Who is the biggest loser in Telecom cabinetisation plan?

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Quentin

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#17554 1-Dec-2007 06:57

I have been lurking around this forum for sometime and this is my first contribution.

In my opinion, Vodafone NZ is the biggest loser. They bought Ihug in order to provide a fixed and mobile options the NZers. The internet plans that they are providing now are not that exciting partially i think they are still wondering what they can do with ihug "dominance".

When Ihug placed their red hot box in the exchange, it looks like a big day for Vodafone and Ihug. I can hear Vodafone saying..."now we can provide cheaper internet offering through LLU"

Obviously, the marketing and engineering boys and girls did not sit together to understand the technology of ADSL. If they have do a google search, they would have found out that European operators have done similar rollout as Telecom in the past.

To me, buying ihug is the biggest mistake Vodafone has ever made. If they are really keen, why not expand ihug infrastructure? Why decide to announce to the public that they want to further expand their HSDPA network? Only time will tell. I cannot see Ihug surviving in this brave new world of telephony. Sooner or later, Ihug will have to go.

I believe the dark horse is now TelstraClear. They have heaps of cables all the way from the top of the north island to the south island. if telstra get their acts together, they might be the winner of the cabinetisation debacle.

GEOMAX

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Ultimate Geek

#97762 1-Dec-2007 08:51

opinions will no doubt differ but I don't see any big losers. Several ISPs will be looking for people with different skills and no doubt DSLAM capacities will be adjusted at some sites.
I don't hear any ISP saying..."now we can provide cheaper internet offering through LLU" as IMHO prices wont come down due to LLU.

sbiddle

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#97769 1-Dec-2007 09:40

From a business perspective I think Vodafone buying ihug was about as bad as you can get. At the end of the day all Vodafone paid $41 million for was a customer base. A customer base of fickle customers who are now not scared to jump between ISP's.

There are two ways to enter into an emerging market - start from scratch or buy an existing player. There are far more success stories from companies who start from scratch rather than buying companies who have plenty of baggage.

Vodafone could have easily offered exactly what they're offering now for a lot less than $41 million. There are plenty of people around who could have helped them expand into the ISP sector and build of what they had rather than trying to merge two operations together and suffer the issues that always result.

Vodafone NZ could be a far bigger player in the NZ telco sector than what they are. They have some very smart people working for them and they also have people working for them who shouldn't be there. IMHO phone services and internet access are now virtually a FMCG product. This means you listen to your customers and give them what they want, not tell your customers what they will be having. People have choices and will vote with their feet if they don't like what they see.

I pick Telecom as the biggest winner, TelstraClear as a big winner and probably another 4 large ISP/Telco's who will gain. I'm predicting some serious carnage in the ISP market over the coming years as those companies who have completely misread the future and have flawed business models realise that the light at the end of the tunnel isn't daylight but a train coming the other way ready to run you over.

jesseycy

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Ultimate Geek

#97853 1-Dec-2007 23:58

I would just like to clarify something...

With Telecom cabinetisation plans, can't the other ISPs continue installing their own DSLAMs into existing exchanges?

Because, if there is nothing restricting them... What's stopping them from providing a good service, for around 5 years at least, to quite a sizeable chunk of the population??? Any plans for 5 years later should involve new equipment anyway, doesn't it??? I would reckon that a company like Orcon, or iHug/Vodafone, can quite well capture a big chunk of the market (and earn $$), by quickly installing DSLAMs into exchanges in urban areas, and offerrng cheap (and good) internet plans....

KiwiOverseas66

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#97867 2-Dec-2007 07:53

To me, buying ihug is the biggest mistake Vodafone has ever made. If they are really keen, why not expand ihug infrastructure? Why decide to announce to the public that they want to further expand their HSDPA network? Only time will tell. I cannot see Ihug surviving in this brave new world of telephony. Sooner or later, Ihug will have to go. I believe the dark horse is now TelstraClear. They have heaps of cables all the way from the top of the north island to the south island. if telstra get their acts together, they might be the winner of the cabinetisation debacle.

Excellent question. It would be interesting to get an insight into the voda business plan re this. I remeber reading somewhere a year or so ago that with the mobile marekt reaching saturation - they had to go in another direction. I guess that's why number portability and the home phone is so important as it was the only way they could realistically sell more mobile (by displaing landlines). With the Ihug purchase - perhaps its not so much that fact that it provides broadband - but is an ISP with content? Whether or not they deliver ISP services via mobile or DSL - do they care? As long as they have a recognisable ISP brand? So it might not be a case of getting a significant benefit from having Ihug, more a case of having a significant disadvantage by not having a recognised ISP at all.

