ARN: What is the focus of Telstra's approach to the wholesale market?Rosemary Howard, managing director of Telstra Wholesale: In 1997, after deregulation came about in Australia, like any incumbent telco we had some difficulty conceptualising our wholesale customers as customers. We now have about 120 wholesale customers, and a very customer-centric growth strategy. We have two sales teams with dedicated business managers whose job is to understand their customer's business. The majority of the revenue in the business is covered by wholesale commercial contracts.
We realise retail customers have a different agenda. We need to have contracts where we understand the end-to-end processes, as well as roles and responsibilities, in order to provide a seamless end-to-end service for the end customers. The main difficulties lie in provisioning, bordering, fault and billing processes, and dispute processes.
We have a wholesale product team that specifically develops for the wholesale market. The lion's share of our wholesale products are not declared products, they have been developed according to commercial imperatives not because the regulators told us to develop them.
Wholesale customers are really looking for operational efficiency from us, so we are quite well advanced in terms of online operational efficiency. With the online billing and ordering systems we have developed we are providing customers with improvements in efficiency of up to 40 per cent, which significantly reduced the cost of people interfacing back to us.
It is true that there are still some regulatory issues in the industry. The industry and our customers want to keep it to a minimum. We do a customer survey every year and we all agreed unanimously that the ACCC [Australian Competition and Consumer Commission] is too slow. We are much better working things out between us through negotiation. Clearly that is what we are aiming to do and what our customers want us to do as well.
How do you look after your wholesale clients whilst still maintaining a retail arm?Telstra is becoming a group of synergistic businesses focused on different markets.
Either Telstra gets to the end market through its retail business or through our external wholesale customers. Our customers are carriage service providers and communications service providers that work in competition with Telstra's retail business units. They have the choice of building their own infrastructure or buying it from some of our wholesale competitors. Our part in the business is to deliver solutions to carriage service providers working in Australia and our vision is to be the provider of choice.
The first phase of this happened at the beginning of this financial year and the second phase will begin on the first of July this year. Infrastructure services are now combined with wholesale. All of our fixed network, field workforce and product development capabilities are part of Telstra Wholesale.
You also have the Telstra Retail businesses, which are becoming retail service providers in competition with our external wholesale customers. As of the first of July, we will take the first step to actually set this up as a true profit centre.
How will Telstra Wholesale affect your other businesses?Competition is really important to stimulate the growth of new markets. From a Telstra point of view, retail and wholesale can sit very synergistically beside each other. The division is not happening in a revolutionary sense, obviously the management is very complicated, it is a gradual process.
Our retail business will be offered the same access as our other customers. It will give us the opportunity to make our retail arm model customers. The opportunity for us is to make these guys the people with whom we can practice doing these commercial negotiations, to optimise the win-win between us and our customers. What we figure out between Telstra Wholesale and Retail will form the basis of what we will offer our other customers.
Telstra Retail is essentially one of our customers. There are some very strict data security arrangements around the wholesale business unit because we do have confidential customer information. We can aggregate the forecast from our customers and we must use those figures to plan the network supply our customers need. We will not provide customer-specific information to any other player in the industry. It is all guarded by wholesale customer confidence.
We have had to do a lot of process and system work over the last couple of years to achieve that - we have had to look at the commercial arrangements, the building arrangements and so forth, so that Telstra Retail has zero access to the information provided by our wholesale customers.
Will Telstra Retail pay the same price for access as your other wholesale customers?It is going to be staged, I can't tell you exactly which products will be available on a commercial basis from July 1. However, those products which will go from a transfer cost basis to a commercial basis will be all under the same terms and conditions. Yet there may be differences. The wholesale clients may commit to some sort of huge forecast commitment, they may give us a forecast commitment saying how much they will buy from us, and therefore take on some of the risk. You can't look at the price issue separate from the terms and conditions. If they offer us favourable non-price terms and conditions for offering them a favourable price, we would be prepared to negotiate. Clearly we will have some customers we get on better with than others, and that affects the commercial relationship and the way we operate together. Telstra Retail will be our model wholesale customer.
How do you respond to claims that Telstra Retail competitors can only get access to high bandwidth at retail and not wholesale rates?That is just not how it happens. There may have been some confusion regarding the availability of our different wholesale products. We launched both the ADSL wholesale and retail products at the same time, which may have caused some of the confusion.
Our wholesale customers also have access to our retail products. However, we also offer 60 products only for wholesale customers. Two of those products refer to access to the copper cable in various forms which allow our wholesale customers to provide broadband access to their customers.
Either they can take Wholesale ADSL or they can take the Unconditioned Local Loop (ULL). The ULL is the basic raw copper twisted pairs which run from the customer back to the local exchange. ULL customers have to lease a space in the local exchange to place their DSL equipment in, they then have to have some kind of broadband connectivity back from the exchange to join up with their own network. Basically they buy the connection and provide the infrastructure. Although it is complicated, some of our customers want to do that.
The other choice is Wholesale ADSL - here we provide the infrastructure from our wholesale customers network through to their customers.