Under the heads of agreement announced this afternoon, Telstra would provide access to Telstra facilities and progressively migrate Telstra traffic onto the National Broadband Network, subject to regulatory approval. The agreement for these terms will have an approximate value of $9 billion.
Separately, the Federal Government has agreed to progress “public policy reforms” with an attributed value of approximately $2 billion. These basically involve changes to Telstra’s current universal service obligations with the establishment of a new Commonwealth entity – USO Co – which will deliver unprofitable services. USO Co will receive a maximimum of $100m in annual taxpayer contributions with the rest to be funded by presumably increased industry contributions. It will take over Telstra’s USO obligations from 2011.
Telstra also said it has received a written agreement from the government that it will be able to participate in LTE spectrum auctions under the deal.
“This is a sound outcome for NBN Co because when finalised it can maximise the use of existing infrastructure and accelerate the roll out of its network,” NBN Co CEO Mike Quigley said in a press release.
NBN Co added that Telstra would likely become its largest customer. NBN Co will pay Telstra for migration of traffic on to the NBN and the decommissioning of its network.
The Heads of Agreement also provides for NBN Co’s use of Telstra’s “existing fit-for-use infrastructure, such as ducts, pits and conduit and a right to acquire Telstra backhaul services and space in Telstra exchanges. While there is a considerable amount of negotiation and contractual work to go, we believe this agreement is a significant step forward to creating a more competitive telecommunications industry,” Quigley said.
Telstra expects to be able to place the deal to a shareholder vote in the first half of next year. The deal is subject to both that vote and ACCC approval.
About this time 9 years ago, I was sitting in a management meeting with my Director of Marketing, and we were reviewing the latest iteration of a truly dismal situation. The telco bubble had burst, 3G was a bust, and a huge internal project to install GPRS and MASSIVE ISP infrastructure had just gone through it's 3rd rescoping. From the hubris of a fully connected world where everything ran off a PDA - a state the world only managed to get to in 2009 with the iPhone 3GS - came the realisation that the only proposition available was. basic colour WAP over GPRS, using the classic Ericsson T65 handset.
Out of sheer frustration, my director uttered the immortal words in his best James Bond "Gentlemen. I want a killer app in 2 weeks". a meeting that still amuses me to this day, although it was anything but funny at the time (the project bill by this point was bordering on ?55m). Since that time I have many more 'amusing' meetings, where out of sheer frustration at the world of complexity, decisions have been made to pursue a technology or a specific way of selling come hell or high water, hoping this eventual silver bullet will prove to be what unleashes torrents of success and money.
A little bit like throwing $48bn at a fibre network (Australia) or $10bn (NZ - you didn't think the country would be rewired for less than that, did you?). This is the silver bullet to unlock all our problems. Especially if you actively destroy the existing technology and force everyone to start again.
Or maybe deregulating the Building Act, to make it faster cheaper and easier to build new houses. now there's a silver bullet to get the economy going. Too bad that people don't get the difference between treated and untreated timber, or what living in NZ's wet climate really is like (we have been here for a great many years. not that much has changed!)
The expression, 'No Silver Bullet', comes from a book written by software engineer Fred Brooks in the 80's. He wrote
".there is no single development, in either technology or management technique, which by itself promises even one order of magnitude [tenfold] improvement within a decade in productivity, in reliability, in simplicity." While Brooks insists that there is no one silver bullet, he believes that a series of innovations attacking essential complexity could lead to significant (perhaps greater than tenfold in a ten-year period) improvements.
Over the christmas break - while having a ball with my Telecom XT connection - I read a book called 'How the Mighty Fall' by Jim Collins. His main premise was that successful companies get arrogant, start to decline but fail to recognise until the decline is too late, then throw resource and money at the problem until it's fixed. which almost never happens, and they carry on as 'zombie' companies until closed down or sold off. Basically you'd have to be spectacularly bad to fail outright. it's more a case of gradual decline. Probably true for a large corporate trading on old successes.. I think smaller companies don't have this sort of luxury!
