At a wholesale level Telstra’s market share stands at around 64%, Optus at 22% and the other service providers make up the rest of the $31 billion telco market. On the retail side Telstra’s market share is around 55%, with the service providers at 25% and Optus in charge of the balance. Fixed voice accounts for 40% of revenues, followed by mobile with 33% and data by 17%. The market is on the brink of significant changes, mobile is saturating, VoIP is taking over traditional voice and broadband is moving into triple play models.

The industry moving into 2006
Revenue Overview 2000-2005
Market Share Analysis 2004-2005
Market Forecasts 2005-2015
Revenues and Market Shares - 2nd-tier telcos 2004-2005
Forecasting (qualitative) 2006
Industry Overview
International Carriers
Local Access and Services Market
Wholesale Services
Mergers and Acquisitions
Data Market - Revenues and Key Trends
Calling Card and Callback Markets
Premium Rate Services
Enhanced Voice Services, IVR
Pricing Strategies, Churn
Competition Issues
Regulations - developments in 2005
The August 2005 Telco revolution


Executive Summary
Continuing strong growth
Despite some reports that might indicate otherwise, the Australian telecoms industry is in good shape - I would say perhaps in its best form since 2000.

Revenues are increasing by 5.5% in 2005, and a conservative forecast for 2006 is 4.1%. Over the last five years the average growth has been 4.6%, well above most of our western trading partners.

Telstra the best international performer
Telstra’s profits are world famous. No other similar incumbent telco in the western world even comes close to Telstra’s consistent financial performance.

On competition, we see that competitors now have 45% of the retail market and a 35% share in wholesale values. This is certainly not a bad achievement. We have seen a number of new players coming to the fore, and the situation is now back to what it was in 1999, when we had nine major telcos with revenues of over $100 million per annum. Some of the names have changed, however – they now include Vodafone, AAPT, Hutchison, Commander, SP Telemedia, Macquarie Telecom, PowerTel, iiNet and People Telecom.

So what are these negative reports all about?

Profit margins set to halve
Telstra’s part of the problem relates to the fact that the company will finally have to join the rest of the industry and become used to much lower profit margins.

This could, over time, be as dramatic as a reduction of 50%. The competitors are used to low margins, but they also will experience further pain.

The margins on voice services are going down across the fixed and mobile markets. VoIP (fixed and wireless) will have an even greater impact here during 2007/2008. And the move from dial-up Internet to broadband constitutes a further margin squeeze. While I, of course, welcome the low entry-level prices for broadband, I am not sure if the industry has been managing these margins well. But what’s done is done.

The other reality is that the current telecommunications market is very much a commodity industry. In other words, you need a very large operation to make a profit. Back in 1999 I forecast that this would mean there wouldn’t be room for more than six national competitors, and they would need revenues of $1 billion plus.

And even such a large revenue figure is no guarantee of success. AAPT is still struggling; I remain pessimistic about Hutchison’s ability to deliver a decent ROI; and Vodafone is still only marginally successful. Optus’s margins are also squeezed and, given the current situation, I don’t see them going back to their heydays of double-digit growth.

Value-added services
On the other side we see the success and resilience of many ISPs, most of whom have built interesting value-added services around their businesses, ranging from PC services, web hosting, firewalls, security to home networking and so on. In general terms, most of the telcos have failed to move into value-added areas and the margin squeezes are going to cause further problems in this market.

It is too easy to blame this simply on poor wholesale rates from Telstra.

If we follow the developments of the industry over the last decade then we see that, despite Telstra’s dominance in the market, other telcos and ISPs have made good inroads – customers obviously value the extra services they receive from these competitors.

Infrastructure competition
There are now also more than 50 infrastructure-based projects, either in existence or under construction. These include Fibre-to-the-Home (FttH), Broadband over Powerlines (BPL), and wireless. In the infrastructure business the first few years are always the most difficult, as it is necessary to build before customers can come, but this has now been done by companies such as Unwired, PBA, SP Telemedia, utilities and regional companies such as BushCom, CountryTel and a dozen or so others.

On top of this, there are a dozen WiFi operators who can extend their business into WiMAX, plus an equal number of DSLAM operators who are also able to deliver new innovative services independently of Telstra.

With another $5 billion earmarked for infrastructure investments the future looks bright for telecoms in Australia, as long as we are able to use this money wisely and not fritter it away in political pork-barrelling.

