New converged voice and data services launched this week by Telstra's competitors have the potential to eat into one of the few legacy revenue streams the carrier relies on, according to one analyst.
Describing new services announced by Optus and Vodafone as "ISDN killers", IDC analyst David Cannon said they threaten a market worth well over AU$700 million a year for Australia's incumbent carrier.
Optus's announcement of a SIP trunking voice module for its Evolve IP network on Tuesday and Vodafone's announcement yesterday of a voice over broadband solution as part of its Vodafone Business One bundle are both likely to hit Telstra's bottom line hard, Cannon said.
Both offerings, which can broadly be categorised as IP voice trunking technology, give businesses "a more efficient and streamlined means of setting up their communications infrastructure", he said.
"They make the traditional access technology — predominantly ISDN — redundant," he said.
ISDN is among the last revenue earners from Telstra's legacy networks that have been stable in revenue terms.
Since the deregulation of the telecommunications industry began, Telstra's competitors have gradually gone after the lowest hanging fruit — first international calls, then national, then local, Cannon said. The only "fat" remaining from the traditional network, he says, is access revenues. "The one thing that has remained stable in revenue terms for Telstra has been access," he says. "It's been guaranteed revenue for Telstra — one part of the telecommunications environment in which there wasn't an alternative." The ISDN market, for example, was worth some AU$749 million to Telstra in the last fiscal year. While these revenues are declining already — the voice component in particular, in the order of 10-15 per cent per annum — and the access component of that revenue, worth about $420 million, has held steady.
The new alternative, business-grade broadband, has come to be seen as reliable for a business's telecommunications needs, Cannon said. And depending on Vodafone and Optus's pricing, neither of which has been announced, the alternative is also likely to prove far cheaper.
"In Europe and the UK, this technology is pervasive and it is really starting to show up in the bottom line of the incumbents," Cannon said. "We're at a stage in Australia now where it is the next natural progression. It's more flexible and scalable, costs less to implement, and allows for a lot more services over the one pipe. We're at the beginning of a major adoption of this technology."
Telstra only moved on renegotiating access revenues as recently as last year to compete with new fibre being laid by the likes of Optus and AAPT in CBD's and other major metro areas. But it may have moved a little too late.
"This is something Telstra needs to be concerned about," Cannon said. "These products are squarely aimed at access revenues. Telstra's competitors are actively pursuing the access market. Access has become the low hanging fruit. It's definitely going to effect the way businesses connect, and definitely going to effect Telstra's bottom line."
As far as a news story goes, this is old old news isn't it?
Surely everyone knows any revenues from legacy networks are on the way out, and within about 3 or 4 years are likely to be non-existant.
Anyway, to avoid any speculation, I will say up front that I am a Telstra employee (but will remain anonymous), and work in Business Sales.
Over the last 18 months myself and my peers have been aware of any of our revenue streams that are declining. Anything you read about Telstra's transformation is to counter this, and what is happening now (and has been for a couple of years) is that we are providing our customers with converged IP solutions, particularly IP telephony.
I agree entirely that these types of products and services are absolutely ISDN killers, but I can assure all readers that those responsible for looking after Telstra's Business and Industry clients that Telstra has been taking measures to recover this revenue by other means. This is coming in the form of their own IP telephony, and various other data centric solutions.
Is Cannon suggesting Telstra isn't aware of this? Or that they have not taken measures to protect their revenue?
If that is the case, I think it is a very niaive point of view. But like I said, I'm on the inside and have an obvious bias. It just shocks me sometimes having the knowledge of what we are doing with our clients, then hearing media and analyst commentary about how dire Telstra's ongoing revenue prospects are. It certainly doesn't appear that way from where we sit.
For all that wish to respond, please refrain from abuse simply because I work for Telstra, but I will happily engage in legitimate discussion about the topic if ZDNets readers feel so inclined.