Telecom should keep out of content says analyst

Telecom New Zealand must avoid the trap of thinking content is 'more sexy' than running a good network, says Australian telecommunications analyst Paul Budde, who believes Xtra's new emphasis on news is a 'particularly frightening development for New Zealand.'

Telecom New Zealand must avoid the trap of thinking content is "more sexy" than running a good network, says Australian telecommunications analyst Paul Budde. If telcos try to move out of their own areas of expertise they will inevitably fail, but not before doing immense damage to the industries they encroach upon, he says.

Budde is currently compiling his third "Telecommunications and Information Highways New Zealand Report" which is due in November.

"Telecommunications companies around the world are seeing their revenues from voice services dwindle and are now in a rush to move to e-commerce," he says. "Unfortunately quite a few of them are confusing the infrastructure with the actual content."

Budde is concerned that telecommunications companies will set up the IP network necessary for electronic commerce, and then decide to offer their own services — whether accounting software, banking, news reporting or travel agencies. They can't help themselves, he says. "They look at these areas and say 'Why on earth shouldn't we?', and they fall into the trap."

Already, he says, Telecom's Xtra service is starting to employ journalists, "and this [move into news publishing] is a particularly frightening development for New Zealand, where there are no regulations stopping Telecom from dominating any market they choose".

In response Telecom spokesman Glen Sowry says: "So we should just shut down Xtra? And we're not actively hiring journalists — we're partnering with established news organisations like IRN and Reuters rather than having our own news gatherers. Other content like the gig guides and restaurant reviews tends to be contributed by users. We encourage people to make the site relevant to themselves."

Telecom is not setting out to take on news organsations, he says. "But if telcos are able to partner with other organsations and jointly bring our areas of speciality to customers, that's got to be good for everyone."

However, Budde says in other countries a regulator is the first step before going to court. The regulator can quickly make decisions and give guidelines, "unlike the typical New Zealand scenario where it ends up in court and is locked up for years. We don't have the time to wait for that before developing e-commerce."

In the long run, he says, the telco — whether Telecom or any other — won't succeed. "To begin with, they can out-compete any potential competitor just because they own the infrastructure. If you sell accounting software and Telecom starts selling it online, are you going to go to them and get the network you need to compete? It makes it very hard. But longer term they're not an accountancy supplier, not a publisher, not a travel agent, and the companies with the expertise will fight back and beat them."

Telecom's role, he says, should be to provide the best possible platform that allows other companies to rent capacity and build their own e-commerce business. "In the new environment, where software suppliers will be providing applications over the network and everyone is looking at e-commerce, there is plenty of money to be made by Telecom if it offers the best possible computer network. It's moved from supplying voice lines to a computer system — it's the biggest LAN in the country."

While the underlying structure is changing, he says: "I don't believe there will be much change in the actual services and products that will be delivered. True, we'll get pay-per-view but the product — the video or documentary — will stay basically the same. E-commerce will be just another version of … something we have been doing for many years, for centuries."

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