1. THE INDUSTRY MOVING INTO 2006
1.1 Telecoms revival
1.2 Trench warfare and guerilla activities
1.3 The telcos struggling with declining voice revenues
1.4 Consolidation is making steady progress
1.5 Competition not progressing
1.6 Why is Australia lagging behind in competition?
1.7 Broadband resale
1.8 VoIP offering new competition opportunities
1.9 Wireless broadband opportunities
1.10 Shake-out of the ISP market on the horizon
1.11 The mobile market reaching saturation
1.12 The utilities expanding into regional areas
2. REVENUE OVERVIEW 2000 - 2006
2.1 Revenue Telstra Corporation
2.2 Revenue Optus
2.3 Revenue other service providers
2.4 Revenue telecommunications services market Australia
3. MARKET SHARE ANALYSIS 2005 – 2006
3.1 Key highlights of the 2005/2006 analysis
3.2 Fixed market
3.3 Mobile market
3.4 2nd-tier market
3.5 Broadband
4. REVENUE FORECASTS 2005-2015
4.1 By markets
4.2 By products
4.2.1 Overall market
4.2.2 Access market
4.2.3 Voice market
4.2.4 Content
4.3 By industry
4.4 So where to go from here?
5. REVENUES AND MARKET SHARES - 2ND-TIER TELCOS 2005-2006
5.1 Revenue developments 2005-2006
5.1.1 Market analysis of a booming industry
5.1.2 Retail and wholesale market shares
5.1.3 Commodity providers
5.1.4 Value-add within reach
5.2 Revenues 2nd and 3rd tier market
5.2.1 Moving towards new business models
5.2.2 The key players
5.3 Product segments
5.3.1 Too much reliance on voice
5.3.2 Too much reliance on dial-up
5.3.3 Mobile and wireless operators – starring Hutchison
5.4 Market shares – 2nd tier
5.4.1 Introduction
5.4.2 Follow the leaders: iiNet, SPT and Commander
6. FORECASTING (QUALITATIVE) 2006
6.1 The market in ten years time
6.2 Industry restructuring
6.3 Industry-specific forecasts
6.3.1 Fixed networks and services
6.3.2 Mobile telecoms
6.3.3 Broadband – as a concept
6.3.4 Media
7. CARRIERS AND SERVICE PROVIDERS
7.1 Industry overview
7.1.1 Telecommunications carriers
7.1.2 Service providers
7.2.2 Franchising
7.3 International carriers
7.3.1 Overview of international carriers in Australia
7.3.2 Overview of major activities
7.3.3 Dormant telcos ready to move into action
7.3.4 AT&T
7.3.5 Cable & Wireless
8. LOCAL ACCESS AND SERVICES MARKET
8.1 The changing market of access
8.1.1 Australians not in a hurry to substitute phone lines
8.1.2 New ways to measure ARPUs
8.1.3 From bundling to triple play
8.1.4 ULLS dragging on
8.2 Access services
8.2.1 Introduction
8.2.2 Market overview
8.2.3 Revenue per fixed-line
8.2.4 Telephone penetration
8.2.5 Overview by state
8.2.6 Rebalancing calls and access
8.2.7 Survey: rental charges unfair and excessive
8.3 Market statistics
8.3.1 Revenue overview
8.4 Key trends and developments
8.4.1 Changes in prices
8.4.2 Multi services
8.5 Competition never got off the ground
8.5.1 No new players
8.5.2 Competitors did try
8.6 ATUG’s opinion
8.6.1 The truth about declining revenues
8.6.2 Migrating to more profitable areas
8.6.3 PSTN prices still too high
8.6.4 Monopolistic rents
9. WHOLESALE SERVICES – 2005
9.1 The wholesale market moving into 2006
9.1.1 Telstra wants to retain its stranglehold
9.1.2 Calling cards
9.1.3 Value-add based on IP and broadband
9.1.4 Lack of players
9.1.5 Growth in broadband and NGNs
9.1.6 The effects of VoIP
9.1.7 Structural industry changes
9.1.8 Mobile wholesale remains underdeveloped
9.2 Wholesale revenues in Australia
9.3 Wholesale margins
9.4 Regulatory developments
9.4.1 ACCC Report on accounting seperation
9.4.2 ACCC fails to punish Telstra for anti competitive behaviour
9.5 Dark fibre market
9.5.1 Shedding light on a perishable commodity
9.5.2 The business model
9.5.3 Infrastructure capacity and services distinguished
9.5.4 Australia’s market for dark fibre
9.5.5 Metro ETHERNET market
10. MERGERS AND ACQUISITIONS
10.1 Introduction
10.2 Consolidation forging ahead
10.2.1 Overview of mergers and acquisitions
10.2.2 Unresolved mergers and acquisitions
10.3 Key mergers and acquisitions
10.3.1 SP Telemedia
10.3.2 Swiftel merged with People Telecom
10.3.3 PowerTel
10.3.4 iiNet acquired OzEmail
10.3.5 ntl acquired Macrocom
10.3.6 Horizontal telco model for Nextgen
10.3.7 Chariot and datafast
10.4 Consolidation – facts and fantasies
10.4.1 Buzz word
10.4.2 Retreat to niche markets
10.4.3 Obstacles to consolidation
10.4.4 Lack of industry leadership
10.4.5 Where are the opportunities?
10.5 Infrastructure consolidation
10.5.1 Key market for mergers and acquisitions
10.5.2 Trends in new infrastructure developments
10.5.3 Australian leaders
