bad, because the people of Australia loved Telecom and had a real connection to it, and we would risk alienating them as we faced competition.
Frank rang the person and asked what he did. He worked in the IT Department, his team was part of the billing design group. Frank asked the guy if he understood how important that was given the trouble you have with customers if bills are wrong etc. The guy liked what he heard. After a bit more building up Frank finished the call "So you understand how important what you do on billing is to the company?" The guy says "Yes Frank." Frank replied "So how about you get on and do that and leave it to me to run the company/worry about brand."
Novae Meridianae Demetae Dexter delenda est
I want to discuss the three themes in the clip in reverse order, being mission, promise and brand.
Telstra's advertising strap line "It's how we connect" is explained with the video saying "Connection is important to every single one of us. After all we can't be human on our own." This is going to be very powerful for Telstra if they can simply get across the line on actually making this corporate value number 1 - rather than the creation of shareholder value.
I was part of an exercise at AAPT/TCNZ that crafted a really powerful vision that was based on exactly the ame theme - the purpose of Telecom NZ was to satisfy human beings need to communicate. It is remarkable how motivational that can be. That doesn't mean return to shareholders doesn't count - you have to manage all stakeholder interests to achieve the goal. But as John Kay points out in 'Obliquity' often the best way to achieve a goal is to not work on it directly.
Telstra also seems prepared to step up its own communications saying "We sound different to how we used to as well. It's all about taking complicated subjects and talking about them in uncomplicated ways. And concentrating on talking like human beings not like machine."
It is nice to see the acknowledgement that they need to do better. But saying they need to talk about complicated subjects in simple ways is a cop-out. They need to say simpler things! It is not enough to try to explain complicated plans better - the goal should be to simplify the plans.
And if they want to talk like people not machines will they turn off the voice recognition on their queues - or at least give customers the choice between using "grunt" or their keypad. Go one better and put the menu tree for the IVRs up online so a customer can skip right through and just key in the answers at once!
But the real issue is this is dangerous customer service territory. A customer evaluates service as the gap between their expectation and the delivery. Saying you will get better makes the expectation go up, increasing the amount of experience improvement you need to actually shift the satisfaction score.
Finally swe get to the brand itself. No change in the shape of the logo that I can see just the move to six different two colour representations.
The video says of this;
We now live in full colour, because we know you do. It helps make us more relevant to you and your life.
The way we now look is all about representing the way we connect with you, the way you connect with our products and of course how you connect to the people in your life.
This just opens up so many questions. Firstly, did Telstra really live in two colours before just because their logo was? What does it mean to live in full colour? Exactly how does the colours of a logo make anyone more or less relevant?
More interestingly is Telstra going to register all twelve shades and maybe go one better than Cadbury and argue that it now owns the rights to the rainbow? It certainly makes it very hard for others choosing colours.
The overall shift to so many colours reflects the shift to online rather than print for so much copy. Colour is cheap online - it is more expensive (and tiresome) in print. (but see this advice)
The unanswered question is whether the six separate colour pairings will be used to represent different aspects of the way we connect with Telstra, their products or each other, or whether there will be a free-for-all or whether everything comes in different colours.
Finally for the history buffs. The original Telstra yellow and blue logo was created to accommodate the merger between OTC and Telecom Australia.
The merged entity was initially known by its official name - the Australian and Overseas Telecommunications Corporation (AOTC). A logo existed for letterheads and business cards for a few execs in corporate roles but little else (and I couldn't find a copy on Google Images - I'll have to find an old AOTC business card of mine to scan).
The rebranding came up with a new name "Telstra" - to get away from the generic "Telecom". The logo combined the OTC and Telecom Australia colours. It was introduced in two stages. For the first two years the new logo was used with the words "Telecom Australia" for the domestic business, for the overseas business the new logo and name wre used, but "OTC AUSTRALIA" appeared beneath it.
No one, of course, was happy. A lot of OTC guys complained that Asian customers would struggle to pronounce the name. Others were concerned about the confusion between Telstra and Telstar.
But the best of the lot was a story Frank Blount told me. He'd just announced the brand change and received an e-mail from a person who'd come in from the Telecom Australia part. The e-mail told Frank that he thought the decision was bad, because the people of Australia loved Telecom and had a real connection to it, and we would risk alienating them as we faced competition.
Frank rang the person and asked what he did. He worked in the IT Department, his team was part of the billing design group. Frank asked the guy if he understood how important that was given the trouble you have with customers if bills are wrong etc. The guy liked what he heard. After a bit more building up Frank finished the call "So you understand how important what you do on billing is to the company?" The guy says "Yes Frank." Frank replied "So how about you get on and do that and leave it to me to run the company/worry about brand."
Novae Meridianae Demetae Dexter delenda est
Wednesday, September 14, 2011
When smart people say dumb things
As if having Michael Porter blather on about HFC wasn't bad enough, Josh Gans and Jerry Hausmann have contributed to the ACCC consideration of the Telstra SSU.
They maintain it is anti-competitive because of the deal on HFC (not to be used for broadband) and the deal on 4G (not to be promoted by Telstra at time of copper shut down as an alternative).
They first draw conclusions based on completely different market structures about the role of HFC in driving broadband uptake. These mostly model HFC vs ADSL, not HFC vs FTTP. They also mostly come from markets that were clever enough to award HFC monopolies rather than our idiotic duopoly (see note - UPDATED).
But secondly they really don't want Telstra to keep its HFC at all, they think it should be divested.
Hang on guys - Telstra made an NPV negative decision to build the HFC to block the competitive threat from Telstra (see Frank Blount in book with Bob Joss "Managing in Australia"). Optus thought the overbuild was anti-competitive, mounted a legal challenge (for $900M) but settled for what Telstra told Senate estimates (24 May 2005 at P.74) was a "miniscule amount, a very small amount." Telstra isn't about to sell the HFC to Foxtel.
In fact I bet the Foxtel partners are still trying to figure how to unpick the Foxtel shareholders agreement to migrate Foxtel to the NBNs Multicast facility.
Never mind the fact that the footprint of HFC hasn't been expanded since about 1997. Never mind that Telstra and Optus have no interest in using the networks. I think they know more about the technical viability than a couple of Economics professors.
But Gans and Hausmann rail against the lack of competition, even writing, "The presumption and evidence thus far is that competition spurs investment in these industries – even when characterised by a natural monopoly." That may well be the case, but it certainly isn't efficient investment. A natural monopoly is defined as one that is sub-additive in costs - that for any level of output one firm can produce the output more cheaply than two. That's why you only have one water pipe to your home.
HFC and telephony originally did different things and competed in some areas - HFC never did telephony well, and copper never did Pay TV well - both could do broadband. FTTH does all three better than either HFC or copper.
The HFC case is just nonsensical, technically and economically.
The mobile issue is equally illogical. Telstra isn't the only wireless provider. Both Optus and Vodafone can be expected to launch 4G, and vividwireless already has. Spectrum auctions in 2012 could even introduce more operators (though experience suggests the market can't sustain more and that maybe less is better). So what if Telstra doesn't offer 4G as an alternative for the short period around decommissioning copper - V and O still can. Customers can still buy it from Telstra even, they aren't saying they won't sell it.
The clause is very much a very standard one between an upstream and downstream player where the upstream guy is making the big investment that the downstream guy will use best efforts to sell heaps of it. Its the contractual way of dealing with some of the known problems of not being vertically integrated that Henry Ergas normally jabbers about.
Meanwhile, just to show the planet is going completely crazy, Bob Brown has introduced legislation to restrict the construction of mobile base stations. Much as I would like to say I told you so the proposal is dumb on so many levels. Unfortunately AMTA's Chris Althaus didn't really nail it preferring to focus on the NBN issue.
Firstly the consultation called for already occurs under an effective and complied with industry code. Secondly mandatory spacing from schools simply increases likelihood the school falls into the middle of the beam of most intensity (Brown is a medical doctor, he should be able to understand simple physics). Let alone the idea that mobile operators can forecast their tower needs five years hence!
