Over the next decade, telcos will become more like IT giants, Australian telco analyst Paul Budde says.
Budde, who visited New Zealand last week, says “The fact Telecom intends to invest in data centres fits in with my view that in 2010, telcos will look more like IBM, HP and Microsoft than Telecom and Telstra. The whole trend is towards IT.”
There are major changes ahead and Budde says it’s good to see Telecom preparing for them with its all-IP network, to be built by Alcatel. “But with IP, they’re a bit late. Most telcos started that two to three years ago.”
The very nature of IP will change the way telcos derive revenue, pushing them down the IT path, Budde says.
“On an IP network you can’t charge for calls, but it’s ideal for developing applications that can be made available on a charged basis. In ten years’ time, I believe 60% of broadband revenue will come from the enterprise space and companies will want to use it to communicate on a one-to-one basis with customers.”
Revenue from that source will compensate for the declining voice call market, he says.
As for Telecom’s relationship with TelstraClear, he doesn’t discount recent speculation across the Tasman that in the future, Telstra may “gobble up” Telecom.
“At the moment it wouldn’t be possible, but in the future, [competition law] policies may be changed.
“If you look at Telecom and Telstra, it doesn’t make sense for Telstra to operate in a Melbourne-sized market, which New Zealand is. The longer-term picture for Telstra is operate to take an ownership stake in Telecom.”
TelstraClear has been charged with becoming profitable by 2004, “but if Telecom can prevent it becoming profitable for a further two years, Telstra may pull out of New Zealand.”
The best chance Telecom would have of doing that would be through the regulatory process and in light of telecommunications commissioner Douglas Webb’s determination on interconnection prices and draft determination on wholesale rates, things don’t look hopeful in that regard, he says.
“The odds are stacked in Telstra’s favour.”
As for Telecom’s protestations that such rulings will hinder its ability to invest in its network and prevent other carriers rolling out their own, Budde says Telecom is spreading FUD.
“It’s a big yawn. We all knew years ago that the commissioner would be appointed one day and the fact that Telecom’s reaction [to his determinations] is panicky indicates they don’t have a strategy to cope with the changing environment.”
Budde also offered his views on Project Probe, the government’s regional broadband strategy, for which the tender timetable was recently extended and an extra, purely satellite-based tender added.
“The Probe initiative is fantastic. There should be leadership from the government because this is a social and economic issue and these projects aren’t economically viable for the private sector. However, what is missing is a strategic umbrella above the projects. It’s wrong to have 14 projects with their own IT infrastructure etc. It’s important the before you do start implementing the projects, you have an overall plan.”
Overseas, regional arrangements along the lines of Probe have had high failure rates, he says.
“Internationally, 75% of the projects don’t work and most are taken over by the incumbent telco and we can learn from that. You need to look at the whole regional infrastructure first and then start filling the gaps with this technology, this operator etc. Infrastructure is a utility.”
The only realistic solution, he says, is for an existing national infrastructure operator to take on the task, namely Telecom.
Telecom is partnering with BCL to bid for the regional tenders, but lost the Southland contract, the only one let so far, to a Vodafone-Walker Wireless bid.
Budde says the addition of a nationwide satellite tender is a good move.
“For some areas, it’s the only option.”
Again, Telecom would be the ideal provider, he says.
“Satellites have to fit in with fixed and wireless networks.”