01/06/2004 - 22:00

Telstra holds off niche players’ challenge

01/06/2004 - 22:00

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MOST of the world’s developed economies operate with a single incumbent ruling the telecommunications market.

Telstra holds off niche players’ challenge

MOST of the world’s developed economies operate with a single incumbent ruling the telecommunications market.

In this environment, telecommunications infrastructure becomes a natural monopoly.

While the management role of State and Federal governments remains, several alternative providers and niche market players are gaining ground in Western Australia.

Figures from the Australian Communications Authority indicate that $48.6 million was earned by WA carriers using their own telecommunications infrastructure in financial year 2002-2003.

That figure is an increase from about $34.8 million in 2001-02, which was up from around $17 million in 2000-01.

Further, ICT analyst Paul Budde Communications’ presentation material indicates that broadband revenues will double in 2004 to $750 million in Australia.

In the first tier telco space, Optus claims it is gaining market share alongside Telstra, particularly in WA.

However, speaking to WA Business News in early May, prior to the boardroom lunch, Optus State manager Richard Thorning said more competition in WA was needed and should be driven by the State Government.

Of the next tier players, WA-based telco provider Amcom has continued operating in a niche market as an infrastructure owner, providing high-speed broadband to corporates.

Amcom operates a fibre network that extends over 500 kilometres, from Joondalup to Rockingham and entering more than 495 buildings.

It was also one of the first companies in the State to secure a telecommunications carrier licence and one of the first to roll out ethernet across the metropolitan area.

Further, companies such as iiNet, through its carrier Chime Communications, has taken advantage of decreases in price for ADSL enabling technology, such as Dslams, and has been looking at rolling out its own infrastructure.

However, the cost effectiveness of being an infrastructure owner remains an expensive option, because maintaining a network, along with building it proves prohibitive.

This means the issue of competition remains a sticking point.

Westnet managing director Peter Brown said working within the current telecommunications market created its own set of issues for alternative service providers, as Telstra had a responsibility to its shareholders.

“Telstra don’t want to be seen as a government-owned entity,” Mr Brown said. “They are a share-holder-owned entity and they have a responsibility to those shareholders to make as much money as they can.

“Why should they drop the price? A service from Perth to Geraldton costs an absolute fortune, but no-one else will go and run the fibre to give them competition. Naturally so.

“So therefore, why should they drop the price?”

“Building on that, would you build a business where the only way to get to that business opportunity is on a highway that you didn’t own?” Amcom chief operating officer Clive Stein added.

“The converse of that is if the ability to get on the highway cost effectively was there.

“There would be more players out there wanting to build alternative infrastructure in these regional centres.”

“With the world as it is today, building our two regional centers and spending tens of hundreds of millions of dollars is really not going to happen in WA.

“One has to be practical about it and say our business model is predicated on the basis of a regional rollout of infrastructure.

“Perhaps using the sunk copper line that is already there and using the Telstra wholesale capacity from Perth to that regional centre.

“When one puts the two together, there is no commercial viability.”

STANDING BY BUSINESS. TRUSTED BY BUSINESS.

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