Telstra's plans welcomed ... with a brick

commentary Whatever strategy Telstra announced during the strategic review of its operations last week was always going to be controversial. As the nation's former monopoly telco -- in a market where competition is not yet strong enough to be called robust -- any move Telstra makes affects the operations of dozens of smaller telcos.

commentary Whatever strategy Telstra announced during the strategic review of its operations last week was always going to be controversial.

Renai LeMay, ZDNet Australia
As the nation's former monopoly telco -- in a market where competition is not yet strong enough to be called robust -- any move Telstra makes affects the operations of dozens of smaller telcos.

But Telstra's plans to replace its CDMA mobile phone network with a 3G GSM equivalent particularly seemed to irk its competitors, adding to long-standing tensions about the cost of access to Telstra's network hardware.

"Telstra's regional customers must be wondering why the company has been constantly spruiking CDMA only to now tell them it is being ripped out," said a fiery statement issued on Wednesday afternoon by the executive director of the Competitive Carrier's Coalition (CCC).

The industry group represents second-tier telcos like Macquarie Telecom and Primus.

"Telstra shareholders must be wondering why the company is trashing equipment so recently bought, rather than trying to recover some sort of return on it by selling what appears to be a perfectly acceptable network," said David Foreman.

The director also took aim at Telstra chief executive Solomon Trujillo's comments last week that Telstra's strategy required the presence of a "reasonable" regulatory environment.

"The plan required a government and regulator willing to endorse a business plan that looks like the last vestige of Soviet-era industrial organisation -- one giant monopolist and no choice for consumers," said Foreman.

The heat on Telstra was evident all week.

"Stand up for competition. And stand up to Telstra." was the headline on a full-page advertisement placed jointly in Friday's The Australian newspaper by almost all of Telstra's serious competitors, including Optus, Primus, AAPT and iiNet.

The ad -- which would have left the carriers out of pocket by tens of thousands of dollars -- told consumers not to trust Telstra and accused the carrier of "destroying competition to boost profits", issuing political ultimatums to the government, and in general playing bully.

In addition, Primus managing director Greg Wilson today said in speech notes delivered to the media pertaining to a talk given to a Melbourne lunch that he had heard the experience of dealing with Telstra's new management team described as "the business equivalent" of the popular movie 'Meet the Fockers'.

"Most of those who have come into contact with the new family seem to have been traumatised by the experience," he said. The event was held by the Service Providers Association (SPAN) event.

But while in some respects Telstra's competitors have a point, it should also be noted they too have their own agendas to push -- there's money to be made if the government harshly restricts Telstra's ability to control its own infrastructure.

A different view of Telstra's plans was provided by analyst firm IDC, which issued a report pointing out that the telco's plans were necessary ... even obvious.

"It appears Telstra's next-generation network (NGN) strategy was cookie-cut from those of incumbent operators elsewhere ... with highly innovative incumbents like Spain's Telefonica and France Telecom already commercialising NGN-based services, Telstra is now three years behind its peers," wrote IDC.

"Phasing out the CDMA network and replacing it with a 3G GSM network makes absolute sense."

The firm also supported Telstra's regulatory approach.

"The key to Telstra's success will be to balance a [tightrope] act by continuing to seek regulatory holiday while transforming the corporation from a multitude of operating units into one single factory that rocks rather than chalks," IDC concluded.

Telstra's plans attracted very few criticisms from the government or regulators, unsurprising given that both groups should have had some inkling of what was going on before Telstra informed the media.

Communications minister Senator Helen Coonan issued her own statement praising Telstra's plans, and calling regional and rural customers the "big winners" from the 3G GSM rollout.

In the light of these other reactions, it's beginning to look like Telstra's competitors are getting less traction with the powers-that-be than they could have hoped. And regardless of whether they're right or wrong about Telstra's actions harming competition, that's the battle they need to win to get the regulatory controls on Telstra they want.

This could all change, however, if Telstra pushes last week's wins too far.

Your writer has no doubt Trujillo's rendition of Frank Sinatra's "I did it my way" at a Telstra function earlier this week was a rare relaxed moment for the executive who will face a treacherous path negotiating the next few months.

What do you think of Telstra's new strategy? Is the telco anti-competitive or simply doing what needs to be done? Send your thoughts to renai.lemay@zdnet.com.au.

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