Broadband: The second wave

The use of DSL means a reliance on Telstra’s copper phone line network, and the bulk of these connections is provided either by Telstra or by Telstra wholesalers.

The more common form is Asymmetric DSL, with faster downloads than uploads, which Telstra throttles to 1.5 megabit per second downloads despite its ability to go faster.

Despite Muscat’s views that the channel is vital for understanding the customer, broadband behemoth Telstra seems determined to go it alone. This month the telco giant announced it aims to boost its broadband market share from 41 percent to 55 percent over five years, assisted by an in-depth customer analysis system.

The plan is part of a massive Telstra network overhaul including a $10 billion next generation IP core network along with the replacement of the CDMA mobile phone network with a national, 3G/GSM mobile network. ADSL infrastructure is being upgraded to ADSL2+, offering 24Mb/s download speeds. Currently this is being done by upgrading Telstra’s Digital Subscriber Line Access Multiplexer (DSLAM) hardware in telephone exchanges. The new network upgrade involves running high-speed fibre connections to the street level in five mainland capital cities and then connecting to premises using less than 1.5km of copper phone lines. Such as model is known as Fibre to the Node (FTTN).

At the announcement, Telstra chief executive Sol Trujillo said "broadband is the key to the future of Telstra", but strongly indicated this new infrastructure would not be available to Telstra Wholesale customers.

"The new things that we want to invest in, they ought to be for the benefit of our shareholders, not for the benefit of shareholders in Singapore and other places," he said.

While some Telstra competitors have installed their own DSLAMs in Telstra telephone exchanges, it would be impractical for competitors to install hardware at the street level. Such a system would deprive the channel of the competitive pricing and innovation in broadband that competition brings.

Such plans make it clear Telstra does not want to offer wholesale access to competitors, says internet service provider Internode’s founder and chief executive Simon Hackett.

"This plan implies an intention to actually disconnect customers from competitors’ DSLAMs and voice equipment in the telephone exchanges," Hackett says.

"The only real solution is for the regulator to force Telstra to offer access to this new network to the wholesale channel. If that doesn’t happen, then competition will be officially dead and buried for two-thirds of the market in the five major cities within five years."

Telstra should be embracing the new world of IT-based wholesale services, says telecommunications analyst Paul Budde.

"They see wholesale as evil and will fight it in any way they can. This will mean many more years of delays and frustration. They want nothing less than a monopoly and are anti-competitive towards any attempts by the government to increase competition," Budde says.

If Telstra builds for its own exclusive use a new fibre access network to eliminate local exchanges and associated copper lines, they will devalue, if not destroy, the access network investment made by competitors, says IProvide managing director Phil Sykes.

"As for channels, I can’t see Telstra Business Services changing their tune any time soon from their position of two months ago where they indicated that they wanted to help and embrace the channel but still wanted to 'own the customer'. Reality is, the channel already owns the customer because of the nature of SME trust relationships," Sykes says.

A former Telstra executive and Request Broadband chief executive, Sykes and two former colleagues from Request set up IProvide to deliver the IP-based voice and data services to SMEs/SMBs in conjunction with AAPT.

"We think the SME market has been starved of sophisticated — and I don’t mean complicated — communications services. The retail divisions of Optus and Telstra have not bothered to put the effort into presenting those services in a way that the business benefits can be easily grasped and wouldn’t want to then service a large number of small businesses with sophisticated products, so they just continue to offer consumer-style products," Sykes says.

"If smaller services providers just want to resell broadband internet services and not add any new value, they will fail financially. As we heard from Telstra’s Sol Trujillo, he’s going to concentrate his forces on his retail business, with Telstra wholesale concentrating on supplying regulated, bulk commodities to other larger carriers.

"This will make life very difficult for the hundreds of service providers who currently buy services from Telstra Wholesale and then add their value to support the needs of small and medium enterprises," Sykes says.