10.6 Customer perspective
10.6.1 Corporate market
10.6.2 SME market
10.7 Acquisitions
10.7.1 The AAPT acquisitions
10.7.2 Vodafone
10.7.3 Acquisitions from other companies (A-D)
10.7.4 Acquisitions from other companies (E-P)
10.7.5 Acquisitions from other companies (R-Z)
11. CALLING CARD AND CALLBACK MARKETS
11.1 The calling card market in 2005
11.1.1 Industry consolidation
11.1.2 Product development
11.1.3 Revolving door at the bottom of the market
11.2 Market overview
11.2.1 Calling cards and phone cards
11.2.2 Product segments in the market
11.2.3 Calling card complaints
11.3 Major players
11.3.1 Overview
11.3.2 Telecorp
11.3.3 Boost-tel
11.3.4 The rise and fall of VoIP operators
11.4 Revenue statistics
11.4.1 Payphone cards
11.4.2 Remote stored value access cards
11.5 Trends and developments in the calling card market
11.5.1 Electronic recharge cards
11.5.2 Trends in market segments
11.5.3 The travel market
11.5.4 Bundling
11.6 Post-paid cards
11.7 Callback operators – historical overview
12. PREMIUM RATE SERVICES
12.1 The market moving into 2006
12.1.1 Premium rate SMS cannibalising premium rate voice
12.1.2 Market led by regulations
12.1.3 Wireless, 3G and VoIP
12.2 Interactive Marketing Bureaus
12.3 Revenue fluctuations in premium rate services market
12.3.1 URL billing
12.4 Market segments
12.4.1 Dating underpins fixed premium rate services
12.4.2 Fixed voice-based services – consumer market
12.4.3 Fixed voice-based services – business market
12.5 Premium rate SMS
12.6 Key players
12.6.1 Industry overview
12.6.2 Legion Interactive
12.6.3 Information Dialling Services (IDS)
12.6.4 Telads Communications – Infocall
12.6.5 Dialect
12.7 Industry regulation
12.7.1 Telephone information services regulation – TISSC
12.7.2 Internet dumping
12.7.3 Number portability
13. ENHANCED VOICE SERVICES, IVR
13.1 Introduction
13.2 The speech recognition market in 2005
13.2.1 Market still waiting for a breakthrough
13.2.2 Statistical data
13.2.3 Centrelink
13.2.4 Strategic issues
13.3 Enhanced voice services in Australia
13.3.2 CND and CLI
13.4 Free call/Toll free (1800) and local call services (13x)
13.4.1 Product overview
13.4.2 1800, 13, and 1300 statistics
13.5 Interactive Voice Response services
13.5.1 Background
13.5.2 Speech recognition potential
13.5.3 Market statistics
13.5.4 Service providers
14. PRICING STRATEGIES, CHURN
14.1 Price packages
14.1.1 From usage to access charges
14.1.2 Value telco propositions
14.1.3 From bundling to triple play
14.2 Discounting
14.2.1 Overview of discount calling rates
14.3 Churn
14.3.1 Crippling costs
14.3.2 Developments in 2005/2006
14.3.3 Churn analysis
14.3.4 Reasons for churn and possible solutions
15. DATA, INTERNET AND BROADBAND STATISTICS
15.1 Data market
15.1.1 Introduction
15.1.2 Data market moving into 2006
15.1.3 Data market revenue statistics
15.1.4 Data market driven by the Internet
15.1.5 Key trends and developments – network re-engineering
15.2 Internet statistics
15.2.1 ISP dial-up subscribers – 2001 - 2005
15.3 Broadband statistics
15.3.1 Broadband DSL retail subscribers – 2002 - 2005
15.3.2 Total subscriber statistics (dial-up and Broadband DSL) – 2001 – 2005
16. COMPETITION STATISTICS AND ISSUES
16.1 Industry revenue and network capex reports
16.2 ACCC delivers mixed competition scorecard – May 2005
16.3 Competition issues in the wake of T3 – April 2005
16.4 The need for a super regulator
16.5 Lack of facilities-based competition
16.6 Regulations have not delivered the level of promised level of competition
16.6.1 ACCC on status of competition in 2004
16.6.2 Reports highlight competition problems
16.6.3 Competitive Safeguards Report – 2004
16.6.4 Prices paid for telecommunications services – 2004
16.6.5 Telstra’s compliance with the price control arrangements – 2004
16.7 From technology to service competition
16.8 Competition from inside and outside the industry
17. THE AUGUST 2005 TELECOMS REVOLUTION
17.1 Are you ready for the telecoms bonanza?
17.1.1 Key elements
17.2 What does this mean for customers?
17.2.1 What does this mean for the industry?
17.3 Start of a telecoms revolution
17.4 Leadership – Helen Coonan
17.5 Leadership – Sol Trujillo
17.6 Full sale of Telstra highly unlikely
17.7 The end of Telstra?
17.8 Sol tells it like it is
17.9 Our debate with Sol
17.9.1 We are more than ready for the debate, Sol
17.9.2 USOs
17.9.3 Industry cooperation
17.9.4 On regulations
17.9.5 Best services and best prices
18. GLOSSARY OF ABBREVIATIONS