But the biggie - are you listening Bob Brown - is that the recent labelling of mobiles as a "possible" cancer risk relates only to handsets held to your head - not base stations. You know the best way to REDUCE the power that the handset operates at - be CLOSE to the base station which means have MORE of them.
In fact a really good solution is to have your very own femto-cell - just like Optus launched. Guess what - that gets connected using fixed broadband.
Can we please be allowed to get on with delivering the future now?
Note: The Keating Government was presented with a suggestion by a shareholder in Optus Vision that instead of OV and Telstra duplicating the country should be divided into a set of franchise areas for monopolies. In most circumstances this would have been the right thing. In the specific case he was right to say no given who was asking - Kerry Francis Bulmore Packer.
Novae Meridianae Demetae Dexter delenda est
They maintain it is anti-competitive because of the deal on HFC (not to be used for broadband) and the deal on 4G (not to be promoted by Telstra at time of copper shut down as an alternative).
They first draw conclusions based on completely different market structures about the role of HFC in driving broadband uptake. These mostly model HFC vs ADSL, not HFC vs FTTP. They also mostly come from markets that were clever enough to award HFC monopolies rather than our idiotic duopoly (see note - UPDATED).
But secondly they really don't want Telstra to keep its HFC at all, they think it should be divested.
Hang on guys - Telstra made an NPV negative decision to build the HFC to block the competitive threat from Telstra (see Frank Blount in book with Bob Joss "Managing in Australia"). Optus thought the overbuild was anti-competitive, mounted a legal challenge (for $900M) but settled for what Telstra told Senate estimates (24 May 2005 at P.74) was a "miniscule amount, a very small amount." Telstra isn't about to sell the HFC to Foxtel.
In fact I bet the Foxtel partners are still trying to figure how to unpick the Foxtel shareholders agreement to migrate Foxtel to the NBNs Multicast facility.
Never mind the fact that the footprint of HFC hasn't been expanded since about 1997. Never mind that Telstra and Optus have no interest in using the networks. I think they know more about the technical viability than a couple of Economics professors.
But Gans and Hausmann rail against the lack of competition, even writing, "The presumption and evidence thus far is that competition spurs investment in these industries – even when characterised by a natural monopoly." That may well be the case, but it certainly isn't efficient investment. A natural monopoly is defined as one that is sub-additive in costs - that for any level of output one firm can produce the output more cheaply than two. That's why you only have one water pipe to your home.
HFC and telephony originally did different things and competed in some areas - HFC never did telephony well, and copper never did Pay TV well - both could do broadband. FTTH does all three better than either HFC or copper.
The HFC case is just nonsensical, technically and economically.
The mobile issue is equally illogical. Telstra isn't the only wireless provider. Both Optus and Vodafone can be expected to launch 4G, and vividwireless already has. Spectrum auctions in 2012 could even introduce more operators (though experience suggests the market can't sustain more and that maybe less is better). So what if Telstra doesn't offer 4G as an alternative for the short period around decommissioning copper - V and O still can. Customers can still buy it from Telstra even, they aren't saying they won't sell it.
The clause is very much a very standard one between an upstream and downstream player where the upstream guy is making the big investment that the downstream guy will use best efforts to sell heaps of it. Its the contractual way of dealing with some of the known problems of not being vertically integrated that Henry Ergas normally jabbers about.
Meanwhile, just to show the planet is going completely crazy, Bob Brown has introduced legislation to restrict the construction of mobile base stations. Much as I would like to say I told you so the proposal is dumb on so many levels. Unfortunately AMTA's Chris Althaus didn't really nail it preferring to focus on the NBN issue.
Firstly the consultation called for already occurs under an effective and complied with industry code. Secondly mandatory spacing from schools simply increases likelihood the school falls into the middle of the beam of most intensity (Brown is a medical doctor, he should be able to understand simple physics). Let alone the idea that mobile operators can forecast their tower needs five years hence!
But the biggie - are you listening Bob Brown - is that the recent labelling of mobiles as a "possible" cancer risk relates only to handsets held to your head - not base stations. You know the best way to REDUCE the power that the handset operates at - be CLOSE to the base station which means have MORE of them.
In fact a really good solution is to have your very own femto-cell - just like Optus launched. Guess what - that gets connected using fixed broadband.
Can we please be allowed to get on with delivering the future now?
Note: The Keating Government was presented with a suggestion by a shareholder in Optus Vision that instead of OV and Telstra duplicating the country should be divided into a set of franchise areas for monopolies. In most circumstances this would have been the right thing. In the specific case he was right to say no given who was asking - Kerry Francis Bulmore Packer.
Novae Meridianae Demetae Dexter delenda est
Tuesday, September 06, 2011
Telstra ongoing embarrassment from its CEDA foray - Updated
One of the observations Dr Phil Burgess made to me about Australia was the lack of engagement by Australian business in political debate. He set about changing that.
Most particularly he made it clear to think tanks and research institutes that he was only interested in funding organisations that supported the views that Telstra espoused.
The Committee for the Economic Development of Australia (CEDA) was one body that heard the message. CEDA commissioned a report that was ultimately released as Growth 60: Australia's Broadband Future - Four doors to greater competition. It is not totally available on line but many libraries have copies.
I am not suggesting that CEDA was funded by Telstra to undertake the research, however the bulk of the contributors were at some stage paid by Telstra for writing similar pieces elsewhere.
Confusingly the CEDA link to the report dates it as "Wednesday, November 18, 2009", however, the one chapter available online dates the report as 2008. The introduction also refers to "current policy" as FTTN to 98% of the population.
Having been in the audience for the launch (and at one stage considered as one of the authors) I know the report was released at the time of the conclusion of tenders for NBN 1.0 in November 2008.
This date is supported by the excellent review by Stuart Corner. He noted;
Leading economic think tank CEDA (Committee for Economic Development of Australia) has criticised the Federal Government's obsession with building the National Broadband Network, saying a subsidised $4.7 billion FTTN rollout is unnecessary. CEDA's report, Australia’s Broadband Future: Four doors to greater competition, maintains that focussing on FTTN to the exclusion of competing access methods will decrease competition.
The CEDA report contains six chapters written by eminent economic researchers, all of whom argue among other things excessive regulation and structural separation of Telstra is unwise, while the promotion of competing access networks including cable, copper and wireless would provide the necessary competitive marketplace.
Yet CEDA as recently as April 2011 has been peddling this report as if it is informative about the current policy position.
This is compounded by the fact that the AFR continues to use the report's commissioner, Michael Porter, to write opinion editorial pieces on the NBN; the latest offering is Fibre rollout wastes billions. These pieces ignore the reality of what happened in the NBN 1.0 tender and make fanciful and inaccurate technical claims.
I will move to a systematic response to the column in a moment. My first point is though that CEDA and Porter's interest in this matter was spurred when Telstra wanted NBN 1.0 stopped. In particular Telstra did not want any solution that involved their structural separation - the key reason they declined to bid.
Now Telstra's position is totally different. They would like to get on with their business and deploying NBN 2.0 is what they want to achieve. David Thodey has made it clear that shareholders should not vote on the NBN and separation deals on the assumption that there is an alternative policy. It might be worthwhile for Telstra to have another quiet chat with CEDA.
Moving to Porter, he asserts that "by avoiding fibre overbuild in metropolitan and regional areas, HFC can indirectly finance up to $20 to $30 billion of NBN savings."
This assertion simply does not stand up to scrutiny. HFC exists mostly only in metropolitan areas, there is very little in regional areas. HFC passes somewhere around 70% of Australian households, but it is a well known fact that it has extremely low penetration into multi-dwelling units. That is a technological limitation due to the difficulty of feeding a whole coax cable into existing spaces.
The total NBN construction cost of $43B includes the cost of the satellite and wireless solutions. The implementation study provided detail (below) of the cost per premise connected by percentile.
