The figures behind Telstra’s 2022 transformation

Telstra chairman John Mullen used this week’s AGM to play up the telco’s ‘T22’ turnaround strategy – unveiled in June 2018 – dubbing it ‘the most radical and ambitious [transformation] being undertaken by any communications company in the world today’.

The three year strategy included the establishment of a new wholesale infrastructure company, Telstra Infraco, simplified product offerings and business structure and a cost reduction program.

Mullen told the AGM that in the year since launching T22, the company has reduced more than 1,800 consumer and small business plans to just 20 in market plans and done away with lock in contracts on new consumer and small business mobile and fixed plans.

The number of calls coming into Telstra’s contact centres has dropped by more than 15 million a year, with the company planning to reduce them by another 16 million by 2022.

That’s no doubt helping drive cost reductions too, with Mullen noting $1.2 billion of annual cost reduction since FY16.

Also helping on the cost reduction front – but not something Mullen was keen to play up – is the 6,000 direct employee role reductions this year.

While Mullen dubbed the reduction ‘a great concern’ given that ‘every employee is a person with a family, hopes and aspirations’ he noted that one of the biggest drivers was the transfer of Telstra’s fixed line business back to government ownership.

“While we have lost some 6,000 employees, NBN now employs 6,400 and many thousands of contractors, so overall employment has risen in the industry.”

Mullen shot down criticism of chief executive Andy Penn’s $5 million pay packet, saying the board had spent a ‘huge amount of time’ consulting to find an appropriate compensation scheme after being given a ‘first strike’ last year when shareholders rejected the company’s remuneration report.

He said share prices can’t be the only metric on which management performance is rated, and cautioned that ‘first class leadership’ is critical in the current environment of transformation and retaining top management depends on a number of things, including remuneration.

“When I was younger almost every executive aspired to being the CEO of a big public company. Today there is a real risk that the media scrutiny, populist criticism and governance challenges are starting to lead talented executives to look for alternative career paths such as private equity where they can build their careers out of the spotlight.

“Transparency and accountability are of course good things, but we need to be very careful that the pendulum does not swing too far and we lose top talent, as this will ultimately only be to the detriment of shareholders.

The company reported a drop in profit this year with Mullen laying part of the blame – some $600 million in negative recurring EBITDA headwind – on the NBN but promising FY2020 will be ‘pivotal’ for Telstra, with expectations of up to $500 million in growth.

Mullen saved much of his chairman’s speech to slam the NBN, saying it is a ‘state-owned monopoly that is going to cost the country more than $50 billion’ – while also accepting that Telstra must bear part of the blame due to its recalcitrance in helping the government at the time.

He says all Australians would have had access to better high-speed broadband at ‘a fraction of the cost’ if the NBN had not happened.

“It is always easier to comment with the benefit of hindsight, but it is my view that over the last 10 years private sector competition between strong players such as Telstra, Optus, TPG and others was always going to build 100MB broadband access and speed to the majority of the population of Australia, in an ongoing competitive landscape and at no cost whatsoever to the taxpayer.”

Southern Cross takes NEXT steps for A/NZ-US cable

The US$300 million Southern Cross NEXT cable has been given the regulatory green light to begin construction, with Telstra also receiving the go ahead in its bid to take a 25 percent stake in the company.

The 13,483km cable, due for completion in January 2022 and connecting Australia, New Zealand, Fiji, Tokelau, Kiribati and the US, is designed to carry 72 terabits per second, providing what Southern Cross says will be the lowest latency pathway from Australia and New Zealand to the US.

The cable adds to the existing 20Tbps of capacity on the current Southern Cross systems.

Alcatel Submarine Networks (ASN) has been contracted to build the cable which is based on an Open Cable architecture, with a Contract in Force now granted.

Laurie Miller, Southern Cross president and CEO, says the new route will provide further resilience and connectivity options between Australia, New Zealand and the United States. It will also provide a key interconnecting infrastructure for the South Pacific, providing FijiA, Tokelau and Kiribati with a direct pipeline, and offering greater options for Vanuatu, Samoa and Tonga.

Telstra joins Spark New Zealand, Singtel and Verizon as shareholders and will be an anchor customer of the NEXT cable. It’s shareholding sees Spark’s shareholding drop from 50 percent to 37.5 percent.

Michael Ebeid, Telstra enterprise group executive, says the cable will benefit customers from enterprise to wholesale and consumer.

“With 80 percent of all the internet traffic to Australia coming from the US, a high speed, low latency direct route to North America is a very important investment for our business and our customers,” Edeid says.

