Australia - Thodey will take his time on national broadband

[the australian] David Thodey insists he won't be driven into a fast decision on the national broadband network. Actually, there's not much chance of anyone thinking that.

Given how much time has already elapsed and Telstra's mantra that negotiations continue to be "complex and complicated", Thodey's concession yesterday that it would "definitely be months" before the issue comes before Telstra's long-suffering shareholders is hardly a surprise.

For all the talk of complexity, the fundamental problem is still price, price, price. What and how much will the government pay Telstra for the use of its ducts and for the migration of its customers on to the new network?

That commercial equation won't be altered by the government's determination to reintroduce its bill this month that threatens Telstra with all sorts of additional punishments unless it co-operates with the NBN vision. And there is still no obvious resolution.

But while that is still being argued about -- ever so "constructively", of course -- Thodey and his team are also having to cope with a fast-changing market where Telstra is losing ground in all sorts of areas.

Part of the disappointing 2.5 per cent decline in half-year revenue announced yesterday was due to the unexpectedly rapid and accelerating decline of the traditional phone line, along with its nice high margins, particularly over the past few months. About 10 per cent of households now don't have a fixed line at all. Those that do are making five fewer calls a month on average.

Despite its massive investment in transformation to understand the market, Telstra didn't manage to predict the pace of that dramatic change. Thodey now says that there is no reason to think the trend will not continue.

There is also the problem, which will be a very big problem for the economics of the NBN as well, that the fixed broadband market is said to be "maturing". That is a polite way of saying that with 65 per cent penetration, new household subscribers are becoming harder to attract because the market is more saturated.

Nor do they necessarily want to pay higher prices for higher speeds -- as also seems obvious from the slow take-up of Telstra's upgraded HFC cable network in Melbourne offering speeds of up to 100Mbps. Instead, the real promise is in the constantly expanding mobile market, particularly mobile broadband given the demand for data.

But Telstra has also managed to lose market share in what should be its key growth areas. The excuse is that Telstra kept its prices too high for too long in the face of aggressive competition on price from other players. That is part of the continuing struggle to get the right balance in terms of managing its margins, while also managing its growth.

When Telstra belatedly realised it had got that balance wrong, it was then too slow in getting its new cheaper offers out into the market. That doesn't quite sound like the smoothly running machine in either marketing or consumer satisfaction Telstra has been promising. Instead, Thodey kept talking about it clearly being a challenging half-year and promising to do better.

But it is now the third time in less than a year that Telstra has had to revise down Thodey's revenue estimates. And while the impasse -- sorry, constructive, complicated, complex negotiations -- over the NBN continues, that is only going to be harder for Telstra to fix.

No wonder Thodey didn't look very ebullient yesterday.

Thodey will take his time on national broadband