Even if we assumed that HFC did cover 70% of households, these are the households it costs $2 to $3K to connect. It is noteworthy that it was this analysis that saw the FTTP footprint extended to 93% from 90%. That means that Porter's upper bound of saving $30B, being three-quarters of the capital cost, is totally beyond reach. $20B may be reasonable to estimate the amount of capital not spent.
But here's the other problem - the outcome is not comparable. The 100Mbps speeds being quoted for HFC are shared speeds - not what is available to each premise. To provide a comparable service over the life of the asset requires additional investment. Further, as mentioned above, HFC simply is not available at all the premises it passes.
Porter asserts
Most independent experts would prefer NBN Co to request tenders by location and speed, not technology. Regional markets, with support from the private and public sectors, could sort and blend bids and technologies, and deliver content competition.
and concludes
To be commercially viable, NBN Co should invite all parties to bid to build upgraded and expanded cable, wireless and fibre in metropolitan areas. It will then start to have a better balance sheet owing to savings on fibre rollout - estimated at well over $20B.
The difficulty is that neither Telstra nor Optus - the owners of the two big HFC networks - have any interest at all in this strategy. It doesn't deliver comparable service and does not defer forever the need for a fibre to the home investment.
It is interesting to note that Porter's latest contribution only credits his university post. It is unclear from the CEDA site whether he is still also CEDA National Director Research and Policy. (Update - I have been informed that Porter is no longer with CEDA. His replacement is Nathan Taylor, Chief Economist). CEDA could profitably leave its 2008 report - properly dated - on its website and delete the more recent blathering.
Novae Meridianae Demetae Dexter delenda est
Most particularly he made it clear to think tanks and research institutes that he was only interested in funding organisations that supported the views that Telstra espoused.
The Committee for the Economic Development of Australia (CEDA) was one body that heard the message. CEDA commissioned a report that was ultimately released as Growth 60: Australia's Broadband Future - Four doors to greater competition. It is not totally available on line but many libraries have copies.
I am not suggesting that CEDA was funded by Telstra to undertake the research, however the bulk of the contributors were at some stage paid by Telstra for writing similar pieces elsewhere.
Confusingly the CEDA link to the report dates it as "Wednesday, November 18, 2009", however, the one chapter available online dates the report as 2008. The introduction also refers to "current policy" as FTTN to 98% of the population.
Having been in the audience for the launch (and at one stage considered as one of the authors) I know the report was released at the time of the conclusion of tenders for NBN 1.0 in November 2008.
This date is supported by the excellent review by Stuart Corner. He noted;
Leading economic think tank CEDA (Committee for Economic Development of Australia) has criticised the Federal Government's obsession with building the National Broadband Network, saying a subsidised $4.7 billion FTTN rollout is unnecessary. CEDA's report, Australia’s Broadband Future: Four doors to greater competition, maintains that focussing on FTTN to the exclusion of competing access methods will decrease competition.
The CEDA report contains six chapters written by eminent economic researchers, all of whom argue among other things excessive regulation and structural separation of Telstra is unwise, while the promotion of competing access networks including cable, copper and wireless would provide the necessary competitive marketplace.
Yet CEDA as recently as April 2011 has been peddling this report as if it is informative about the current policy position.
This is compounded by the fact that the AFR continues to use the report's commissioner, Michael Porter, to write opinion editorial pieces on the NBN; the latest offering is Fibre rollout wastes billions. These pieces ignore the reality of what happened in the NBN 1.0 tender and make fanciful and inaccurate technical claims.
I will move to a systematic response to the column in a moment. My first point is though that CEDA and Porter's interest in this matter was spurred when Telstra wanted NBN 1.0 stopped. In particular Telstra did not want any solution that involved their structural separation - the key reason they declined to bid.
Now Telstra's position is totally different. They would like to get on with their business and deploying NBN 2.0 is what they want to achieve. David Thodey has made it clear that shareholders should not vote on the NBN and separation deals on the assumption that there is an alternative policy. It might be worthwhile for Telstra to have another quiet chat with CEDA.
Moving to Porter, he asserts that "by avoiding fibre overbuild in metropolitan and regional areas, HFC can indirectly finance up to $20 to $30 billion of NBN savings."
This assertion simply does not stand up to scrutiny. HFC exists mostly only in metropolitan areas, there is very little in regional areas. HFC passes somewhere around 70% of Australian households, but it is a well known fact that it has extremely low penetration into multi-dwelling units. That is a technological limitation due to the difficulty of feeding a whole coax cable into existing spaces.
The total NBN construction cost of $43B includes the cost of the satellite and wireless solutions. The implementation study provided detail (below) of the cost per premise connected by percentile.
Even if we assumed that HFC did cover 70% of households, these are the households it costs $2 to $3K to connect. It is noteworthy that it was this analysis that saw the FTTP footprint extended to 93% from 90%. That means that Porter's upper bound of saving $30B, being three-quarters of the capital cost, is totally beyond reach. $20B may be reasonable to estimate the amount of capital not spent.
But here's the other problem - the outcome is not comparable. The 100Mbps speeds being quoted for HFC are shared speeds - not what is available to each premise. To provide a comparable service over the life of the asset requires additional investment. Further, as mentioned above, HFC simply is not available at all the premises it passes.
Porter asserts
Most independent experts would prefer NBN Co to request tenders by location and speed, not technology. Regional markets, with support from the private and public sectors, could sort and blend bids and technologies, and deliver content competition.
and concludes
To be commercially viable, NBN Co should invite all parties to bid to build upgraded and expanded cable, wireless and fibre in metropolitan areas. It will then start to have a better balance sheet owing to savings on fibre rollout - estimated at well over $20B.
The difficulty is that neither Telstra nor Optus - the owners of the two big HFC networks - have any interest at all in this strategy. It doesn't deliver comparable service and does not defer forever the need for a fibre to the home investment.
It is interesting to note that Porter's latest contribution only credits his university post. It is unclear from the CEDA site whether he is still also CEDA National Director Research and Policy. (Update - I have been informed that Porter is no longer with CEDA. His replacement is Nathan Taylor, Chief Economist). CEDA could profitably leave its 2008 report - properly dated - on its website and delete the more recent blathering.
Novae Meridianae Demetae Dexter delenda est
Wednesday, July 27, 2011
Management speak
I always like the fact that Don Watson used a number of examples from telcos in his classic critique of management speak Death Sentence.
Today's Crikey prints a staff e-mail from Optus CEO Paul O'Sullivan (aka POS). It reads
From: Paul O'Sullivan -- Chief Executive
Sent: Tuesday, July 26, 2011 3:04 PM
To: Optus People Everywhere
Subject: Repositioning Optus for the future
Hi team
Today we are taking another step in our transformation journey. In a highly competitive industry it’s important we are efficient and streamlined. Over the past few months we have reviewed our structure, our capability, our systems and processes, and our cost base. As a result of our review we have made some hard decisions -- to consolidate roles, reduce headcount and reduce operating expenditure. Today we are announcing the removal of 250 roles from across all areas of the business. This will result in around 180 people leaving the company.
We have spoken today with each of the affected individuals to discuss their situation and any alternative employment opportunities. Redundancies will not be voluntary -- they will result from areas where we can flatten our management structure, reduce duplication or streamline the business. To ensure the best personal outcome for those people impacted we have engaged an external provider for counselling and career services.
We have a comprehensive strategy to take us into the future, and we have already delivered a number of major initiatives to prepare us, including the establishment of ODM and release of the first product set including TV Now and Smart Safe. These changes are part of our ongoing transformation to continue our focus on customer experience and support our evolution as a digital services provider. We will communicate more over the coming months on our strategy to enable us to compete in a rapidly changing market and manage growth for the digital future.
Please take time to talk to your manager or HR representative if you have any concerns or questions.
POS
This has all the classic hall-marks - most notably an attempt to sound concerned for people while never really mentioning their contribution. The Watson examples were all about writing to "valued customers" about taking something away.