So how many companies s do you see out there lurching from strategy to strategy, product launch to product launch, always consuming more and doing more but never quite seeming to succeed?
Success is'nt about just striking the right mix - although that's important to. It's about endeavouring to understand your market, trying, adjusting, reflecting, going back and refining and keeping at it. It's about consistency mixed with execution. It's about staying the course and holding your nerve, and not backing away when it starts to look hard. And it's about trusting the people around and beneath you, while also supporting - and verifying - that things are on the right course. It's also about communicating widely and taking feedback from all places - not just those you work with day by day, but everyone. If the cleaner can tell you what you're about - you know a lot of effort has gone into living and breathing what you're doing.
It may not be widely known, but Apple launched the iPod in 2001, as a followup to the nascent MP3 market started by the Diamond RIO (I had one of those. good gadget). But they applied continuous effort to innovation, change, and were lucky enough to have some powerful management able to leverage content. In 2003 iTunes went Windows. In 2004 the 15GB iPod's came out, and then things really started getting interesting.
Imagine sitting in that meeting at Apple in 1999, with a Director proclaiming "Gentlemen. I want a killer app in 2 week", and proposing what iPod has become. Brass ones for sure.
Bring on the Broadband.
Over the the christmas break in 2009/10, I took the opportunity to buy a Telecom Prepay Mobile Data stick, running on the new XT network, and used it while away on holiday at the beach. Modern lifestyle means it can be very hard to be away from what you get used to: instant access to information, banking, email. and even sometimes just filling in quiet time when it's just too hot to go outside (and to avoid the other great holiday mode behaviour. eating!)
I also compared coverage with the Vodafone 3G network, which has the benefit (or curse) of being able to fallback to GSM/GPRS mode. In that review, I found the Vodafone network wanting.
This Easter break, we took the opportunity to have another beach break, this time in the Coromandel (near Hot Water Beach), and I have availed of modern technology during the high noon heat. The township I'm in is small but well formed, some of the houses look to be worth staggering amounts (especially those with walks down to the beachfront), and it has been genuinely gratifying to see people out camping and benefitting from the facilities.
The campsite we're at suffers power failure like clockwork between 7 and 9pm, when the draw is high. Water pressure falls to a trickle around 4pm. The general store reminds me of NZ in the late 70's (pile stock high, sell straight from the box), and some of the buildings reflect the building glory of that era (shades of brown everywhere).
But the township also has wide area WIFI Coverage (really) at $8/hr at not so bad speeds, spread across a area around 1 square kilometre, run by a group of shops on behalf of the community and visitors to the area. Vodafone's coverage and speed is good, but my gadgets fallback to 2G far too much for me.
Telecom's XT coverage is brilliant, with HSDPA readily available. Not bad for a coastal town with few residents.
This got me thinking about the pace of change in this country, and how telco is evolving as a whole. In my first role at Telecom (1996), the manager at the time told me how 'every year since 1987' had been the year of Mobile Data, the next big coming thing for the industry (1987 being the year Telecom rolled out the AMPS network - target forecast 50k subs by 1995). It really took the launch and settling of GPRS - 2003 - and widespread launch of 3G -2005 - along with the iPhone - 2007 - before anyone could really say that Mobile Data was here to stay.
But it is, and Telstra's model for Next G - go far, go fast, go deep - shows exactly what you can do if you build a high-quality mobile network. Too bad it's data pricing can't compare with a $35/month DSL connection. Mobility still enjoys a premium - for now - but the relentless downward pressure from government, consumers, competitors and so on, means this business is changing just as the huge pressure in fixed calling dropped prices to 'irrelevant' status (compared to mobile).
So Telecom suffered unforgiveable failures with XT, and is now running ads in the papers of photogenic staff who lived through that period (although Chris Q really looks just over it). So Mr Hamburger has stopped the Florida commute, and maybe a local will be appointed to take ownership of the line. The network is there, it's running. and it's still performing well.
That mobile network failures can take this much media attention shows exactly how important Telecom - STILL - is to this country. The difference: they are getting over the introduction and settling of new technology (just wait till the IP Voice services start rolling out), and just getting into the game for the next 10 years.
