15 November 2004 by Richard Chirgwin

But Macquarie Telco’s Big News is in Services

Last Thursday (November 11) Macquarie Corporate Telecommunications unveiled a new identity – as Macquarie Telecom – and also lifted the lid on plans for a new range of services based on its own access network.

Faced with every telco’s problem – how to protect margin in a world where access to the customer is governed by Telstra’s access network – MT is to start creating services based on an Ethernet access network.

MT’s CEO David Tudehope said the company has spent 12 months planning its own metropolitan access network.

In corporate services, he said, “The critical success factor is the quality of the network”, and by creating an access network, “We create a real opportunity for business and corporate clients.”

The MT access network will embrace all of its existing offerings, but where possible, the access network will embrace a planned fibre rollout to customer premises. This, according to (title) Glen Noble, will depend on the economics.

Those economics, however, are helped by MT’s existing customer base. Noble told CommsWorld that instead of having to build a network and then recruit customers, MT can migrate an existing customer base to the access network. All-MT network rollout will chiefly focus on fibre loops in CBD areas, Noble said.

An Ethernet-based fibre rollout means MT will be able to support converged customer connections, with voice, data and video on a single QoS-enabled high speed customer tail. Noble also said the company will consider expanding the definition of “on-network” traffic; for example, allowing corporates using the MT access network for VoIP traffic to make on-network calls between each other.

 22 November 2004 by Richard Chirgwin

Here is a hilarious coincidence.

This morning (Sunday, November 21 at 8.15am), Centrelink’s home page is down.

In the next Mozilla tab, I have a list of headlines detailing the history of Centrelink. Apart from the string of leaks to the computer press designed to get it some favourable press – stories like its commitment to open source software – we also get the darker side. I’ll get to that in a minute.

The third Mozilla tab has the most ludicrously unsceptical report I’ve seen in the IT press this year, from Federal Computer Weekly in America. FCW – the story is at www.fcw.com/fcw/articles/2004/1115/web-aussie-11-16-04.asp – is telling us how wonderful is Centrelink, as demonstrated by an address given by its CIO, Jane Treadwell, to a conference in America.

FCW got the quotes right, and pretty much nothing else.

It described Centrelink as an e-government project, rather than a government agency which has an e-government project (in the usual self-congratulatory terms, Centrelink ‘serves Australians on the ground and online’). It’s described as having ‘customers’ when in fact it’s mostly in charge of delivering various kinds of welfare (hint: you don’t buy welfare; calling the unemployed ‘customers of Centrelink’ is double-speak). And its main role, in the blinkered faraway world of the US press, is … well, I’ll let the words of FCW speak for themselves: ‘One of Centrelink’s top services provides Australians the ability to change their addresses’.

But what’s stunning is the gap between the glowing media it gets as a conference presenter, and the kinds of headlines I find in Australia. Headlines like ‘ Planning flaws put Centrelink system at risk’ (AFR, October 27 2003), ‘ Glitch causes Centrelink scar e Millions of mistakes by Centrelink’ (The Australian, February 14, 2004), ‘ Office porn purge at Centrelink’ (Herald Sun, January 21, 2004), ‘ Computers block fix on errors’ (The Australian, February 16, 2004), ‘ Centrelink’s $5.3m website’ (The Australian, March 16, 2004), ‘IT failures that hit the public purse’ (AFR, April 20, 2004), ‘ Centrelink changes may cut back technical help’ (AFR, April 28, 2004), ‘ Centrelink web lost in the past’ (The Australian, July 23, 2004), ‘Glitch hits agency’s debt recovery’ (The Australian, August 3, 2004), and ‘ Privacy concern at data sharing’ (The Australian, August 27, 2004) .

And, proving that Americans haven’t stopped patronising this country, some dude from Washington seriously and with a straight face told FCW that Australia would have gone broke without Centrelink.

Centrelink’s $5.3 million Website returned to life some time this afternoon.

22 November 2004 by Richard Chirgwin

Revamping Suite with HMP
System Solutions, a long-time supplier of telephony software, has taken the plunge and turned its attention to the world of IP telephony.

According to Ivor Livingstone, the company’s CEO, the move will open its MESSAGEmanager suite – which includes IVR, voice messaging, speech recognition, fax, SMS and other services – into the expanding world of business IP telephony.

Livingstone told CommsWorld that rather than redevelop the product set from scratch to support VoIP, the company decided to use Intel’s Host Media Processor as a gateway between its TDM-based heritage and the emerging IP telephony world.