What I find fascinating is how every telco seems to have as its core ethos "transformation" - this is the ter that David Thodey uses and Paul Broad used to at AAPT. But a transformation is a one-off event that has a starting condition and an ending condition. What telcos use it to mean is a never-ending process that is partially reactive to external change and partly driven by the inability to ever consider all the dimensions of the business and respond to the current "crisis".
Telcos lurch on a rhythmic cycle between focusing on market share or revenue growth, margin growth and cost containment. They never seem to be able to have strategies that address the optimisation of more than one key metric at a time.
The good people at Optus though can rest easy. Their CEO has told them "We will communicate more over the coming months on our strategy to enable us to compete in a rapidly changing market and manage growth for the digital future."
Meanwhile I'm informed by people who have had recent Optus experience that their metrics are just as bad as the Government's Digital Economy ones...what I've critiqued as ordinal rather than cardinal goals. Optus still thinks it wants to "beat Telstra" on things like customer service rather than define what it thinks customers want and then delivering it.
Novae Meridianae Demetae Dexter delenda est
Today's Crikey prints a staff e-mail from Optus CEO Paul O'Sullivan (aka POS). It reads
From: Paul O'Sullivan -- Chief Executive
Sent: Tuesday, July 26, 2011 3:04 PM
To: Optus People Everywhere
Subject: Repositioning Optus for the future
Hi team
Today we are taking another step in our transformation journey. In a highly competitive industry it’s important we are efficient and streamlined. Over the past few months we have reviewed our structure, our capability, our systems and processes, and our cost base. As a result of our review we have made some hard decisions -- to consolidate roles, reduce headcount and reduce operating expenditure. Today we are announcing the removal of 250 roles from across all areas of the business. This will result in around 180 people leaving the company.
We have spoken today with each of the affected individuals to discuss their situation and any alternative employment opportunities. Redundancies will not be voluntary -- they will result from areas where we can flatten our management structure, reduce duplication or streamline the business. To ensure the best personal outcome for those people impacted we have engaged an external provider for counselling and career services.
We have a comprehensive strategy to take us into the future, and we have already delivered a number of major initiatives to prepare us, including the establishment of ODM and release of the first product set including TV Now and Smart Safe. These changes are part of our ongoing transformation to continue our focus on customer experience and support our evolution as a digital services provider. We will communicate more over the coming months on our strategy to enable us to compete in a rapidly changing market and manage growth for the digital future.
Please take time to talk to your manager or HR representative if you have any concerns or questions.
POS
This has all the classic hall-marks - most notably an attempt to sound concerned for people while never really mentioning their contribution. The Watson examples were all about writing to "valued customers" about taking something away.
What I find fascinating is how every telco seems to have as its core ethos "transformation" - this is the ter that David Thodey uses and Paul Broad used to at AAPT. But a transformation is a one-off event that has a starting condition and an ending condition. What telcos use it to mean is a never-ending process that is partially reactive to external change and partly driven by the inability to ever consider all the dimensions of the business and respond to the current "crisis".
Telcos lurch on a rhythmic cycle between focusing on market share or revenue growth, margin growth and cost containment. They never seem to be able to have strategies that address the optimisation of more than one key metric at a time.
The good people at Optus though can rest easy. Their CEO has told them "We will communicate more over the coming months on our strategy to enable us to compete in a rapidly changing market and manage growth for the digital future."
Meanwhile I'm informed by people who have had recent Optus experience that their metrics are just as bad as the Government's Digital Economy ones...what I've critiqued as ordinal rather than cardinal goals. Optus still thinks it wants to "beat Telstra" on things like customer service rather than define what it thinks customers want and then delivering it.
Novae Meridianae Demetae Dexter delenda est
Wednesday, July 06, 2011
So what do you think - and more on Telstra
I've had a fiddle at the template for the blog - much cleaner I think. Tell me what you think of the new design - including the placement of the "gadgets" (all the buttons around the side).
To see how it looks I've got an update on my take on the Telstra story - courtesy of some nice help from the folks at Telstra.
Their view is that there really are five big customer focussed blocks, three groups in support and a group of corporate functions. I've modified the diagram they used to explain it - partly because I think actual job titles are important.
Now I'd personally quibble with this and would argue that each of Freeth, Akhurst, Shiff, and Robbiati are really running "Lines of Business". The fact is Deena's job title is CEO as she is running a subsidiary. It just looks like Telstra's single biggest Venture - Foxtel - is still left out of it.
I also didn't say anything about Telstra "veteran" Stuart Lee in the earlier post. But if anyone out there recalls Telstra's Strategic Partnership Agreements the fact is they had joint parentage between Stuart and myself. But that is twenty years ago. Facts are Stuart is a very determined individual - what wholesale will look like will very much depend on whether internally it is being embraced as an important future channel or simply tolerated as a necessity of the current market structure. The certainty is that whichever is the model that Stuart thinks he has been asked to implement is the model that will be delivered.
Novae Meridianae Demetae Dexter delenda est
To see how it looks I've got an update on my take on the Telstra story - courtesy of some nice help from the folks at Telstra.
Their view is that there really are five big customer focussed blocks, three groups in support and a group of corporate functions. I've modified the diagram they used to explain it - partly because I think actual job titles are important.
Now I'd personally quibble with this and would argue that each of Freeth, Akhurst, Shiff, and Robbiati are really running "Lines of Business". The fact is Deena's job title is CEO as she is running a subsidiary. It just looks like Telstra's single biggest Venture - Foxtel - is still left out of it.
I also didn't say anything about Telstra "veteran" Stuart Lee in the earlier post. But if anyone out there recalls Telstra's Strategic Partnership Agreements the fact is they had joint parentage between Stuart and myself. But that is twenty years ago. Facts are Stuart is a very determined individual - what wholesale will look like will very much depend on whether internally it is being embraced as an important future channel or simply tolerated as a necessity of the current market structure. The certainty is that whichever is the model that Stuart thinks he has been asked to implement is the model that will be delivered.
Novae Meridianae Demetae Dexter delenda est
More changes at Telstra
It has been 15 years since I worked for Telstra and so I can't claim any insights into its workings.
However, it does seem to maintain its world leading ability to subject itself to re-organisations.
CEO David Thodey has today announced the latest changes. I confess to not being able to fully understand them.
These changes follow those from earlier this year that occured with the hiring of Brendon Riley (from 1 March) as Chief Operations Officer and Paul Fegan as GMD Strategy and Corporate Services. There was marginal reorganisation with these appointments.
These followed the appointments in June 2010 of Gordon Ballantyne and Robert Nason in February 2010.
The biggest part of the latest decision is the creation of a "Chief Customer Officer" in the person of Gordon Ballantyne. The GMDs of both Business (with Deena Shiff replaced by Will Irving) and Government and Enterprise report to him - but it is assumed the existing consumer and country wide substructures report to him.
The centralisation of marketing functions is reported as supporting this customer focus but it is understood the CMO role still reports to the GMD of Innovation, Products and Marketing Kate McKenzie.
The appointment of Deena Shiff as GMD Applications and Ventures adds another element of confusion. I've attempted to draw up an org chart and found the easiest way to do so was to group Ackhurst, Shiff, Robbiati and Nason together under the heading "New and other ventures".
That leaves the support functions - most of which have been previously swept into the orbit of Paul Fegan previously. The release said;
Telstra will centralise key internal business support functions with improved accountabilities, eliminating duplication.
This is just the latest in what I call the Hookes Law of organisation design, and is best viewed from the perspective of the HR function. Centralised HR is very effective at creating standardised practices and efficiencies of scale, but it isn't very good at meeting the needs of the business. Decentralised HR is very responsive to business needs but leads to inefficiencies, difficulties in workforce planning and even internal competition for personnel. Neither is perfect and the best solution is to keep alternating between the two, bouncing like an undamped spring around the ideal but unachievable mid point.
Thodey's decision today ends a journey commenced in 1987 of creating customer facing divisions under the advice of McKinsey and Co. One of these days I'll write more about this.
The changes today were described by Thodey as;
part of his long-term strategy to build a stronger sales- and marketing-led culture.
