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Saturday, 19 November 2005 16:14

Trust us we're Telstra!

Telstra's mammoth six hour strategic review briefing on Tuesday 15 November was part strategy announcement, part financial outlook announcement and part - a very big part - a very slick sales pitch. But can Telstra deliver on its promises?

At the core of the announcement were details of how Telstra is going to replace its multiple legacy networks for voice and data with a single IP network comprising 52 core routers from Cisco, around 1000 edge routers from a vendor yet to be named and various access technologies over which services will be delivered to end users.

In parallel with this will be a massive rationalisation of the myriad software systems used to control this network, provision services on it and bill customers for their use: referred to in general as business support systems and operational support systems, or BSS/OSS for short.

This single network will be capable of delivering all the services Telstra presently offers and a whole lot more. To make sure it can get customers to sign up for these new services Telstra plans to build a massive date warehousing system closely linked to its BSS/OSS that will contain, to an unprecedented degree of specificity and granularity, details of each and every customer, their preferences and the services they take from Telstra. And it will be updated in real time from the BSS/OSS: take a new service or cancel one and a customer service rep looking at your account will have that information instantly available.

This is all supposed to happen in five years. There are two downsides to this: One is it will hit profitability in the short term. And to pay for it all Telstra has cancelled the third stage of its $1.5 billion share buyback and is capping dividend payments. Secondly it is a high-risk strategy, though you would not have thought that to hear Telstra's senior executives talk. The only risk they mentioned - time and time again - was adverse regulation.

The market was not impressed: Telstra's shares were traded in record volumes and the price sank to just north of four dollars. Reports seem to indicate that the main reason for this was the short term financials. However, the risks in execution are considerable. They should not be underestimated.

But this was a sales pitch, and a very slick sales pitch, or rather several pitches given by members of CEO Sol Trujillo's handpicked team of imported US executives and former Trujillo colleagues. (Dubbed, initially the Three Amigos, but now, according to some report up to at least seven).

What did they have to back up with? Nothing really, except "trust us". After waxing lyrical about the new customer information systems Telstra's group managing director, strategic marketing, Bill Stewart anticipated the cynics and the sceptics who have heard it all before and never seen very much delivered. He claimed key differentiators would be the experience of himself and the other members of Sol Trujillo's hand-picked team in executing similar transformations in other markets, and the scale and scope of Telstra's market research.

"In case you're asking 'We're heard this before, what's different?' I'll tell you. First, we've done this before all over the world. Additionally, no competitor in this market has ever done the breadth and depth of customer research we're doing."

Like I said: "trust us."

But that's just the customer information side. Of greater concern are the network elements. Having one integrated system is all very well, but if there is delay or problems in any one part, it will, by the very integrated nature of the system, have an impact all the way through to the ability to deliver new services generating the new source of revenue on which Telstra's future depends.

That's not to say the strategy is wrong. It isn't. Nor is it innovative: it's a stock standard next generation network deployment that most major carriers around the world are either deploying or planning to deploy.

One of the best known, and one of the largest is BT's 21CN strategy, the key vendors for which were named earlier this year. And just this week, BT's group technology officer. Mick Reeve, at an ITU Forum in London spelt out some of his concerns with making this transition, in particular with standards, or rather the lack thereof, which will be needed to get every part of this great machine operating in harmony.

Among Reeve's concerns, as reported in Light Reading are:
- That there are still a number of major NGN hurdles that need to be addressed, most specifically in terms of interconnection, wireless, MPLS, and Ethernet.
- Ethernet also still poses too many O&M issues due to the technology's lack of carrier-class management features.
- The need for standards focused on IPTV developments.

He was reported saying that BT would "rather have waited for the standards and worked to those," but had to forge ahead to meet its business objectives and had to work around the ongoing standards work. "We've been trying to convince the standards world that the architecture we have for the 21CN is the right one."

BT might be big enough to do that,. Telstra certainly isn't. So how might changes in standards, or the lack of them, impact its plans? I don't know the answer, but I would suggest significantly.

The there are its plans to rationalise all it its BSS/OSS, incidentally while still trying to maintain business as usual. No easy task. And the precedents are not encouraging.

When Optus was gearing up to enter the market back in 1991, it boldly announced plans to develop a comprehensive integrated operational support system (OSS), "designed to provide Optus with expert support in every facet of its operations as the second carrier". A billion dollars was to be spent on its development and in addition to supporting Optus an exportable product capable of earning similar amounts was envisaged. What became of it? Nothing.

Despite is its green field start, Optus has as much of a mish-mash of systems as any former PTT. Today it is still using, albeit much modified, its original mobile billing system brought in as an interim solution when it launched in 1992.

But these Americans are great salesmen, and they even managed to convince, or at least half convince, one hard-boiled and normally very sceptical journalist. Alan Kohler, writing in the Sydney Morning Herald after attending the strategic review briefing commented "The plan to leverage Telstra's integrated nature with better retail marketing and improved network rationalisation is not new, - [Telstra] has been banging on about it for years. But yesterday was the first time I felt a tremor of excitement that Trujillo, Stewart and [chief operations officer Greg] Winn, could actually do it.

Like I said, it was a very good sales pitch.

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