[LINK] Telstra - taking its ball and going home.

[Frank O'Connor]

Gotta love the new Telstra management,

They get here, one of them lets the public know what he thinks the 
value of a Telstra share is and lo and behold, it sinks to that.

They argue that telecommunications shouldn't be regulated (at least 
that bit of the regulation that affects them) in this country to 
ensure some semblance of service to the bush and areas removed from 
exchanges. The government says no. They have a hissy fit. Share price 
sinks lower.

They use FTTN as a bargaining chip with the ACCC ... lose out, and 
cancel any investment in FTTN. Share price drops again.

And it was purely an ideological dispute. One could argue that EVERY 
damn publicity seeking debate we've had over the last 12 months has 
been ideological. Management should be pragmatic, not ideological.

Now I have some sympathy with those who espouse little or no 
regulation in telecommunications ... hey, it's all privatised now so 
who gives a damn.  Trouble is ... Telstra is coming off 20 years of 
network neglect and little infrastructure investment, has been 
actively pursuing business practices which have reduced their client 
leverage (through those dinky copper wires) by charging like wounded 
bulls for same - when to my mind the whole copper network was 
probably amortised 20 years ago, have failed to take advantage of 
their initial fibre investment by making any attempt to bridge the 
last kilometer, have pursued rather inappropriate technologies in 
their place (Foxtel and cable internet for God's sake! Wasn't that a 
winner? They won't amortise that for another 40 years), got into 
really dubious and sensationally non-profitable overseas investments 
to absorb the mountain of cash they previously accrued. and now seem 
into be intent on squeezing the last buck out of their ever 
diminishing number of clientele ... who are leaving due to Telstra's 
brilliant policy of charging them like wounded bulls for a copper 
service that there are any number of existing alternatives to.

I mean, I have always seen ADSL as an intermediate solution until 
when fibre or fast satellite or wireless became the norm. From 
Telstra's perspective though it was another Golden Goose technology 
(that they got into VERY late) that trapped people on the copper and 
could provide a money stream for time immemorial.

Does anyone at Telstra have an idea of how they are effectively being 
rendered into obsolescence by technology?

If they had had fibre to the node 10 years ago ... it may have helped 
them. If they had had fibre to the home 5 years ago, we'd probably 
all be locked in to Telstra's service ... no matter what they charged.

But now ... now real alternatives are starting to appear. Now the 
copper wire really is on the way out, and Telstra doesn't have a 
product leg to stand on. Third parties already provide IP pipes that 
don't use Telstra's infrastructure ... and the number of these third 
parties continues to grow. Technological alternatives for 
out-reaching Telstra to consumers are becoming legion ... at a much 
lower initial infrastructure cost than the current exchanges and 
wires.

These days a high end router could probably handle a whole suburb's 
need. Little numbers like 802.16n and the like point toward eventual 
high speed wireless ... they don't mean that yet, but they point to 
it ... and how much does a high end wireless router cost viz-a-viz a 
full blown telephone exchange? Not a hell of a lot.

And despite this looming crisis, Nero "Fiddling while Rome Burns" 
Trujillo and the lads from the US persist in peeing against the 
political wind, seem absolutely bereft of ideas for increasing 
business or meeting the challenge of the future, have actually 
opposed ideas which would have ensured the telco's survival for a 
number of years (eg. splitting Telstra wholesale and retail 
operations), have made any number of current suppliers happy with big 
orders for replacement obsolete equipment ... and have NO credible 
strategies, ideas or tactics.

These guys weren't involved in Enron were they?

Anyway ... this weekend I'm gonna advise my mother to sell her 
Telstra shares, as there is no hope for the company now. I'll tell 
her to wait a few years before investing in the telecom sector again 
(when new players have effectively wiped Telstra off the board, and 
we have some idea who ... and what technology ... is going to be a 
winner in the new environment) and in the interim invest her money in 
blue chips with a future.

Trujillo said a couple of weeks back that he's be revealing a 
strategy for Telstra ... well I hope he has the good grace to go down 
with the ship. About the only 'strategy' left for Telstra is to 
liquidate the over-valued double counted assets (the copper wire for 
example is now probably worth whatever the price of copper is ... and 
the fibre is only a half done job). That said, I'd hate to see the 
boys from the US rewarded for conducting the fire sale.

				Regards,