Call control, he said, is very different in IP telephony, and would have demanded a considerable rewrite of software to support. While TDM switches are highly proprietary, the task of unravelling their behaviour is straightforward, if time-consuming. A third-party vendor like System Solutions would treat the switch as a state machine, and analyse the outputs it produced in response to different inputs.

The presence of competing standards also raised its head as a challenge.

Standards have “started to evolve – for example, SIP is very popular, but not a lot of the existing switch vendors support it. So we had to provide other flavours of IP telephony in our development project; the H.323 protocols, for example.”

Intel’s HMP had its feet in technology with which System Solutions was already familiar, having its own heritage in the acquisition of Dialogic some years ago. As a developer, he said, System Solutions found it relatively easy to use the HMP Global Call API to handle the integration to IP-based environments.

The developer, Livingstone said, uses Global Call to address the HMP hardware, and HMP provides the integration to the IP devices.

However, “validation against each of the switches – the Ciscos, the Alcatels, the Avayas – that’s challenging.”

While traditional TDM environments carry a lot of the features System Solutions is offering as software, Livingstone said by concentrating on its own capabilities, the company has been able to offer competitive features sets.

The more open world of IP telephony gives the company the opportunity to do things that don’t fit easily into traditional telephony systems, he said. “There’s a tremendous opportunity to develop productivity applications on top of telephony. These go beyond cost savings: you can embody IP telephony into all sorts of applications, far further than in traditional telephones.”

Livingstone said the expansion of System Solutions into the IP telephony space will expand its overseas opportunities, and also the scope of partners the company can work with. This is enhanced, he said, by the company’s work with presence servers and its ability to act as a media gateway.

Presence products, Livingstone said, create opportunities to work with companies whose traditional business is in data networking.

As for media gateways, he said, System Solutions is now in its third generation of product while he

30 November 2004 by Richard Chirgwin

Are Wholesale Services `Up to Scratch’?

The lawsuit between Crazy John’s and Telstra is, in my mind, just as important to the privatisation debate as the ongoing and pointless discussion about whether services are ‘up to scratch’.

When Australians think of telecommunications services, they’re apt to think of what reaches the retail consumer. However, in a contestable market, with a wholesale-retail split, services are also what reaches the retailer from its upstream wholesaler.

What’s sold at wholesale is quite different from retail, and not just in volume.

The retailer buys a lot of things from wholesalers, but they all add up to this: retailers are buying the ability to make money. They’re buying the services themselves (mobile, fixed, or data); they’re sometimes buying a supply of physical products; they’re buying some level of tech support to keep the services running.

And most of all, they’re buying an income stream.

That income stream depends on accurate record-keeping – a point brought home years ago in the One.Tel collapse – but it’s still one of the most difficult and challenging parts of the wholesale-retail relationship.

In part, that’s because Australia is still relatively new to the wholesale-retail business. The Telecom of old had no need for the kind of wholesale business IT systems it now needs: there was no retail sector.

That changed throughout the 1990s, but we’re still only into perhaps the second or third generation of wholesale business process in this country.

The retail business, however, continues to change much faster than the systems which support it. This is partly because the wholesale market has become so contestable. When Telstra was the only source of wholesale business, products were available in ‘any colour, so long as it’s black’. Wholesale competition has brought with it the need to differentiate products; this, in turn, makes the products and the relationships more complex.

Herein lies the importance of the Telstra-Crazy John’s court case.

It’s possible that Australia’s telecommunications market is too monolithic for true contestability, at least for another decade to come.

Whether or not that’s true, a contestable market demands that the wholesale-retail relationship functions properly.

In trying to determine whether or not Telstra’s services are ‘up to scratch’, the federal government is gazing with a fixed stare at rural and regional services – not even the whole of the carrier’s retail business.

As a result, the government is ignoring whether or not the carrier’s wholesale services – upon which the storefront retailers depend – are also ‘up to scratch’. This seems strange, because most retailers (by number if not by value) are the kind of business which is supposed to be the Liberal Party’s core constituency: the owner-operated, probably franchise-based SME.

The Crazy John’s lawsuit is more important than the industry thinks.

06 December 2004 by Richard Chirgwin

Telstra’s Wholesale-Retail Split

If you wanted evidence of Australians’ mal de tete, run through the Telstra sale process. The population were skinned for half the value of the shares they bought, but they still elected a government committed to skinning them a third time.

This is relevant, given last week’s events. The consensus about Ziggy Switkowski’s successor is that whomever gets the gong, he’ll have to be a salesman. As Kate Askew and Colin Kruger put it in Saturday’s Sydney Morning Herald, the next CEO will be expected to “beat the drum” to relieve the carrier’s supposedly inadequate share price.