Where's everyone else?
Well, what a february it was, as a start to the new decade.
Telecom suffered the most ignominious of sustained failure, with their shiny new WCDMA 850Mhz network having fallen over several times, with the blame eventually falling on AlcaCent (the supplier) and a sacrificial head from Telecom (Frank Mount, whose contract ended in June 2010 anyway). Add to the woe problems with the sacrosanct 111 emergency call system, and the Telecom must feel like someone has a voodoo doll of Spot furnished away, full of broken fibres (in the stitching). Add the new comments from the former boss Ms G about how things were'nt like this when she was there, and you can't help but feel that someone probably doesn't like you!
But never fear, as Vodafone NZ and 2degrees have invoked the fates and called on the combined forces of Murphy and Sod, taking switching campaigns to market on the back of these failures, inviting customers to join a reliable network. so now it's just a waiting game for their network to fail (as indeed it already has, but not to the same scale).
I'm interested in what is happening inside Telecom, to it's sales staff, support staff, field staff and everyone involved in service delivery. Because it is from these folks that customer's present and future take their lead on purchasing decisions. and there is nothing that has more inertia or destructive force that delivery entity that refuses to supply. A loss of confidence is hideously difficult to turn around - collective memory being a self-healing, reinforcing wall of despair (at least where salesfolk are concerned). After all, who wants to sell something they perceive to be a lemon, and have to deal with the fallout?
It has been my jolly good luck to have taken career roles where a turnaround has been required, coming from high expectations to failure to having to rebuild. and it never quite is the same again. The hubris is gone, replaced by an air of 'whatever', and a market that actively questions what is being said, even if all the elements are fixed. My article on using Telecom Mobile over the Christmas period has been challenged, but I stick with my assertion that Telecom has the better network. especially now that the failures will force people inside the company to sit up and take notice.
Microsoft required Windows 7 to get over the failure of Windows Vista, even though the service packed product is quite usable (I have Vista on one of my machines and it works very well). But markets have long memories, and product quality is so good these days, that customer replacement cycles have extended and people are more selective.
Service providers (like Telco's) can be frustrating to work in at times - you know good stuff is coming but you can't really say anything, because inevitably Sod's Law kicks in and you miss the dates you said. Equally people don't want to hear 'coming soon, we are working on it really really really'. they want solid dates, and they expect them met. Fair enough - but technology is such a complex beast that dates given are almost always under threat, and compromises/workarounds have to be made to get to the dates - or if the above can't be done. you slip. As companies get larger and have more systems, the complexity becomes exponential. so things take longer.
Speaking to some folk I know (none of which are involved with XT), we surmised that somewhere in the deployment of XT a compromise was made. A workaround was introduced to meet a date - "of course we can reuse xxx component, it's a few years old now but it still works" - which is pure poison with technology. Vendors can only backup, within reason, their own kit (and even then they struggle against all permutations), but telco's rarely rip and replace an entire system.
So 'integration' is required - words that are enough to send a shudder down your spine if you've ever had to do it. Integration is a level of joy reserved only for the brave.
But when integration goes right then wrong, products don't work well. When products don't work well, the humans cannot explain, respond or repair fast enough. When response is slow, confidence is lost.
Confidence lost is not a good place to be, personally, professionally or collectively. The YouTube clip of the Downfall/XT mashup is below, which I found quite funny. But the original is very sobering (when reality has struck home, when you have to take responsibility. and the first response is so very human, and so very appalling).
What conversations are being had inside the great Service Providers everyday? at what point are the accusations made of 'lies, betrayal, hiding things etc'?
I wonder how confident the Telecom folk are feeling today?
2degrees Mobile and Telecom XT launched in 2009. Vodafone, Orcon and towards the end of the year, TelstraClear, launched offers using unbundled copper lines (telecom copper connected to other providers infrastructure). Telecom Wholesale created and launched a huge range of IP-only access products, allowing a service provider to offer Internet, Internet+IPVoice, or Private Network products, with a range of service speeds and characteristics.
