COMMENTARY: On May 8 of this year, Steve Lowe was appointed managing director of AT&T Australia & New Zealand. Almost immediately he announced plans to expand AT&T's presence in Australia. But what does that mean for us?
Q: AT&T recently announced an "expanded presence" in Australia, providing network management services. How has the business model changed from AT&T's presence here since 1992?
Lowe: A great deal has happened to AT&T worldwide since 1992, including two major restructurings, the second of which is still in process now and due for completion at the end of this year. Australia is rather unique in terms of the business model we've had here. Here's a quick chronological rundown since 1992:
- 1996--AT&T announced a major restructuring, often referred to as "trivestiture" when we decided to spin off Lucent and NCR, the equipment making part of the businesses. What remained was the telecom services portion of the business including voice and data, plus R&D through AT&T Labs. (There were subsequent cable and wireless company acquisitions which became AT&T Broadband and AT&T Wireless, but that's another story and only affects the US).
- 1999--AT&T acquired the IBM global network in a US$5 billion transaction. It was a huge, complex deal that took more than a year to complete globally due to regulatory and legal requirements in each market. That increased our physical presence in Asia from four markets to 13 and significantly increased our product and service portfolio, as well as people. However, Australia was an exception in that IBM's services were provided in the country by a company called Advantra (a JV between Telstra, IBM, and Lend Lease), so AT&T inherited this business model with the IBM purchase and it remained in place until April 1, 2002. Advantra ownership changed in 2000 when Telstra bought out the partners and the business became Telstra Enterprise Services (TES)--effectively our local service provider.
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2000--Concert was formed, a JV between AT&T and BT. Both partners contributed significant assets and people as well as the top 270 largest global accounts. Concert was intended to serve the communications needs of these very large global enterprises. With changes in the telecom industry, and falling prices (especially for voice services), the Concert model was no longer viable and Concert was officially unwound on March 31, 2002. The partners took back the assets they contributed to the JV. In Asia, AT&T also acquired many of BT's assets, including its frame relay network. In Asia, Australia had the largest concentration of Concert people and assets, so this has also served to increase our presence significantly.
- Today--There are three distinct elements to the Australian business operation: Business, which provides networking solutions to business customers, especially those with operations in multiple locations around Asia or other parts of the world; Consumer, which provides international voice service to business and leisure travellers with the AT&T Calling Card, and the military using the AT&T Direct service; and finally wholesale and carrier services, which provides interconnection to AT&T's global network for other carriers and ISPs.
Network services
What can AT&T offer that sets it apart from other local network service providers?
Our primary target market is the multinationals and large local enterprises with regional or global operations. Our key strengths are an extensive global network with 2500 points of presence in 850 cities in 60 countries.
We offer seamless, end-to-end connectivity for businesses of all sizes, with a single point of contact, flexible billing arrangements, and a broad portfolio of services ranging from dial-up connectivity to fully managed network solutions and complete outsourcing.
We are also a global Tier 1 ISP. At a time when there is so much uncertainty in the telecom and IT industry, AT&T's longstanding reputation for quality, reliability, and service is enabling us to grow our business. Customers are increasingly looking for long-term stability in their partners, so we're experiencing a flight to quality.
How has this change affected AT&T's relationship with Telstra? How is that relationship likely to change in the coming months?
We still have a very positive relationship with Telstra and will continue to work with them to access their domestic network. We don't have exclusive relationships with any vendors or partners, so we constantly review our business model to ensure we're providing the best possible service to our customers at the most competitive prices.
Can you tell us in more detail why AT&T's joint venture with British Telecom, Concert, was dissolved?
It was a combination of factors. Partly because the whole business environment and the rationale for creating Concert changed rapidly and dramatically, which meant that it was no longer the best model for serving our largest global customers.
In addition, prices fell much faster than anyone anticipated with increasing competition and the glut of available bandwidth and service providers, which was further exacerbated by the dot.com meltdown.
AT&T's purchase of the IBM global network also contributed to some extent because we were offering competing services in some circumstances.
Finally, it became clear that it was not going to succeed in its existing form, so it made more sense for the partners to dissolve the JV and take back their respective assets. For us in Asia, this has worked out very favourably as we're in an even stronger position than before, with additional assets and people.
It has been reported that AT&T currently has roughly four percent of the managed service provider (MSP) business in Australia. How do you plan to grow that share?
We should point out that those figures are rough estimates based on analyst figures from a couple of years ago. Frankly it's difficult to say exactly what our share is. However, we're confident that we can quickly grow our share of the business in Australia for several reasons:
- 1. Our customers globally like to deal directly with AT&T wherever possible, rather than a third party and we've already had a very positive response from our customers about the new model.
- 2. We anticipate an increase in NZ/Australia business now that we have a direct presence in Australia. Many companies in the South Pacific have operations in Australia and NZ, so we believe the ability to deal with AT&T in both markets, and receive the same level of service, quality, and reliability will be a boost to the business.
- 3. We are investing heavily in the region and Australia will also be a recipient of those investment funds, which will help us to upgrade our network and provide a range of enhanced services.
- 4. We have not done any direct marketing or advertising in Australia under the old business model, so we now have an opportunity to create some noise in the market and use our solid brand reputation to offer customers an alternative choice.