I have three issues with this. The first is that I have been hearing this description since 1989 at least as outlined by Luke Bozza's presentation of that time.
The second is that a simple head count of the senior team and what their responsibilities are still has the people with actual customer responsibility in the great minority.
The third is the interesting set of backgrounds of these executives. Four of them - Shiff, Ackhurst, Irving and Geason - have made their way via the Telstra legal function. Not one of them has been grown internally through a career with customer responsibility. That says more about the culture of the organisation than anything else.
Novae Meridianae Demetae Dexter delenda est
However, it does seem to maintain its world leading ability to subject itself to re-organisations.
CEO David Thodey has today announced the latest changes. I confess to not being able to fully understand them.
These changes follow those from earlier this year that occured with the hiring of Brendon Riley (from 1 March) as Chief Operations Officer and Paul Fegan as GMD Strategy and Corporate Services. There was marginal reorganisation with these appointments.
These followed the appointments in June 2010 of Gordon Ballantyne and Robert Nason in February 2010.
The biggest part of the latest decision is the creation of a "Chief Customer Officer" in the person of Gordon Ballantyne. The GMDs of both Business (with Deena Shiff replaced by Will Irving) and Government and Enterprise report to him - but it is assumed the existing consumer and country wide substructures report to him.
The centralisation of marketing functions is reported as supporting this customer focus but it is understood the CMO role still reports to the GMD of Innovation, Products and Marketing Kate McKenzie.
The appointment of Deena Shiff as GMD Applications and Ventures adds another element of confusion. I've attempted to draw up an org chart and found the easiest way to do so was to group Ackhurst, Shiff, Robbiati and Nason together under the heading "New and other ventures".
That leaves the support functions - most of which have been previously swept into the orbit of Paul Fegan previously. The release said;
Telstra will centralise key internal business support functions with improved accountabilities, eliminating duplication.
This is just the latest in what I call the Hookes Law of organisation design, and is best viewed from the perspective of the HR function. Centralised HR is very effective at creating standardised practices and efficiencies of scale, but it isn't very good at meeting the needs of the business. Decentralised HR is very responsive to business needs but leads to inefficiencies, difficulties in workforce planning and even internal competition for personnel. Neither is perfect and the best solution is to keep alternating between the two, bouncing like an undamped spring around the ideal but unachievable mid point.
Thodey's decision today ends a journey commenced in 1987 of creating customer facing divisions under the advice of McKinsey and Co. One of these days I'll write more about this.
The changes today were described by Thodey as;
part of his long-term strategy to build a stronger sales- and marketing-led culture.
I have three issues with this. The first is that I have been hearing this description since 1989 at least as outlined by Luke Bozza's presentation of that time.
The second is that a simple head count of the senior team and what their responsibilities are still has the people with actual customer responsibility in the great minority.
The third is the interesting set of backgrounds of these executives. Four of them - Shiff, Ackhurst, Irving and Geason - have made their way via the Telstra legal function. Not one of them has been grown internally through a career with customer responsibility. That says more about the culture of the organisation than anything else.
Novae Meridianae Demetae Dexter delenda est
Wednesday, June 29, 2011
Let's blame the lawyers
Electricity price rises are much discussed in Australia, but the underlying causes aren't.
Tom Parry in the Oz today is prepared to lay part of the blame on lawyers.
In an informative article he takes us on a journey through the introduction of regulated pricing (rather than prices being set politically)in NSW. The regime started as light touch and incentive based, where firms could benefit by "outperforming" the regulatory allowance for efficiency improvements.
The system now is still "building block" based but is now about the regulator "second guessing" the business. The lawyers get the blame for increasing resort to appeal processes primarily to argue "arcane elements of the cost of capital (the angels on pinheads of regulation) that are increasingly accounting for large increases in network charges."
We should care about this because the ACCC has been moving to use energy style building block and Rate of Return regulation for telecommunications pricing.
Two particular features are worth noting. The first is Parry's observation that "businesses are being accused of gold-plating." The second is the relevance of cost of capital.
"Gold-plating" in a regulatory sense is really about building to a higher standard than is prudent. Regulated firms may have an incentive for doing so because all costs are recovered and so may indulge in inefficient design. There is, however, a more specific version of inefficiency called the Averch-Johnson effect. This effect, named after a 1962 paper, is that a firm under Rate of Return regulation can increase its profit by (inefficiently) changing the mix of capital and labour (or capital and expenses).
A particular example is the approach taken by energy firms to metering. The efficient way to use comms is to buy services from a dedicated comms supplier achieving economies of scale. But the profit can be maximised by investing capital in a bespoke communications network. As the cost of smart metering is one of the drivers of increasing energy prices the significance of the A-J effect is large and growing.
The cost of capital is the second area of dispute. Regulatory lawyers have an interest in arguing up the cost of capital - despite, as Parry notes, "that a business will drive all of its costs, including efficient financing costs, so that customers can share in those benefits." In fact, this is a paradox in the theory of managerial capitalism - an efficient firm drives down all costs including financing costs, yet we are to believe it exists to "create shareholder value" - that is to maximise funding costs.
The saving grace in telecommunications might be that the firm that used to be the industry's biggest access provider (Telstra) is about to be its biggest access seeker. If they can marshal their impressive intellectual power to the problem we might find a better outcome. Unfortunately they too have allowed regulatory processes to be captured by lawyers rather than economists.
A good strategy for them would be to split their regulatory teams into "old world" and "new world" teams. They can mount arguments that the old world treatment is to be grandfathered and new rules apply for the new world. The challenge is to have the "new world" team focussed on strategy, economics and markets rather than the law.
Note: modified to make clear that the AJ effect is not a case of gold-plating but an inefficient mix of capital and expenditure.
Novae Meridianae Demetae Dexter delenda est
Tom Parry in the Oz today is prepared to lay part of the blame on lawyers.
In an informative article he takes us on a journey through the introduction of regulated pricing (rather than prices being set politically)in NSW. The regime started as light touch and incentive based, where firms could benefit by "outperforming" the regulatory allowance for efficiency improvements.
The system now is still "building block" based but is now about the regulator "second guessing" the business. The lawyers get the blame for increasing resort to appeal processes primarily to argue "arcane elements of the cost of capital (the angels on pinheads of regulation) that are increasingly accounting for large increases in network charges."
We should care about this because the ACCC has been moving to use energy style building block and Rate of Return regulation for telecommunications pricing.
Two particular features are worth noting. The first is Parry's observation that "businesses are being accused of gold-plating." The second is the relevance of cost of capital.
"Gold-plating" in a regulatory sense is really about building to a higher standard than is prudent. Regulated firms may have an incentive for doing so because all costs are recovered and so may indulge in inefficient design. There is, however, a more specific version of inefficiency called the Averch-Johnson effect. This effect, named after a 1962 paper, is that a firm under Rate of Return regulation can increase its profit by (inefficiently) changing the mix of capital and labour (or capital and expenses).
A particular example is the approach taken by energy firms to metering. The efficient way to use comms is to buy services from a dedicated comms supplier achieving economies of scale. But the profit can be maximised by investing capital in a bespoke communications network. As the cost of smart metering is one of the drivers of increasing energy prices the significance of the A-J effect is large and growing.
The cost of capital is the second area of dispute. Regulatory lawyers have an interest in arguing up the cost of capital - despite, as Parry notes, "that a business will drive all of its costs, including efficient financing costs, so that customers can share in those benefits." In fact, this is a paradox in the theory of managerial capitalism - an efficient firm drives down all costs including financing costs, yet we are to believe it exists to "create shareholder value" - that is to maximise funding costs.
The saving grace in telecommunications might be that the firm that used to be the industry's biggest access provider (Telstra) is about to be its biggest access seeker. If they can marshal their impressive intellectual power to the problem we might find a better outcome. Unfortunately they too have allowed regulatory processes to be captured by lawyers rather than economists.
