Telstra trying to cover its assets: Budde

Telstra's negotiation with Optus for cheaper wholesale copper network access was an exercise in protecting its assets, said veteran telecommunications analyst Paul Budde, who claimed the deal would actually lessen competition.Budde said Telstra's recent agreement on pricing for PSTN (Public Switched Telephone Network) access from mid-2003 to mid-2006 with its chief rival was designed to protect the telco's "aging network" from becoming obsolete.

Telstra's negotiation with Optus for cheaper wholesale copper network access was an exercise in protecting its assets, said veteran telecommunications analyst Paul Budde, who claimed the deal would actually lessen competition.

Budde said Telstra's recent agreement on pricing for PSTN (Public Switched Telephone Network) access from mid-2003 to mid-2006 with its chief rival was designed to protect the telco's "aging network" from becoming obsolete.

According to Budde, the deal was motivated by "preventing [Telstra] competitors from moving towards new technologies that would be a serious threat to its dominance in the telco market."

The copper network remains the biggest revenue earner for the telecommunications heavyweight, said Budde, as voice services continue to bring in around 80 percent of the providers total business profits.

Budde said that developments in the VoIP triple-play network (integrating voice, data and video services) are presenting significant customer savings opportunities over traditional connections.

"The cost advantage of IP makes it possible for operators of these networks to, for example, offer an access charge of AU$30 per month, with additional applications being available for an incremental charge," said Budde. "For instance, 'all-you-can-eat' voice services for AU$5 per month, broadband TV for AU$5 per month, multimedia games for AU$5 etc."

Budde said that Telstra's move to lower the price of access to the old network will prevent other telcos from exploring the new technology.

"This [deal] allows Telstra to protect its old network and milk its incumbent assets. This is quite logical, but I believe it is not in the best interests of innovation and long-term competition," he said.

" The fact that, after close to a decade of failed, or at least very painful, negotiations, Telstra has come up with this announcement (at a time when new disruptive technologies are making inroads) is a clear indication of Telstra's strategy."

Budde adds that the acceptance of the Telstra network access deal by Optus is testament to the passivity of the telco market, as competitors are "taking the 'lazy' option of getting cheap rides on an old network, rather than pushing ahead with new, more innovative infrastructure that would really deliver some competition to Telstra."

He warns that in the short-term agreeing to such a deal might make good financial sense, "it doesn't constitute a good long-term sustainable business model".

Budde predicts that Optus will resume "whinging ... about the prices and conditions offered to them by Telstra" to the Australian communications regulator in 6 to 12 months time.

"By not moving towards generating their own infrastructure, rather than just remaining resellers of Telstra services, they will be kept hostage indefinitely by Telstra," said Budde.

Newsletters

You have been successfully signed up. To sign up for more newsletters or to manage your account, visit the Newsletter Subscription Center.
See All
See All