Oh - when you say debacle - do you mean from a commerical point of view (for the smaller ISPs who are now up to their necks in it), or from a political/ TUANZ/ callplus I'll throw my toys out of the cot kind of way?

With Telecom cabinetisation plans, can't the other ISPs continue installing their own DSLAMs into existing exchanges?

absolutely - the only problem for them is whether or not its too little to late. A very smart business operator I once knew gave me a business phrase that has stuck - in business, either you do what everyone else is doing but better (cheaper, faster, whatever), or you do what no one else is doing - you sure as hell don't do what everyone else is doing, and do it worse! So the problem, therefore, is that with the new cabinet plans - exchange based DSL is looking like a case of doing it worse. I guess its not immediate as it will take time for Telecom to roll out the fibre - but onces its in a suburb, town, etc - why would you settle for anything less?

I pick Telecom as the biggest winner, TelstraClear as a big winner and probably another 4 large ISP/Telco's who will gain. I'm predicting some serious carnage in the ISP market over the coming years as those companies who have completely misread the future and have flawed business models realise that the light at the end of the tunnel isn't daylight but a train coming the other way ready to run you over.

on the money!- bad business planning (almost as if it were stuck in a time warp). Its one of the things that has always puzzeled me about the ISP/telco business in NZ - you can watch Telecom, Voda, Telstra reacting to each other everytime a new product comes out in mobile, internet, etc - so you know its gonna happen. So if your trying to build an ISP and come up with a new product - what to you think everyone else will do when you launch it - sit around with their thumbs stuck up their ar#@!

GEOMAX

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Ultimate Geek

#97921 2-Dec-2007 19:20

GEOMAX:
opinions will no doubt differ but I don't see any big losers. Several ISPs will be looking for people with different skills and no doubt DSLAM capacities will be adjusted at some sites.
I don't hear any ISP saying..."now we can provide cheaper internet offering through LLU" as IMHO prices wont come down due to LLU.

i still do not see any big losers....what I see is opinions centred on ISPs which traditionally knock Telecom via noise. Oron who have said nothing but are a participant in the Ponsonby trial and have no doubt a stake as big as Vodafone (Ihug) have said nothing but no doubt are silently reviewing their future stratagy. The origonal question did not look for winners so I will no speculate........

jesseycy

294 posts

Ultimate Geek

#97952 2-Dec-2007 22:35

KiwiOverseas66:
absolutely - the only problem for them is whether or not its too little to late. A very smart business operator I once knew gave me a business phrase that has stuck - in business, either you do what everyone else is doing but better (cheaper, faster, whatever), or you do what no one else is doing - you sure as hell don't do what everyone else is doing, and do it worse! So the problem, therefore, is that with the new cabinet plans - exchange based DSL is looking like a case of doing it worse. I guess its not immediate as it will take time for Telecom to roll out the fibre - but onces its in a suburb, town, etc - why would you settle for anything less?

Yes, fibre's the "geeky thing", and will allow us to have great connections, fancy IPTV, etc...

BUT. I am sure that if Auckland-wide, say an ISP Orcon or Ihug/Vodafone, can offer ULL Broadband, with decent quality (FS/512kbps, 30Gb cap), at say only $50, they will definitely capture a very big chunk of the market! Unbundled telecom exchanges will allow them to do this. If they do it quick, they can be earning quite healthily for 5 years. What they do 5 years later, whether they will eventually get access to Fibre, or build a Fibre network themselves, hey, they have 5 years to play "catch-up" then!

So really, I don't think there is any "loser" at all. Telecom in my opinion still "loses out", because for these 5 years at least, their profits can very easily be eaten away by "cheap, big cap, fast ISPs" that only serve the major population centres.... while they build their fibre network.

sbiddle

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#97969 3-Dec-2007 06:44

jesseycy:
KiwiOverseas66:
absolutely - the only problem for them is whether or not its too little to late. A very smart business operator I once knew gave me a business phrase that has stuck - in business, either you do what everyone else is doing but better (cheaper, faster, whatever), or you do what no one else is doing - you sure as hell don't do what everyone else is doing, and do it worse! So the problem, therefore, is that with the new cabinet plans - exchange based DSL is looking like a case of doing it worse. I guess its not immediate as it will take time for Telecom to roll out the fibre - but onces its in a suburb, town, etc - why would you settle for anything less?