A good strategy for them would be to split their regulatory teams into "old world" and "new world" teams. They can mount arguments that the old world treatment is to be grandfathered and new rules apply for the new world. The challenge is to have the "new world" team focussed on strategy, economics and markets rather than the law.
Note: modified to make clear that the AJ effect is not a case of gold-plating but an inefficient mix of capital and expenditure.
Novae Meridianae Demetae Dexter delenda est
Friday, June 24, 2011
The NBN and Telstra
Hopefully my views on the Telstra/NBN deal will appear in iTnews today. So I won't repeat them here.
But the NBN as a whole is a continual exercise in different policy challenges and options.
Peter Gerrand outlined his view that the ACCC decision on POIs "saved Telstra" allowing it to "re-emerge as the dominant national wholesale and retail telecommunications carrier."
This and other issues will be aired at an ACS-TSA NBN Policy Forum next week. The link is to the Sydney Forum on 30 June, there is also a Melbourne one on 28 June.
Novae Meridianae Demetae Dexter delenda est
But the NBN as a whole is a continual exercise in different policy challenges and options.
Peter Gerrand outlined his view that the ACCC decision on POIs "saved Telstra" allowing it to "re-emerge as the dominant national wholesale and retail telecommunications carrier."
This and other issues will be aired at an ACS-TSA NBN Policy Forum next week. The link is to the Sydney Forum on 30 June, there is also a Melbourne one on 28 June.
Novae Meridianae Demetae Dexter delenda est
Monday, June 20, 2011
Telcos - get your act in gear
In the SMH on the weekend it was reported that the rest of the telco industry had declined an invitation to get together with David Thodey "in good faith to meet together to discuss the challenges and opportunities we face as an industry at a time of unprecedented change."
His colleagues decided to interpret the invitation entirely through the lens of "access seekers" and reject the discussion on the basis they want serious regulation, and this image is potentially reinforced by the fact that when others declined the head of Wholesale chose to interpret the act as indicating that his customers had no areas of concern.
However, Thodey was really returning to a proposition he advanced in his Comms Day Summit speech (though the speech is not on the Telstra speech site).
In that speech Thodey said;
If – as an industry – we want to get the policy settings right we must have a stronger voice. With that in mind, let me come back to the question of how our industry can play a wider role and be a catalyst for change and growth.
o If we accept that technology is changing the way we live and work …
o If we accept that – thanks to next generation networks and technologies – our industry is now at the heart of an increasingly digital nation …
o If we accept all that as a given what, as an industry, are we doing about it?
Are we – as a group – stepping up and taking a leadership position on matters of national importance?
o Do we speak with a united voice when it matters?
o Are we seriously tackling endemic issues – such as our industry’s reputation on customer service and accountability?
o Or are we still thinking like a peripheral – rather than a national – industry?
I believe we are not stepping up to this challenge well enough … The failure to use our social, economic and political capital means that we don’t receive the credit or the influence we deserve.
Ah well. At least he tried. He went on in the speech to say "One of the first areas where, as an industry, we need to start leading is customer service. Poor service undermines our public credibility." In this he is echoing the Minister who was quoted in the Sunday Age again putting the industry on notice, saying;
I sympathise with customers who have suffered poor service at the hands of the telecommunications companies. It is simply not good enough and now they are effectively on notice that if they don't improve their practices themselves, the government will step in to ensure consumers get quality customer service.
One could, of course, question whether the meeting needs to take place given that Communications Alliance exists as the voice of industry (though I can never win the argument that it is not a "peak" body, because peak bodies are made up of other bodies). It is rewarding to see that, after a period of decline, the seniority of the people who make up the CA Board is now mostly direct reports to Chief Executives. David to his credit helped us in a critical phase at AMTA by agreeing to serve on its Board after it too went through a brief period languishing under insufficient representation on the Board.
Perhaps Thodey's mistake was to not ask CA to facilitate the meal. It is a little known fact that we did try in meetings hosted by ACIFs (CAs predecessor) Anne Hurley between Phil Burgess, Paul Fletcher and myself (representing AAPT) in 2006 try to close the gap between Telstra and the G9 - an initiative I originally put to Phil in November 2005. However, Phil could never really bring any movement from Sol to the table, and Optus was always convinced everything from Telstra was a con (see Fletcher's book).
There is an old adage - if what you are doing isn't working try anything else. Thodey's idea is good as a "do anything else". If the direct invitation hasn't worked, then see if someone else can organise it.
Novae Meridianae Demetae Dexter delenda est
His colleagues decided to interpret the invitation entirely through the lens of "access seekers" and reject the discussion on the basis they want serious regulation, and this image is potentially reinforced by the fact that when others declined the head of Wholesale chose to interpret the act as indicating that his customers had no areas of concern.
However, Thodey was really returning to a proposition he advanced in his Comms Day Summit speech (though the speech is not on the Telstra speech site).
In that speech Thodey said;
If – as an industry – we want to get the policy settings right we must have a stronger voice. With that in mind, let me come back to the question of how our industry can play a wider role and be a catalyst for change and growth.
o If we accept that technology is changing the way we live and work …
o If we accept that – thanks to next generation networks and technologies – our industry is now at the heart of an increasingly digital nation …
o If we accept all that as a given what, as an industry, are we doing about it?
Are we – as a group – stepping up and taking a leadership position on matters of national importance?
o Do we speak with a united voice when it matters?
o Are we seriously tackling endemic issues – such as our industry’s reputation on customer service and accountability?
o Or are we still thinking like a peripheral – rather than a national – industry?
I believe we are not stepping up to this challenge well enough … The failure to use our social, economic and political capital means that we don’t receive the credit or the influence we deserve.
Ah well. At least he tried. He went on in the speech to say "One of the first areas where, as an industry, we need to start leading is customer service. Poor service undermines our public credibility." In this he is echoing the Minister who was quoted in the Sunday Age again putting the industry on notice, saying;
I sympathise with customers who have suffered poor service at the hands of the telecommunications companies. It is simply not good enough and now they are effectively on notice that if they don't improve their practices themselves, the government will step in to ensure consumers get quality customer service.
One could, of course, question whether the meeting needs to take place given that Communications Alliance exists as the voice of industry (though I can never win the argument that it is not a "peak" body, because peak bodies are made up of other bodies). It is rewarding to see that, after a period of decline, the seniority of the people who make up the CA Board is now mostly direct reports to Chief Executives. David to his credit helped us in a critical phase at AMTA by agreeing to serve on its Board after it too went through a brief period languishing under insufficient representation on the Board.
Perhaps Thodey's mistake was to not ask CA to facilitate the meal. It is a little known fact that we did try in meetings hosted by ACIFs (CAs predecessor) Anne Hurley between Phil Burgess, Paul Fletcher and myself (representing AAPT) in 2006 try to close the gap between Telstra and the G9 - an initiative I originally put to Phil in November 2005. However, Phil could never really bring any movement from Sol to the table, and Optus was always convinced everything from Telstra was a con (see Fletcher's book).
There is an old adage - if what you are doing isn't working try anything else. Thodey's idea is good as a "do anything else". If the direct invitation hasn't worked, then see if someone else can organise it.
Novae Meridianae Demetae Dexter delenda est
Friday, June 03, 2011
Where are they now (2) .....
This time not from the Kate askew book - somewhat more recent.
At the yet again eponymous website Solomon Dennis Trujillo III looks like he's launching a campaign to be the first Hispanic President of the USA.
But let's look in more detail abouthis claims for his achievements at Telstra.
Key achievements under Sol’s leadership:
* Privatized a previously government-owned telecommunications ultility.
* Built an integrated media-communications company with CATV, Internet, directories, phone, and satellite.
* Built the world’s largest, fastest, most advanced mobile Internet – a high-speed wireless 3G network.
* Achieved highest user and revenue growth in the industry.
* Grew average revenue per user (ARPU) by approximately 15 percent and data ARPU by more than 200 percent.
* Created Hong Kong’s largest mobile business.
* Changed the company’s focus from products to the customer experience.
