opinion Last weekend, long-time Optus chief executive Paul O’Sullivan delivered a rare landmark speech on the past, present and future of Australia’s telecommunications sector, with the intention of reinvigorating what he said had become its stunted industry debate.
He couldn’t have had a more captive or receptive audience; about 60 journalists, representing almost every technology media outlet in the nation, had flown from all around Australia that morning to attend the Kickstart Forum on the Gold Coast. O’Sullivan’s was the keynote speech (watch it in full here) which would kick off three days of intense debate about Australia’s ICT sector.
And in some senses O’Sullivan delivered.
The Irish-born telco chief’s notorious good humour, deep industry knowledge and leadership gravitas were all turned up to maximum as he warmed up the audience and spiked our intellect with nuggety morsels of delicious telco insight. It was almost as though the O’Sullivan of old — the one who mischievously delighted in pulling Sol Trujillo’s nose — was back, after a long period of pale convalescence associated with his 50th birthday last year.
But as the speech wore on, I grew increasingly perplexed by its subject matter.
You always expect an Optus executive to land blows on the old nemesis Telstra during a major speech. But after doing so, O’Sullivan went into some unexpected areas … calling for NBN Co’s management to be outsourced just as the fibre rollout is kicking into gear and demanding an independent oversight body be set up to regulate the fledgling fibre telco, just as parliamentary committees serving the same function have been approved.
Apple and Google, too, came in for their fair share of Irish scorn, with O’Sullivan bemoaning Apple’s closed iTunes ecosystem and wondering aloud whether the traffic to sites such as Google and eBay could be auctioned off to the highest bidder.
Some of the ideas which O’Sullivan proposed were innovative — even revolutionary. And I have no doubt that his intent with his speech was to propose out-of-the-box thoughts that might stimulate the national telecommunications debate into bold new areas. But for me, they did nothing more than confirm my suspicions about just how distant the Optus chief is from the current debate in his sector … and his customer’s impressions of his company.
There is, flatly, no way that Communications Minister Stephen Conroy would ever oust NBN Co’s stellar management team led by Mike Quigley for a bunch of guns for hire, just as its fibre rollout is starting to deliver. And as Quigley pointed out recently, NBN Co already has plenty of oversight. Furthermore, the idea that Google or eBay should surrender any of their hard-won internet traffic to their competitors … is an idea as uncompetitive as it is imbecilic.
Can you imagine the reaction from Mountain View if Google was asked if it would insert links to Microsoft Bing or Yahoo on its home page? Let’s make no bones about it: Neither Optus, nor parent Singapore Telecommunications, is a large enough company to even start have that conversation with the world’s most powerful search company.
The fact that O’Sullivan would raise such an idea in public reveals that he simply does not understand the fundamental nature of the internet right now. There is no need to regulate companies like Google the same way the Government does Telstra — because the cost of internet publishing is almost zero; there is no barrier to entry for competitors.
Not only that, but internet users do not want the Government imposing an obnoxious level of regulation across their pristine natural net landscape. Look what happened with Labor’s internet filter … or the ongoing net neutrality debate. “Hands off our Apache servers!!”, they would scream.
Other aspects of O’Sullivan’s speech, and his answers to questions afterwards, were also concerning.
If you examine Optus’ recent financial results compared with those of its competitors, it is clear that the company is facing a devastating war of attrition on two fronts. iiNet has recently claimed the number two position in Australia’s ADSL broadband market in as clear and public terms as possible, launching a nationwide advertising blitz aimed at positioning itself as Telstra’s chief rival in fixed-line telecommunications.
This is no idle claim. With the scalps of Westnet, Netspace, AAPT and dozens of other smaller companies under its belt, iiNet now has more ADSL customers than Optus — and its revenues are expanding rapidly as a result — up 45 percent for the six months to the end of 2010, compared with the same period in 2009. That’s a jump of $107 million in one year, in case you were wondering.
Optus, in the same period went backwards slightly — with consumer and SME fixed revenues declining two percent year on year. To put matters into perspective, even number one telco Telstra grew in that period — adding 1.2 percent in revenues.
It’s a similar situation on when it comes to mobile.
It’s clear from Telstra’s recent financial results session that the quality of the company’s Next G mobile network is vaulting it ahead of its competitors — along with some judicious price cuts and a sledload of marketing money poured into the market in late 2010. Australia’s biggest telco added just 39,000 post-paid customers in the three months to the end of June last year. But the next quarter — as its efforts took effect — it added some 116,000, and then a further 181,000 in the Christmas period. The company’s mobile serices revenue jumped $210 million.