The Commerce Commission waded in on commercial wholesale rates for voice calling for fixed and mobile networks, and of course the government pushed the Crown Fibre Company concept. The field service industry was shaken by Visionstream in Northland, and the march of Downer EDI as the technicians of choice. Chorus began the hard work of turning variable grade copper and successive investment decisions of the last 30 years into a semi-viable business model. and the last vestiges of the NZ Post Office were tackled (there are still chalk and blackboards in use out there, in the depots.).
TelstraClear flipped back to Vodafone for mobile, Black and White, Digital Island, Compass and Callplus all took Mobile (Wholesale) offers to market, most settling around the 25c/minute mark for mobile (good rate that.). FX Networks continued to cobble together a fibre network of own-grown and in-sourced, the utility companies tried to become telco's (Northpower, Vector.).
So lots of technology investment, lots of change, lots and lots and lots of money being spent. Or at least, planned to be spent.
NZ was about 4.2m people five years ago. I think we're about 4.3m now. The NZ telco industry is forecast to shrink from $5.6bn to $5.2bn by 2012. and the collective investment of the last few years has been about $4bn as I recall.
Commercial models based on the old world of TDM - POTS for Voice, with DSL grafted on top, moving up to Centrex or Trunk lines - is disappearing as the technologies become just another service, sitting on top of an IP-enabled access circuit. Mobile phones' continue to be the access device of choice (note I said MOBILE - not the mobile service providers).
The notion of paying $xxx for a phone line, $yyy for mobile, $zzz for Internet, and a raft of rates and charging models (1 minute billing, per minute billing, mobile mb being expensive but fixed being cheap). is all challenged, thrown in the air, and being thought about by many people. Some have no experience in economics, the reality of making targets, the challenge of recovering expensive installation costs. Some like to push numbers as a soundbite. Others overthink the market or allow inertia to act as a cushion to aggressive or poor sales practises.
Identity is the next big change to happen, as a way of standing out or just surviving this brutal market. Superior technology was an excellent way of creating identity, until the competition caught up. Telecom has caught up, and at a national level - so the technology line is reset (good time to buy shares btw - their performance can only improve from here). What do the others stand for? are their services even relevant now? Being $5 or $10 cheaper than the next one in line is hardly a compelling reason to change providers. And would you really trust your critical business apps to a company that comes in thousands of dollars cheaper? that gap in revenue is being achieved by some means, and not all of it is new technology - a lot has to do with tiny investment in backup systems and resilience.
The major movie franchises spent most of this decade being successfully recast - REBOOTED - along the lines of reality, grit, plausibility, and connection with the audience. Daniel Craig's James Bond is brilliant. Batman is enjoyable. Sherlock Holmes was enjoyable and grounded in the real when dressed in fantasy. So it goes.
2010 marks the start of the reinvention of NZ Telecommunications. The models of the old are challenged and under severe strain. The game has been lifted for all players. There is less money to be made but more people chasing it.
Companies will fold. Products will fail. Teams will be reorganised. Strategies will be challenged. Pressure will cause innovation. Careers will be made. Companies will succeed.
I look forward to being part of it!
BTW: This is the first article I wrote using Windows Live Writer and posting via the Metaweblog API Mauricio made available quote some time ago... worked very well...
antoniosk's profileAntonios Karantze
Antonios has been actively employed in the IT & Technology sector since 1991, and has worked on many commercials projects and products in New Zealand, Australia and the United Kingdom. Working in product or actively managing programmes of work, he has always focused on building for the end customer, and not just promoting new technologies. Industry experience includes all telecommunications areas for business and private customers, private insurance, loyalty, media, energy and gambling.
Since 2013, he has been involved with the development and launch of many popular smartphone applications in New Zealand, including
- TAB Mobile
- AMI & State Insurance digital experience
- Fly Buys
- Newshub for web and app
- Genesis Energy & Energy Online
- MyACC for Business
Genuinely passionate about technologies, internet and computing in general, he lives in the city he was born in - Wellington, New Zealand, the creative heart of hub of digital sector for the country.