By my recollection he arrived late in the privatisation cycle, and even once pitched that the final traunche be delayed. The Government found him a hinderance not a help in privatisation.
He did not build any of the "integrated" elements - all there before he arrived.
I will concede the 3G network point, and the growth points. I think "created" in relation to HK mobile is fanciful as it implies starting from scratch not buying an existing business.
Finally, and most tellingly, aren't we being told by David Thodey that changing "the company’s focus from products to the customer experience" is HIS challenge?
Novae Meridianae Demetae Dexter delenda est
At the yet again eponymous website Solomon Dennis Trujillo III looks like he's launching a campaign to be the first Hispanic President of the USA.
But let's look in more detail abouthis claims for his achievements at Telstra.
Key achievements under Sol’s leadership:
* Privatized a previously government-owned telecommunications ultility.
* Built an integrated media-communications company with CATV, Internet, directories, phone, and satellite.
* Built the world’s largest, fastest, most advanced mobile Internet – a high-speed wireless 3G network.
* Achieved highest user and revenue growth in the industry.
* Grew average revenue per user (ARPU) by approximately 15 percent and data ARPU by more than 200 percent.
* Created Hong Kong’s largest mobile business.
* Changed the company’s focus from products to the customer experience.
By my recollection he arrived late in the privatisation cycle, and even once pitched that the final traunche be delayed. The Government found him a hinderance not a help in privatisation.
He did not build any of the "integrated" elements - all there before he arrived.
I will concede the 3G network point, and the growth points. I think "created" in relation to HK mobile is fanciful as it implies starting from scratch not buying an existing business.
Finally, and most tellingly, aren't we being told by David Thodey that changing "the company’s focus from products to the customer experience" is HIS challenge?
Novae Meridianae Demetae Dexter delenda est
Tuesday, May 24, 2011
Who would have thought it
Back in the mid 2000s when I worked for Telecom New Zealand subsidiary AAPT I tried to convince Telecom that structural separation would be in its strategic interest, and that following that separation Telstra would be able to be forced to follow. This culminated in my 2008 paper for the TJA.
At the same time I was advocating in Canberra that while structural separation was desirable it was hard to force onto incumbent telcos but would be possible at the time of new investment in fibre access networks.
Now, on top of the developments with the NBN and Telstra in Australia comes news that Telecom NZ subsidiary Chorus has won the FTTH contract for most of the country and will "de-merge". That this announcement was made by Paul Reynolds is somewhat interesting. In her book Bird on a Wire former CEO Teresa Gattung makes the claim that Telecom was close to separating before her departure but the incoming CEO from the UK placated the Board and convinced them that the line could be held at operational separation.
The financial models in the two countries are different, and the timescales are different. But now in Australia and New Zealand the former incumbents will not own the access network.
For the financial press, watch this space. Telstra's strategy in the medium term has to be to find a buyer for Telstra Clear. That could be very easily Vodafone or SingTel. It could very easily be one of the up and coming Australian Service Providers like iiNet or TPG.
Once divested of Clear and with separation progressing Telstra can then move to a merger of the retail companies. It would suit their objectives in the corporate market and would provide reasonable leverage for both in the residential market (growing the addressable market of the same applications and services). the Telecom and Telstra mobile networks also now fit well together.
Novae Meridianae Demetae Dexter delenda est
At the same time I was advocating in Canberra that while structural separation was desirable it was hard to force onto incumbent telcos but would be possible at the time of new investment in fibre access networks.
Now, on top of the developments with the NBN and Telstra in Australia comes news that Telecom NZ subsidiary Chorus has won the FTTH contract for most of the country and will "de-merge". That this announcement was made by Paul Reynolds is somewhat interesting. In her book Bird on a Wire former CEO Teresa Gattung makes the claim that Telecom was close to separating before her departure but the incoming CEO from the UK placated the Board and convinced them that the line could be held at operational separation.
The financial models in the two countries are different, and the timescales are different. But now in Australia and New Zealand the former incumbents will not own the access network.
For the financial press, watch this space. Telstra's strategy in the medium term has to be to find a buyer for Telstra Clear. That could be very easily Vodafone or SingTel. It could very easily be one of the up and coming Australian Service Providers like iiNet or TPG.
Once divested of Clear and with separation progressing Telstra can then move to a merger of the retail companies. It would suit their objectives in the corporate market and would provide reasonable leverage for both in the residential market (growing the addressable market of the same applications and services). the Telecom and Telstra mobile networks also now fit well together.
Novae Meridianae Demetae Dexter delenda est
Friday, May 20, 2011
This is funny and cruel
Thanks to Stephen King for pointing out this cute clip called "Vodafail the musical".
I'm not sharing it to have a dig at them - I think somehow that their network issues have been over-stated. Plus I think the combination of a bit of customer churn and new network investments means that the VF network is about to be very very good.
(Interesting discussion can be had here about the timing of investments. A similar issue existed at Telstra once where they didn't invest in more "head room" on their Bigpond servers, a virus infecting their customers created a traffic spike and brought down the service. The story goes that they paid out more in compensation than the capital investment that they had delayed - and had to make the capital investment.
Anyone who thinks running a telco is easy should ask a telco engineer, a marketer and a CFO to explain how you make investment decisions!)
Novae Meridianae Demetae Dexter delenda est
I'm not sharing it to have a dig at them - I think somehow that their network issues have been over-stated. Plus I think the combination of a bit of customer churn and new network investments means that the VF network is about to be very very good.
(Interesting discussion can be had here about the timing of investments. A similar issue existed at Telstra once where they didn't invest in more "head room" on their Bigpond servers, a virus infecting their customers created a traffic spike and brought down the service. The story goes that they paid out more in compensation than the capital investment that they had delayed - and had to make the capital investment.
Anyone who thinks running a telco is easy should ask a telco engineer, a marketer and a CFO to explain how you make investment decisions!)
Novae Meridianae Demetae Dexter delenda est
Monday, May 16, 2011
Mobile coverage and information in markets
In his Twisted Wire podcast last week Phil Dobbie raises the question of how consumers should be informed about the coverage available on mobile networks. On positing the idea of a consolidated detailed map of coverage Telstra’s Max Jennings said;
I don’t think so. It’s a very competitive industry in this country, and it’s in each of the operators interest to (a) publish correct data about coverage and performance and (b) to maintain that performance level over time. Now the coverage maps won’t indicate performance per se, they’ll indicate where the signal is available; but the capacity side of the equation is also extremely important.
Your customers will very quickly tell you if you are not meeting the expectations that were delivered to the customer at the time of purchase and they have the opportunity to walk to one or two or however many operators that exist selling mobile services.
I don’t think it needs to be regulated. I think the competitive forces within the industry will sort that issue out.
The discussion reveals a good example of the naive faith in competition and markets promoted by telcos. As I've outlined elsewhere the discussion ignores what is known in economics (after Akerlof's paper as the "market for lemons". More recently research shows that the problem of the efficiency deviation of lemons markets is increased by increasing competition.
The position described by Max of a customer being able to change network after the fact of finding poor coverage reflects the failure to understand that the consumer can't do that because of a lack of information about the alternative.
The suggestion ignores the high switching costs for customers as well. There is not only the problem of time commitment now but the very fragmented spectrum model that really you want to keep your phone on the network you bought it for.
But the buzzword in customer experience these days is "reducing customer effort" with its own score. The attitude of let customers buy and then experience the coverage doesn't reduce customer effort.
It is a bit disappointing because when Max and I worked together in the Corporate Customer Division of Telstra the research then conducted on customers by PA Consulting revealed that reducing the effort they had to put into managing telecommunications was a big driver of assessment of the quality of customer service. That in turn fed part of the assessment of the attractiveness of our long term agreements (called Strategic Partnership Agreements).
Max and Phil went on to share a joke about how Vodafone was already witnessing a big churn driven by poor coverage experience. Vodafone has now developed a coverage checker that conveniently uses Google Maps. It has however already received negative comments as the coverage shown isn't what is reported.