Exhibit 1 – Nextgen telecoms
Exhibit 2 – Key revenue trends – period to 2015
Exhibit 3 – New public network concept
Exhibit 4 – Overview licensed carriers – July 2004
Exhibit 5 – International carriers in Australia – 2005
Exhibit 6 – Types of local access networks and carriers – 2004
Exhibit 7 – Type of local access network connections by carrier – 2004
Exhibit 8 – PSTN migration
Exhibit 9 – Consolidation – cooperation
Exhibit 10 – The consolidation of the calling card market
Exhibit 11 – Marketing strategies and advertising campaigns




Table 1 – National sales revenue Telstra Corporation – 2000 – 2006
Table 2 – Telecommunications sales revenue, Optus – 2000 – 2006
Table 3 – Telecoms services revenue, other companies – 2000 – 2006
Table 4 – Total revenue Australian telco market by company – 2000 - 2006
Table 5 – Annual retail revenue growth (percent) – telcos – 2000 – 2006
Table 6 – Services market by operator segment – 2000 – 2006
Table 7 – Revenue Australian telecoms market by service – 2000 – 2006
Table 8 – Revenue growth Australian telecoms market by service – 2000 – 2006
Table 9 – Average industry five-year revenue growth – 2001 – 2005
Table 10 – Revenues services market by operator – 2000 – 2006
Table 11 – Revenue market share by company/SP group (wholesale values) – 2000 – 2006
Table 12 – Revenues by company/SP group (retail values) – 2000 – 2006
Table 13 – Retail revenue market shares by company/SP group – 2000 – 2006
Table 14 – Average five-year revenue growth per product group – 2000 - 2005
Table 15 – Make up of the market – 2000 - 2006
Table 16 – Market share ($) fixed voice and data market – 2000 - 2006
Table 17 – Market share (percent) fixed voice and data market revenue – 2000 – 2006
Table 18 – Revenues mobile operators – 2000 - 2006
Table 19 – Market share revenues (percent) mobile operators – 2000 – 2006
Table 20 – Market share Top Ten dial-up ISPs – 2005
Table 21 – Top DSL broadband resellers – 2005
Table 22 – Telecommunications services revenue by market – 2005; 2010; 2015
Table 23 – Telecommunications services revenue by product – 2005; 2010; 2015
Table 24 – Access revenue – 2000 - 2015
Table 25 – Triple Play* Revenues – 2005 - 2015
Table 26 – Access percent of total telecoms spend – 2000 - 2015
Table 27 – Voice revenue (Fixed, VoIP, Mobile) – 2000 - 2015
Table 28 – Voice percent total telecoms revenues – 2000 - 2015
Table 29 – Content/Advertising percent total telecoms spend – 2000 - 2015
Table 30 – Telecommunications services revenue by industry group – 2005; 2010; 2015
Table 31 – Telecoms services revenue, 2nd and 3rd tier companies – 2000 – 2006
Table 32 – Annual retail revenue growth (percent) – 2nd and 3rd tier – 2000 – 2006
Table 33 – Total revenues 2nd tier market - 2000 – 2006
Table 34 – Growth revenues (percentage) 2nd tier market – 2001 – 2006
Table 35 – Retail revenue – 2nd tier fixed-line telcos and ISPs – 2002 - 2006