“Southern Cross builds on our existing footprint across Asia Pacific where we carry 30 percent of the region’s active capacity.”

Spark told the NZX it expects to contribute between $70 million and $90 million of equity across FY20-22

A marine survey was completed in 2017, with Sydney BMH and bore landing facilities completed in 2018 along with landing arrangements in Los Angeles and Auckland.

The system was initially expected to go live in the second half of 2021.

In May, the 36Tbps Indigo subsea cable, connecting Sydney and Perth with Jakarta and Singapore was lit up. That cable is a partnership between Google, Telstra, Singtel, AARnet, Indosat and SubPartners.

NBN service quality complaints on the rise

Complaints about service quality, connections and migrations involving Australia’s National Broadband Network (NBN) rose in the first six months of 2019, despite complaints relating to the country’s broader telecommunications services falling overall during the year ending June.

This is according to the latest figures by the Telecommunications Industry Ombudsman (TIO). The TIO’s annual report for the financial year ending June 2019, released on 25 September, paints a picture of increasing complexity among the issues Australians are complaining about when it comes to their telecommunications services.

“Complaints about phone and internet services in Australia have continued their downward trend, and this is good news for consumers and the telecommunications industry, but this is only one part of the story,” said Ombudsman Judi Jones. “The volume of complaints coming back to us unresolved shows an emerging picture of complexity in technical and small business issues.

“Some measures we have taken to address this are the formation of specialist teams to handle these escalated complaints, and working closely with the phone and internet providers to better understand the barriers to resolving these issues,” she said.

According to the TIO, the 12 months from July 2018 to June 2019 saw 47 per cent of escalated complaints closed within 60 days, compared to 77 percent in FY2017-18.

The top five complaint issues about internet services were no action or delayed action by a service provider, with 13,976 complaints, service and equipment fees (13,509 complaints), slow data speed (8,668 complaints), intermittent service/dropouts (7,915) and delay establishing a service (7,431).

At the same time, the top five complaint issues about mobile services were service and equipment fees, with 12,905 complaints, no or delayed action by provider (11,675 complaints), resolution agreed but not met (4,263), misleading conduct when making a contract (3,656) and termination fees (2,975).

Altogether, the TIO received 132,387 complaints throughout the year, representing a year-on-year fall of 21 percent. However, for the first time, complaints relating to internet services exceeded those of mobile services, with 43,164 complaints – or 32.6 percent – and 40,103 complaints, respectively.

Complaints relating to services delivered via the NBN comprised a large portion of the total regarding internet services. According to the report, 23,362 complaints were recorded in FY2018-19 about service quality on the NBN. Complaints increased from 2.1 per 1,000 premises on the network in the first half of the year to 2.5 per 1,000 in the second half of the year.

Services delivered over the NBN were the subject of 48.2 percent of complaints about service quality during the 12-month period. By comparison, 40.4 percent of such complaints revolved around services delivered via other networks. Mobile networks accounted for 11.3 percent of complaints of this nature.

Meanwhile, 11,635 complaints were recorded in FY2018-19 about changing providers or establishing a connection to the NBN. Complaints increased from 6.7 per 1,000 premises added in the first half of the year, to 8.6 in the second half of the 12-month period.

Indeed, 56.4 percent of all complaints relating to connection and changing providers were about services delivered over the NBN. However, this comes as little surprise, given that, as the national broadband wholesaler draws closer to the completion of its rollout, more end consumers are being connected to the network.

“With transition to the NBN, providers offered a range of new products and services. As a result, we saw a new range of complaints and enquiries from consumers navigating the changed environment. The increase in complaints about internet services is one example of this,” the TIO report stated.

By comparison, such complaints involving services delivered via other networks accounted for 30.6 percent of the total, while mobile network services were at the centre of 13 percent of complaints about connection or changing providers.

Unsurprisingly, the country’s largest telecommunications player, Telstra, claimed the lion’s share of complaints, accounting for roughly 50.2 percent, although it should be noted that the company enjoyed a 19.5 percent fall in complaints from the previous year’s tally of 82,528.

Optus, as the country’s second largest telco, came in second, with 23.9 percent of the total. Like Telstra, Optus saw a fall in complaints against its name, enjoying a 22.2 decrease, year-on-year. Optus was followed by Vodafone, iiNet and TPG Internet, with 5.1 percent of the total, 4.3 percent and 4.1 percent, respectively. All experienced a year-on-year decrease.

“We are pleased to see that complaints decreased in every state, and for all of the providers listed in the report,” said John Stanton, CEO of telecommunications industry body, the Communications Alliance.