In comparison, Optus’ net additions to its mobile network stayed flat over the period. Optus has been regularly adding about an average of 150,000 new post-paid mobile customers like clockwork every quarter for several years now. But its rate of change is not accelerating … it’s declining. The telco actually lost 16,000 pre-paid customers, net, over the past half. Mobile service revenue still grew — at 7 percent — but it was along extremely predictable lines.
What I am really saying here, is that Optus’ mobile growth has been reliable … but that is that in a single half of marketing push, Telstra started adding the same numbers of customers to its network as the SingTel subsidiary — that is literally how fast the company’s Next G-fuelled turnaround has been. Telstra has changed gears under David Thodey — and last year caught up to Optus in a heartbeat.
VHA, of course, had a mediocre second half of 2010. But it doesn’t appear from the data available that Optus soaked up many of the customers jumping off the sinking Vodafone ship. Instead, those customers appear to have embarked on a long-term voyage and are now sipping Moet & Chandon from David Thodey’s diamond-encrusted champagne glasses.
The response from O’Sullivan to these problems — when I and other journalists pinioned the executive about them at the speech and afterwards — was, in my opinion, to hide his increasingly greying head in the sand.
Throughout his speech, O’Sullivan remained fixed on Telstra’s dominance of the fixed-line broadband market, and the need to change the regulatory environment in Australia to promote competition in that arena. When I asked him about iiNet’s challenge, the Optus chief merely pointed out that Optus was still technically the number two in the fixed-line market courtesy of its HFC cable network. Well, that doesn’t mean much when Optus won’t even answer questions about whether, like Telstra, it is in talks with NBN Co to shut its HFC network down.
I don’t recall the executive addressing Telstra’s mobile dominance — except to point out that Optus, too, was moving towards the Long-Term Evolution standard which Telstra will implement this year, and O’Sullivan has previously highlighted Telstra’s mobile marketing blitz.
And yet there is no need for Optus to attack Telstra in the fixed-line market right now. After all, all of O’Sullivan’s Christmases have come at once over the past years in that sector … massive government investment, structural separation of Telstra, new regulatory controls and so on — the list of concessions which Optus has won from Labor since it took power in late 2007 is endless.
What more does Optus need to compete? A golden guarantee written in ink and bathed in the waters of Labor’s secret Sussex St shrine to Lenin and the other righteous gods of market intervention, avowing Optus’ permanent position as number two telco?
In short, O’Sullivan’s speech gave the impression that he was stuck in the past. Still campaigning to break up Telstra, railing against “new” players such as Apple, eBay and Google, it appears the Optus chief simply does not realise that iiNet and Telstra are eating Optus’ lunch in the fixed and mobile markets right now … while Optus continues to sit on its hands and whinge about government intervention.
If Optus truly wanted to bring competition to Australia’s telco sector, why didn’t it buy Westnet, Netspace and AAPT’s consumer division, as iiNet did? If Optus truly wants to be Australia’s best mobile telco, why hasn’t it announced a billion dollar re-build of its mobile network — as Telstra did in 2005, and as VHA did just two weeks ago?
The answer is that the telco is currently suffering from a lack of leadership.
After seven years of leading Optus and many more in senior leadership positions at the telco before his ascension, O’Sullivan obviously still relishes his role and has a passion for the telecommunications industry. But he no longer has the energy to stay on the bleeding edge which the sector habitually operates on.
He does not have the will — or perhaps the power — to bring Optus’ chips to the table to place the massive bets which the likes of iiNet chief Michael Malone, Telstra chief David Thodey or even VHA chief Nigel Dews are currently making on the future of their companies. O’Sullivan has a great deal of strategic vision. But Optus is being hamstrung tactically each and every day it is in Australia’s market.
There’s no shame in O’Sullivan handing over some of his current power to the up and coming firebrands within Optus — after all, he’s had a fantastic stint at the top; and in 2009 he acknowledged there were two decent candidates to take his role.
Because if Optus doesn’t get its head in the game soon … it may find its decade-long campaign for change in Australia’s telecommunications sector may eventually result in a little more change than it can handle.
Stay with us next week as we examine internal Optus candidates to succeed O’Sullivan.
Image credit: Delimiter