Table 36 – Revenues per market segment (retail values) – 2000 – 2006
Table 37 – Product Mix SP Market – 2000 – 2006
Table 38 – Average 2nd tier industry 5-year revenue growth retail values – 2001 – 2005
Table 39 – Types of local access networks – 2004
Table 40 – Local access network use by other service providers – 2004
Table 41 – Investment in local access networks – 2003 - 2004
Table 42 – Summary of voice and data revenue per fixed-line – 2003 - 2005
Table 43 – Telstra voice revenue per fixed-line – 1999 - 2005
Table 44 – Voice revenue and access lines – all operators – 2002 - 2004
Table 45 – Telstra voice revenue and access lines – 2003 - 2004
Table 46 – Telstra voice and data revenue – 2003 - 2004
Table 47 – Telephone line penetration in Australia – 1986 - 2005
Table 48 – Telecommunications revenue per state early 00s
Table 49 – Household telephone penetration by state early 00s
Table 50 – Local call and access revenues – Telstra and Optus – 1999 - 2006
Table 51 – PSTN revenues – 2002 – 2005
Table 52 – Percentage changes in the PSTN price indexes by service and consumer group – 1997 -1998; 2003 – 2004
Table 53 – Wholesale market revenues by supplier (fixed/mobile) – 1997 - 2006
Table 54 – Business and residential wholesale margins by product - 2005
Table 55 – Wholesale margins by industry group – 2001 - 2005
Table 56 – Wholesale margins by industry group – 1996 – 2000 (historical)
Table 57 - Metro Ethernet market 2004; 2007; 2009
Table 58 – Phone card market share – 2004
Table 59 – Revenue total prepaid card (fixed long-distance) market – 1997 - 2006
Table 60 – Revenue post-paid card market – 1997 - 2006
Table 61 – Premium rate market (mobile and fixed) revenues and growth – 1989 - 2006
Table 62 – Telstra PSTN value added services revenue – 2002 - 2005
Table 63 – PSTN Value-added service customers – 2002 - 2004
Table 64 – Numbering types recorded by ACA – 2002
Table 65 – Bundled service preferences
Table 66 – Average churn rates – 2005
Table 67 – Make up of the market – 2000 - 2006
Table 68 – Revenue Australian data market – 1999 - 2006
Table 69 – Revenue growth Australian data market – 1999 - 2006
Table 70 – Market share Top Ten dial-up ISPs – 2005
Table 71 – Major ISPs total dial-up subscriber statistics – 2001- 2005
Table 72 – Market share top ten dial-up ISPs – 2001 - 2005
Table 73 – Annual growth of Internet subscribers – 2002 - 2005
Table 74 – Broadband DSL retail subscribers - 2002 - 2005
Table 75 – Market share wholesale subscribers – 2002 - 2006
Table 76 – Market share retail subscribers – 2002 - 2006
Table 77 – Annual growth of broadband subscribers – 2001 - 2006
Table 78 – Major ISPs total dial-up and broadband DSL subscribers – 2001 - 2005
Table 79 – Telstra retail market shares - 2001 - 2004
Table 80 – Residential Broadband (BB) growth predictions – next ten years – 2003 - 2015