Yes, fibre's the "geeky thing", and will allow us to have great connections, fancy IPTV, etc...

BUT. I am sure that if Auckland-wide, say an ISP Orcon or Ihug/Vodafone, can offer ULL Broadband, with decent quality (FS/512kbps, 30Gb cap), at say only $50, they will definitely capture a very big chunk of the market! Unbundled telecom exchanges will allow them to do this. If they do it quick, they can be earning quite healthily for 5 years. What they do 5 years later, whether they will eventually get access to Fibre, or build a Fibre network themselves, hey, they have 5 years to play "catch-up" then!

So really, I don't think there is any "loser" at all. Telecom in my opinion still "loses out", because for these 5 years at least, their profits can very easily be eaten away by "cheap, big cap, fast ISPs" that only serve the major population centres.... while they build their fibre network.

The only flaw in this being that Telecom plan to have their cabinetisation complete by October 2010.

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TinyTim

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#97972 3-Dec-2007 07:48

Quentin:

I believe the dark horse is now TelstraClear. They have heaps of cables all the way from the top of the north island to the south island. if telstra get their acts together, they might be the winner of the cabinetisation debacle.

TelstraClear will be a winner because it has content. The other ISPs will simply be trying to undercut each other on price, whereas TCL will actually have something to sell. TCL may also have mobile (currently only for businesses) and is going to be the least reliant on Telecom backhaul of all ISPs.

IF it can write a business case that it can stick to.

(Not that this really has anything to do with cabinetisation).

GEOMAX

450 posts

Ultimate Geek

#97976 3-Dec-2007 08:19

The only flaw in this being that Telecom plan to have their cabinetisation complete by October 2010...

This is a good point. Are we seeing the whole plan or just a subset giving two years notice of intending work?

KiwiOverseas66

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#97977 3-Dec-2007 08:25

jesseycy:

BUT. I am sure that if Auckland-wide, say an ISP Orcon or Ihug/Vodafone, can offer ULL Broadband, with decent quality (FS/512kbps, 30Gb cap), at say only $50, they will definitely capture a very big chunk of the market! Unbundled telecom exchanges will allow them to do this. If they do it quick, they can be earning quite healthily for 5 years. What they do 5 years later, whether they will eventually get access to Fibre, or build a Fibre network themselves, hey, they have 5 years to play "catch-up" then!

So really, I don't think there is any "loser" at all. Telecom in my opinion still "loses out", because for these 5 years at least, their profits can very easily be eaten away by "cheap, big cap, fast ISPs" that only serve the major population centres.... while they build their fibre network.

yeah...I guess it is a timing thing isn't it? And if there is a reasonable chance then I'm sure they will go for it. Still - it just looks nasty!
I mean the technology has already been superceeded, they have only 3 years (as sbiddle has pointed out) to catch a large chunk of a metro market, up against other ISPs who are in exactly the same position, let alone looking over their shoulder at what a major (telecom, Telstra, Voda) might do, before having to turn around and sink a big chunk of capital into fibre gear - and hope their customers don't run off in the meantime. You know - now that I've written it down it looks even worse! Yuck!

Don't know how much telecom would charge for a 100 meg residential fibre feed (guess it would include internet, VoiP, IPTV, etc) - but regardless if you're an ISP offering a slower service - I'm guessing it would have to be cheaper than $50. Given the headless chicken reaction of some of the ISPs, I'm don't think telecom are the ones who are afraid of losing out.

TinyTim

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#97987 3-Dec-2007 09:45

GEOMAX:
The only flaw in this being that Telecom plan to have their cabinetisation complete by October 2010...

This is a good point. Are we seeing the whole plan or just a subset giving two years notice of intending work?

The latter - the Commerce Commission said that Telecom has to give two years notice. From Telecom's UCLL website:

We have provided planned dates for cabinetisation up to May 2010 (i.e. 30 months out). This includes the binding notice required under the Standard Terms Determinations of not less than 24 months. In practice, Telecom’s current intention to give further notice as and when 6 monthly rolling forecasts are provided has required it to give an additional 6 months notice to ensure the minimum 24 month notice period requirement is satisfied on an ongoing basis.

In addition, we have given indicative forecasts from April 2010 onwards. This exceeds the strict requirements of the Initial Notice, is an indicative forecast only and not binding. However, it may assist Access Seekers to better understand our current cabinetisation plans.