“There has been significant work over the past two years by Industry to improve the customer experience, including – but certainly not limited to – NBN Co and RSPs [retail service providers] achieving better communication and coordination for consumers and businesses as they migrate services to NBN-based networks,” he said.

NBN Co stands by CVC charges amid wholesale pricing overhaul

NBN Co has proposed a series of wholesale discounts and higher capacity inclusions across its products as part of its latest industry consultation round, but refuses to bow to telco pressure to drop its controversial connectivity virtual circuit (CVC) charge. 

The company behind the country’s National Broadband Network (NBN) released the second paper of its wholesale pricing review consultation with industry on 17 September, following twelve weeks of consultation with more than 50 NBN retail service providers (RSPs) and industry groups.

Among the big changes proposed by the network builder are wholesale discounts and higher capacity inclusions across its high-speed tiers. These include a 100/20 bundle discount starting with 3.75Mbps of included capacity at an effective charge of A$58 per month, as flagged at the beginning of the consultation process in June.

Additionally, the changes would include a 250/25 bundle discount starting with 4.75 Mbps of included capacity at an effective charge of A$68 per month, and an up to 1000/50 bundle discount starting with 5.75Mbps of included capacity at an effective charge of A$80 per month.

It should be noted that the 100/20Mbps Access Virtual Circuit (AVC) Traffic Class 4 (TC-4) proposal is being considered across all fixed line footprints, with ranged peak information rates (PIRs) being provided for the fibre-to-the-basement (FttB), fibre-to-the-curb (FttC) and fibre-to-the-node (FttN) network services.

The 250/25Mbps and the 1Gbps/50Mbps proposals are being considered for NBN Co’s fibre-to-the-premises (FttP) and hybrid fibre coaxial (HFC) footprints, while the feasibility of offering these tiers in the (FTTC) footprint is still being investigated.

According to NBN Co, the new 100/20 bundle discount is around 11 percent cheaper than the A$65 effective charge for the 100/40 bundle discount and the increase in CVC inclusion improves the total value by 20 percent. At the same time, the new 250/25 bundle discount is 32 percent cheaper than the A$100 effective charge for the 250/100 bundle discount.

The new up to 1000/50 bundle discount, meanwhile, 55 per cent cheaper than the previous A$180 effective charge for the 1000/400 bundle discount. Additionally, an almost doubling of the CVC inclusion to 5.75Mbps improves the total value by almost 68 per cent. 

For Ken Wallis, NBN Co general manager, commercial, these new high-speed tier offerings represent the biggest changes in NBN Co’s latest wholesale pricing proposals.

“We brought down the price, created the new 100/20 to 250/25 and the new up to 1Gbps/50Mbps so that they are at a much lower cost for RSPs to upsell,” Wallis told Telecom Times. “I feel this is the really big change here, and really opens up some greater opportunities for customers, as well as RSPs, in terms of their business cases as well.”

At the other end of the spectrum, NBN Co is planning to introduce a modified 12/1 Entry Level Bundle (mELB) discount on 1 October 2019.

Although the starting effective wholesale charge of A$22.50 and inclusion of 150Kbps (0.15Mbps) remains unchanged for voice only customers and those who use limited data, the additional charge that is applied when the average monthly peak usage across relevant services exceeds the included 150Kbps will be reduced from A$22.50 to A$5.70. 

This additional charge is proposed to be further reduced to A$4.90 in May 2020 and to A$4.10 in October 2020. There will also be the option of an additional CVC charge of A$8/Mbps to accommodate higher data users.

NBN Co is also proposing changes to its mid-tier offering. In an effort to deliver a more economically attractive 25/5 bundle discount to RSPs, the company is proposing to reduce the wholesale effective charge from A$45 (including 2Mbps of CVC) that exists today to A$37 (including 1.25Mbps of CVC) in November 2019, and to increase this capacity allocation to 1.5Mbps in May 2021.

Given that, according to NBN Co, 65 percent of end customers are currently subscribed to the 50/20 wholesale speed tier, the company is proposing to help RSPs improve their service experience by adding extra CVC inclusion to the ($45) 50/20 wholesale bundle discount, increasing from a CVC inclusion of 2Mbps today to 2.25Mbps in May 2020, 2.5Mbps in May 2021.

While NBN Co’s Pricing Review 2019 Consultation Paper 2 appears to have allowed for a series of discounts and other changes to appease the country’s telcos, the company has reiterated its commitment to retain its CVC charge model, despite ongoing criticism by a number of RSPs, most notably Telstra, NBN Co’s biggest retailer.

image (1)“While we know that some RSPs have called for the removal of CVC charges, the reality is that there is a real cost in provisioning and dimensioning the network to accommodate rising data consumption.,” said NBN Co chief customer officer, residential Brad Whitcomb.

