Publication Overview
In this report we provide an overview of the 2nd tier companies, including analysis by BuddeComm, with facts and figures on the company operations in tabular and easy-to-read chart formats.
Companies covered in this report include
AAPT, Amcom Telecommunications Limited, Dodo, gotalk, iiNet Limited, Internode, Macquarie Telecom, M2 Telecommunications, Nextgen Networks, TPG Telecom, TransACT Capital Communications.
Information on Telstra, Optus and Vodafone are covered in a separate report at www.budde.com.au: Australia - Telco Company Profiles - Telstra and Optus
Researchers:- Paul Budde, Stephen McNamara
Current publication date:- November 2011 (17th Edition)
Executive Summary
Tough year ahead for 2nd tier telecoms companies
The year 2012 will be challenging one for competition.
There was certainly a great deal of gaming played out under the previous Telstra management, but at the same time the company mostly stayed away from aggressive competition because it believed the products and services it was offering were of premium quality.
With the new management all that has changed, and Telstra has become the most aggressive competitor. With a $1 billion budget set aside for this the company has created havoc among the competition during 2011. With Telstra’s success will come an increase in self-confidence – a belief that it can indeed compete with lower margins and that it does not need to rely on its monopolistic position in the market.
This will only mean more competition going forward, so 2012 will be a very tough year for competition.
Telecommunications regulatory reform will continue to feature into 2012 as the Telecommunications Consumer Protection (TCP) Code will see that new rules regarding the monitoring of pricing and mobile usage make it easier for consumers to manage. From now on there will much more scrutiny of the service providers, with the possibility of regulations if needed. The other major feature will be the new ACCC regulations governing the transitional period between now and the arrival of the NBN. Subsequently other smaller and niche market operators will look for opportunities to gain a greater market share of the telecommunications revenue streams to shore up their returns.
The second-tier market is making gains in broadband and they are gearing up for IPTV which will then be bundled into their other product offerings. Although the bundled market often sees overall revenues fall it generally maintains a higher ARPU. Further consolidation is also expected in 2012.
While the fixed-voice market revenue is declining in the second-tier market so, too, are mobile and broadband revenues. Falling revenue reflects increased bundle value as well as consumers moving away from fixed-voice services; but it may also be a symptom of increased reliance on VoIP-based and naked DSL platforms in the second-tier market. Nevertheless, overall revenues in second-tier mobile services and data services (including internet access) continue to show growth.
The effects of the NBN on the 2nd tier market
The NBN, and in particular the structural separation between infrastructure and services, is going to change the telecoms industry beyond recognition. Gone will be the days of regulatory gaming. A completely new industry structure will require collaboration and cooperation, rather than the destructive adversarial environment of the past.
There are still some serious issues that need to be resolved. Are the current government policies conducive to achieving the affordable outcome that is necessary? The first signs are promising. The other question is whether the design of the NBN will lead to true wholesale competition, or whether it will restrict it to a handful of players who can afford to build their presence in the 121 points of interconnect.
The ACCC has already indicated that this will be one of the main areas it will be monitoring. The unique construction that offers backhaul competition could indeed be the facilitator in obtaining the competitive outcome needed to ensure that a dynamic system is developed – one that will lead to innovation.
Industry collaboration will also be needed to limit the necessity for more regulation. In a dynamic environment time is money and there is no longer room for year-long regulatory processes. Trust needs to be built up to facilitate much speedier dispute resolution, preferably preventing these disputes from arising in the first place. Some early indications are that NBN Co is willing to sit down and make changes where it makes sense to create a better wholesale and retail environment for all involved.