The site carries the usual disclaimer about such predictive models. Over time the site could get better by being adjusted by the actual experience at actual places. (one of which can also one how high off the ground you are - ever noticed poorer coverage on the higher floors of a building). I sympathise with the carriers and the difficulty of actually defining a coverage expectation, given all the factors that can affect it. But I feel for their customers far more.
But let's face it, Vodafone has felt driven to this situation because of a small disaster with coverage. Telstra and Optus have no need to respond.
Real world markets don't work like they do in economics or MBA courses - firms and policy makers need to recognise that.
Novae Meridianae Demetae Dexter delenda est
I don’t think so. It’s a very competitive industry in this country, and it’s in each of the operators interest to (a) publish correct data about coverage and performance and (b) to maintain that performance level over time. Now the coverage maps won’t indicate performance per se, they’ll indicate where the signal is available; but the capacity side of the equation is also extremely important.
Your customers will very quickly tell you if you are not meeting the expectations that were delivered to the customer at the time of purchase and they have the opportunity to walk to one or two or however many operators that exist selling mobile services.
I don’t think it needs to be regulated. I think the competitive forces within the industry will sort that issue out.
The discussion reveals a good example of the naive faith in competition and markets promoted by telcos. As I've outlined elsewhere the discussion ignores what is known in economics (after Akerlof's paper as the "market for lemons". More recently research shows that the problem of the efficiency deviation of lemons markets is increased by increasing competition.
The position described by Max of a customer being able to change network after the fact of finding poor coverage reflects the failure to understand that the consumer can't do that because of a lack of information about the alternative.
The suggestion ignores the high switching costs for customers as well. There is not only the problem of time commitment now but the very fragmented spectrum model that really you want to keep your phone on the network you bought it for.
But the buzzword in customer experience these days is "reducing customer effort" with its own score. The attitude of let customers buy and then experience the coverage doesn't reduce customer effort.
It is a bit disappointing because when Max and I worked together in the Corporate Customer Division of Telstra the research then conducted on customers by PA Consulting revealed that reducing the effort they had to put into managing telecommunications was a big driver of assessment of the quality of customer service. That in turn fed part of the assessment of the attractiveness of our long term agreements (called Strategic Partnership Agreements).
Max and Phil went on to share a joke about how Vodafone was already witnessing a big churn driven by poor coverage experience. Vodafone has now developed a coverage checker that conveniently uses Google Maps. It has however already received negative comments as the coverage shown isn't what is reported.
The site carries the usual disclaimer about such predictive models. Over time the site could get better by being adjusted by the actual experience at actual places. (one of which can also one how high off the ground you are - ever noticed poorer coverage on the higher floors of a building). I sympathise with the carriers and the difficulty of actually defining a coverage expectation, given all the factors that can affect it. But I feel for their customers far more.
But let's face it, Vodafone has felt driven to this situation because of a small disaster with coverage. Telstra and Optus have no need to respond.
Real world markets don't work like they do in economics or MBA courses - firms and policy makers need to recognise that.
Novae Meridianae Demetae Dexter delenda est
Wednesday, May 04, 2011
Fairfax
In today's Crikey Margaret Simons writes about the decision made at Fairfax to outsource some sub-editing.
In describing the task facing Fairfax's senior execs she writes;
The whole thing is bloody and awful, and while it is part of my job to criticise what Hywood and Matthews do, I also recognise that, despite their fat salaries, their jobs are far from enviable. God knows why people scrap so hard to be in these positions. One assumes it is because they believe they can pull gold out of the shit. I wish I shared their belief.
There are no easy answers to trying to save dying media business models, and they are right to do what their predecessors have failed to do -- admit the depth of the problem and try to do something about it.
She goes on to note that the new CEO has fronted-up to the idea that the classifieds business - the old "Rivers of Gold" - is basically dead.
There are a few observations to make. The first is that Fairfax had plenty of opportunity to act about on-line much earlier. In about 1994 when I was the Account Director for the media portfolio at Telstra the Fairfax CIO Frank McMahon asked us to talk to him about online services. (For the record Frank was responsible for the initial computerisation of the production process at Fairfax - no slouch).
He was particulary interested in what was called "On Australia" which was a Microsoft/Telstra JV. At that stage it was about Microsoft's non-internet based MSN - in the days when AOL and other dial-up subscription services were booming.
To the credit of the guys from telstra Multimedia who met Frank, they told him all about On Australia, but really recommended he have a look at a thing called Mosaic - which was the first web-browser.
In the end Fairfax took a decision to go with a "corporate" style on line service buying something that had a large base in libraries. This route was partly chosen because it could be achieved by acquisition.
The second is that the media are not alone in fronting what Clayton Chritensem dubbed The Innovator's Dilemma
. This is the fact that to expolit the new business as it develops means sacrificing some of your revenues and profits from the old business. The example he used is the manufacture of hard disc drives.
Whenever in business you hear a CEO or exec team reject a strategy because it will "cannibalise our existing business" then you know you need to get out. Quite simply, if the existing business can be cannibalised then it will be cannibalised by someone else if not by you. It is closely related to a problem in business case development of what is the base case - the do nothing case - against which a strategy should be implemented. Too often it is a flat line or worse an extrapolation of historic growth when the reality is that the base case is declining revenue. As an example, AAPT was unable to develop a strategy for VoIP in conjunction with broadband because of how healthy the voice resale margins were.
The important thing to remember though is that CEOs are ultimately paid the big bucks to make the hard decisions. they should all sign-up to JFKs invocation "We choose to go to the moon, not because it is easy, but because it is hard".
Novae Meridianae Demetae Dexter delenda est
In describing the task facing Fairfax's senior execs she writes;
The whole thing is bloody and awful, and while it is part of my job to criticise what Hywood and Matthews do, I also recognise that, despite their fat salaries, their jobs are far from enviable. God knows why people scrap so hard to be in these positions. One assumes it is because they believe they can pull gold out of the shit. I wish I shared their belief.
There are no easy answers to trying to save dying media business models, and they are right to do what their predecessors have failed to do -- admit the depth of the problem and try to do something about it.
She goes on to note that the new CEO has fronted-up to the idea that the classifieds business - the old "Rivers of Gold" - is basically dead.
There are a few observations to make. The first is that Fairfax had plenty of opportunity to act about on-line much earlier. In about 1994 when I was the Account Director for the media portfolio at Telstra the Fairfax CIO Frank McMahon asked us to talk to him about online services. (For the record Frank was responsible for the initial computerisation of the production process at Fairfax - no slouch).
He was particulary interested in what was called "On Australia" which was a Microsoft/Telstra JV. At that stage it was about Microsoft's non-internet based MSN - in the days when AOL and other dial-up subscription services were booming.
To the credit of the guys from telstra Multimedia who met Frank, they told him all about On Australia, but really recommended he have a look at a thing called Mosaic - which was the first web-browser.
In the end Fairfax took a decision to go with a "corporate" style on line service buying something that had a large base in libraries. This route was partly chosen because it could be achieved by acquisition.
The second is that the media are not alone in fronting what Clayton Chritensem dubbed The Innovator's Dilemma
. This is the fact that to expolit the new business as it develops means sacrificing some of your revenues and profits from the old business. The example he used is the manufacture of hard disc drives.Whenever in business you hear a CEO or exec team reject a strategy because it will "cannibalise our existing business" then you know you need to get out. Quite simply, if the existing business can be cannibalised then it will be cannibalised by someone else if not by you. It is closely related to a problem in business case development of what is the base case - the do nothing case - against which a strategy should be implemented. Too often it is a flat line or worse an extrapolation of historic growth when the reality is that the base case is declining revenue. As an example, AAPT was unable to develop a strategy for VoIP in conjunction with broadband because of how healthy the voice resale margins were.
The important thing to remember though is that CEOs are ultimately paid the big bucks to make the hard decisions. they should all sign-up to JFKs invocation "We choose to go to the moon, not because it is easy, but because it is hard".
Novae Meridianae Demetae Dexter delenda est
Subscribe to:
Posts (Atom)