“We believe our bundled charges are the fairest way to implement a user-pays approach to wholesale pricing at this time.”

As such, according to Whitcomb, NBN Co believes the higher CVC inclusions proposed in the paper strike the right balance between helping RSPs to develop affordable offerings for end customers, giving service providers a platform where they can compete, while also allowing NBN Co to generate a “fair and reasonable return” to invest back into the network.

However, in an effort to provide RSPs with additional certainty around CVC, NBN Co’s proposals see an increase in CVC across most wholesale bundles discounts and, for the first time, the company will begin publishing a rolling two-year roadmap of future pricing with incremental annual increases in capacity inclusions on most bundle discounts to meet customers’ growing data demand.

“This roadmap is an important step in showing service providers that we are listening and taking decisive action to provide greater certainty to the industry,” Whitcomb said.

NBN Co has also taken the prospect of differential pricing for video streaming, dubbed a ‘Netflix tax’ by some pundits, off the table. According to the company, the majority of respondents in the first round of consultation highlighted streaming video as an important application driving the need for higher download speeds and more data inclusions.

While the company investigated the possibility of lowering the price of video traffic by differentiating video traffic flows during the initial consultation, only two RSPs supported the proposed initiative, leaving NBN Co to instead focus on ways to meet the challenge of growing video traffic by increasing CVC inclusions and making higher speeds more affordable. 

Going forward, the network builder expects to conduct annual, industry-based consultations to review and refine bundle discounts and inclusions. For now, the company is calling on further feedback from RSPs on the proposals in the consultation paper.

The final outcomes of the wholesale pricing consultation are expected to be announced in November 2019.

Aussie telcos ordered to keep blocking sites hosting Christchurch terror footage

The federal government has ordered Australia’s largest internet service providers (ISPs) to keep blocking eight websites hosting footage of the terrorist attacks last March in Christchurch, New Zealand along with the manifesto of the alleged gunman.

The direction, issued by the office of the government’s eSafety Commissioner on 9 September, compels ISPs to implement a six month block, during which time the eSafety Commissioner will review and remove sites from the list if and when the offending content is taken down.

The action comes several months after the country’s major telcos, including Optus, Telstra and Vodafone, independently moved to block more than 40 websites that were hosting video of the attacks or the manifesto of the alleged perpetrator in the days immediately following the Christchurch attacks.

The ISPs, as members of a task force subsequently set up by Prime Minister Scott Morrison and tasked with looking into terror and violent online content, pressed the Government to provide some direction, given that the ISPs did not have a clear legal footing for the action they had taken independently.

As such, the new direction, the first of its kind exercised by the eSafety Commissioner, is expected to offer ISPs certainty to continue their blocking activities, while also clearing the way for ISPs to remove the blocks they had voluntarily placed on other websites that have since taken down the material.

“Australian internet service providers acted quickly and responsibly in the wake of the terrorist attacks in Christchurch in March this year to block websites that were hosting this harmful material,” said Paul Fletcher, Minister for Communications, Cyber Safety and the Arts.

“ISPs called on the Government to provide them with certainty and clarity in taking the action they did, and today, we are providing that certainty,” he said.

The eSafety Commissioner Julie Inman Grant, meanwhile, has consulted with both ISPs and website administrators, giving the websites in question “ample opportunity” to remove the content.

“Those hosting this material do so in the full knowledge that Australia will take action to halt its continued proliferation,” Inman Grant said. “The remaining rogue websites need only to remove the illegal content to have the block against them lifted.”

According to John Stanton, CEO of telecommunications industry body Communications Alliance, the direction has been welcomed by the country’s ISPs.

“Industry recognised that this was the right thing to do, without explicit Government direction, and we are pleased to see the framework that is now in place as a result of constructive collaboration between industry, government and its agencies,” he said.

The eSafety Commissioner is continuing to work with industry to develop an additional protocol to govern the rapid removal of terrorist and extreme violent material in a crisis event which, according to Inman, is expected to be undertaken infrequently.

“The decision to block websites will be taken only under extraordinary circumstances and will need to meet an extremely high threshold,” said Inman Grant.

Verizon strikes NBN Enterprise Ethernet reseller deal

The local arm of US telco giant Verizon has signed a reseller deal with NBN Co to supply the National Broadband Network (NBN) builder’s Enterprise Ethernet offering to its local customer base. 

The move gives Verizon Australia’s local customers, the bulk of which are government entities and private sector enterprises, the ability to combine NBN Co’s business-oriented broadband product with Verizon’s own services, such as Software Defined Networking (SDN) and Virtual Network Services (VNS).