If that doesn’t scare you, it should. Drum-beating will only serve political interests. It won’t change any of Telstra’s value propositions as an investment – the structural limits on its growth.

What the market now expects, and accepts without even breathing hard, is that regardless of Telstra’s real value, the company will get a CEO willing to pump the share price so the government can sell its 51%.

All of this makes the proposed “wholesale-retail” split a fascinating move.

It’s a couple of years now since the federal government swore that such a split was impossible and unfeasible; and since a federal opposition, cowed by lobbying from the money markets, backed away from a Senate inquiry designed to investigate the structural separation of Telstra.

Back then, the market was dead against any notion of a structural separation – and the investment community was the only sector to speak with one voice. Nearly all of the submissions made to the ill-fated structural separation inquiry were in favour of such a move, a trend which froze the government’s blood. Its response was to write to various institutions, asking them to put the investment community’s case, and was rewarded with a unanimous vote against the proposal. At this point, the ALP lost its bottle and the inquiry was canned.

The thrust of the opposition was simple: Telstra, the investors argued, is only valuable as a vertically-integrated business. As a sop to Telstra’s competitors, which were unanimous supporters of structural separation, the government instituted the “accounting separation” regime which the ACCC has been working to implement for the last year.

Last week’s announcement takes Telstra much further down a path which it (and Ziggy) had strenuously resisted. It’s a “best of both worlds” approach that goes further than accounting separation, without sacrificing Telstra’s capacity to act as an integrated carrier.

Exit the ACCC (As If!)

Telstra’s fervent hope is that the move will appease the ACCC – and that might give us some idea of how the carrier plans to approach the job of “drum beating” in the lead-up to the sale.

I predict its most immediate strategy will be to explain to investors that the more Telstra is able to satisfy the ACCC, the more its share price will rise. This message will be put in a simple, but relentless, media placement strategy to the doyens of the dailies.

That also goes part of the way to explaining why the share price had to be personalised to Ziggy: the thorny relationship between Telstra and the ACCC can now be sheeted home to a departing CEO.

The wink-and-nod of the private briefings will be that the wholesale-retail split was impossible to implement sooner, because it was resisted by the soon-to-be former CEO – an explanation which is probably true, but incomplete.

The other side of the wholesale-retail split goes back to the ACCC. It’s spent a year on the job of implementing the accounting separation regime, and last September it issued a new – and much more detailed – set of record keeping rules for the separation process.

You can bet that the RKRs were the subject of much board debate, and I’ll bet that once the RKRs were fully understood, the board decided that the now-approved split was the easiest road to compliance.

The same restructure will, if the weekend reports were accurate, also create a media group which is to inherit the “sick man of Telstra” – the 50% stake in the loss-making Foxtel which commits the carrier to an ongoing subsidy of the pay-TV business.

Telstra’s never going to sell Foxtel, because to do so would create a ready-made competitor with last-mile access; and as anyone who’s read an Optus annual report can tell you, the best way to sell a pay-TV network is to have it carry phone calls as well.

If Foxtel is to stay with Telstra, then the media division will stay with Telstra. But if those assets are rolled up into a separate division, the carrier can probably convince the markets (and the ACCC) that a separate float is possible.

It’s a scenario which fits with the wholesale-retail split: give the appearance of division, without having to put the integrated business at risk.

I don’t think the ACCC will be fooled. And I hope the public isn’t fooled either.

08 December 2004 by Richard Chirgwin

Bumpkin Negotiators Sell Out Australia, Claim Victory

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Facing opposition from the telecommunications and Internet industries, Parliament has passed the Copyright Amendment Bill 2004 to push through the Australia-US FTA.

Having originally held back the text of the letters exchanged between Mark Vaile and Robert Zoellick in November, the government introduced the legislation in a rush, and it was only at the beginning of this week that the Internet Industries Association made public its opposition to the legislation.

Supported by Ozemail, Telstra and Optus, the IIA warned that sections 11 and 13 of the amendment would import a regime from America, in which the copyright industries send thousands of automated take-down notices, with little regard to the accuracy of their accusations.

In its public statements, the industry passed over Section 3 and Section 7, which put much more onerous restrictions on the status of proxies and caches (putting tighter ropes around the use of “temporary reproductions” needed to transmit or use copyright material).

Australia has already seen the impact of automatic copyright policing, with the copyright industries trying to dazzle Justice Murray Wilcox in their pursuit of Kazaa (if CommsWorld had staff, I would love to spend some time in the courtroom – RC). The same industry is also working to extradite the alleged leader of the DrinkOrDie group of pirates, Hew Raymond Griffiths; the case currently awaiting publication of the judgement.