“This agreement provides choice and competition that hasn’t existed on this scale before. Businesses, particularly those outside of the major cities, deserve access to the globally recognised, best in class services and capabilities that Verizon offers,” Robert Le Busque, Verizon’s regional managing director in Australia, said. 

“A robust network is the backbone of any business, and particularly today, where digital business is the norm, and organisations are increasingly looking for scalable, flexible network capacity to support global growth. 

“Verizon is pleased to be able to present a compelling alternative to Australian enterprise and government businesses,” he added. 

For Verizon, the deal marks a new milestone in its 20-plus year history in Australia, which has seen the company named among the panellists on the australian Federal Government’s Whole-of-Government Telecommunications Services Panel. 

The move sees Verizon join a handful of existing NBN resellers, including Telstra, Vocus and TPG, already offering the Enterprise Ethernet product, which is aimed squarely at the high-margin business market. 

NBN Co launched the wholesale enterprise product, which offers symmetrical speeds of up to 1Gbps and premium customer service, in October last year. At the time, the network builder said that its Enterprise Ethernet connections are designed to be built on request and feature a point-to-point fibre connection.

“This wholesale product has been developed with the specific needs of global enterprise and government organisations in mind. It is capable of delivering the service required by businesses that use data-intensive applications such enterprise network systems and cloud-based solutions,” NBN Co chief customer officer for business Paul Tyler said at the time. 

At launch, the product was touted as being packaged with a premium service-level agreement between NBN Co and retail service providers (RSPs) to provide faster resolution of faults as well as to encourage RSPs to offer an increased service experience for mission-critical applications. 

Vodafone Australia concedes it misled customers over direct billing service

Vodafone Australia has become the third local telco to be hit by the Australian competition watchdog over direct billing services.

The Australian Competition and Consumer Commission (ACCC) said on 16 July that Vodafone Australia had admitted to making false or misleading representations about its now defunct third-party Direct Carrier Billing (DCB) service.

Similar to services previously offered by Telstra, Optus and other telcos, Vodafone’s DCB service let the telco’s customers purchase online software and services from third parties, with the charges for that digital content then billed directly to Vodafone customers’ accounts.

According to the ACCC, Vodafone’s DCB service was automatically enabled on its customers’ mobile accounts, meaning purchases could occur in just a couple of clicks, without any identity verification, and be charged back to customers’ next Vodafone bill.

It should be noted that the content was marketed and provided by third parties who paid Vodafone a commission for sales to end customers.

According to the ACCC, Vodafone likely breached the ASIC Act from at least 2015 by charging consumers for content they had not agreed to buy or bought unknowingly.

Vodafone has offered up a court enforceable undertaking that compels it identify, contact and refund customers from as far back as January 2013 who complained either directly to the telco or via the Telecommunications Industry Ombudsman (TIO) about the DCB service.

According to the court enforceable undertaking, published by the ACCC, Vodafone was aware of issues with its DCB service from at least February 2015. These included a two-fold increase in revenue but a three-fold increase in complaints about the DCB service received in the 2014-15 financial year, compared to the year prior.

Moreover, according to the undertaking document, Vodafone agrees that from at least February 2015, it was aware that the operation of its DCB service had led to customers unintentionally purchasing DCB content without their knowledge or consent.

The ACCC, which carried the investigation into Vodafone’s DCB service under a delegation of the Australian corporate regulator’s powers, said that Vodafone began phasing out DCB subscriptions in mid-2015 in response to an increase in complaints about the service, cancelling its arrangements with some third-party content providers.

However, according to the ACCC, customers could still be charged for one-off purchases without any identity verification until March 2018.

“Through this service, thousands of Vodafone customers ended up being charged for content that they did not want or need, and were completely unaware that they had purchased,” ACCC Chair Rod Sims said. “Other companies should note, money made by misleading consumers will need to be repaid.”

While Vodafone follows Optus and Telstra in being pulled up by the competition watchdog over its direct billing service, it appears to have avoided being slapped with the $10 million fine the two larger telcos were handed over representations relating to their respective direct billing services.

In February, after action by the ACCC, the Federal Court ordered Optus pay a $10 million fine for its “treatment of customers” who unknowingly purchased games, ringtones and other digital content through its third-party billing service. Additionally, Optus committed to refunding affected customers.

Last year, the Federal Court ordered Telstra to pay a $10 million fine for making false or misleading representations to customers in relation to its third-party billing service known as “Premium Direct Billing” (PDB). Telstra also agreed to refund affected customers.