An increasingly competitive telecommunications market faces the realities of living with the channel, and is slowly realising that the days of "one country, one telecommunications company" are over. Jeanne-Vida Douglas reports on how the technology advance is shaping the evolution of the local telco marketThink telecommunications in Australia, think Telecom. Well, not anymore, but for over a century, passing voice messages from one point to another was dependant on a government-owned colossus that busily installed exchanges, erected poles, buried copper cable, employed engineers and generally provided the infrastructure to keep Australia talking.
These days when you think telecommunications you may think of dozens of different telcos vying for market share, busily burying or stringing up optic fibre and establishing points of presence throughout the country. The poles and copper cable are still there, as is Telecom (now called Telstra.)Telecommunications is an industry in flux; to keep up the players need to maintain the infrastructure, lead the way in terms of technology and turn on a 10 cent piece when required.
Just as the aging copper cables are groaning under the weight of the sudden increase in traffic due to data transfer, the aging giants of telecommunications are feeling the strain of accelerated change.
According to industry pundits, the sheer size of our incumbent local exchange carrier both secures its market position and prevents it from providing dynamic service structure.
As telecommunications now involves the transfer of data rather than voice, telcos are increasingly dependant on channel partners with prime market position and know-how to service different levels of the business community.
Maree Lowe, managing director of solutions provider ASI Solutions, describes an increasingly complicated telco/channel relationship. (ASI Solutions is currently involved in providing networking products to telcos and the service element of the telco small office/home office (SOHO) product range.)"No matter how small you are these days, you have to be online," said Lowe.
"Essentially, it is this growing market that's going to force a change in the existing telco market. Services are becoming the key because the market is increasingly looking for minimal IT input; they are looking for companies that can set up and run their IT systems."Lowe believes that selling bandwidth essentially equates with selling computer systems. She points out that telcos are becoming involved in reseller markets in order to access subscribers.
However, Craig Curtin, managing director of Sydney-based Open Systems Integrators, believes the telco presence in the reseller channel does not spell the end for integrators.
"The telcos are trying to focus more on the mid-level business but they really don't have the skills to provide the infrastructure, or the sales experience to target it properly," he said.
"They know what they are doing at the high-end - big companies are usually good at talking to each other - but they are not very good at talking to the mid-range. That is where the channel becomes crucial. As integrators, we can package the telco products appropriately."Curtin believes that telcos are realising they have to engage the channel in order to stay competitive.
"The skills they need to access the bulk of the market are in the channel. I think they realise that and are beginning to change their approach."However, the relationship between telcos and channel players such as network integrators, is somewhat of an uneasy partnership.
Not wishing to fall out of favour with their telco partners, some integrators offered their comments off the record. Most of the criticism centred around the larger telcos' relationships with the channel, and their reported failure to provide reliable services. Although all of the major telcos copped some criticism, the majority was directed at Telstra.
"Telstra hasn't got rid of the monopoly mentality. It doesn't seem to realise it's in competition with anyone else. Orders are fulfilled late and often repeatedly postponed.
"When it comes to communicating with the channel Telstra is particularly bad - you tend to find out about things because of a general announcement and a lot of the integrators get better treatment," commented one channel player who requested anonymity.
Several integrators spoke of their frustration at what they referred to as a customer-ownership mentality which prevents Telstra and other telcos from working effectively with channel players.
"The telcos don't know how to cope with channel partners because they lack the experience. It is not an industry prone to resale. Boxes can be passed around without problems but with telco services it is more difficult as the services are ongoing. The integrators put in the hard yards in terms of service and sales, only to be pushed around and told that they won't be able to offer the level of service they require. They are too big and too set in their ways," said one integrator.
"While we are trying to package and develop products according to the market, there is still that element of you will buy what we tell you'," lamented another integrator.
Telstra's acting general manager of channels, Eddie Baghdikian, appears aware of the problems faced by the telecommunications giant as it attempts to juggle increasing competition, universal service obligations, a partially privatised company structure and emerging channel partnership programs.
Having worked with IBM through its transition from direct selling to channel sales, Baghdikin recognises the benefits of a channel distribution model and is keen to make it work for the company.
"IBM was forced onto a channel model after it suffered its first loss in history and realised that the market was changing. I believe Telstra is slightly ahead of that situation, because we can see what is happening to the market. Telstra recognises that channel partners can cut vendor costs and provide skills and expertise where they belong - out in partner land.
"Telstra is following that line at the moment because of the changes in technology. Accordingly, telcos are starting to embark on non-traditional business models. We can't just put in the infrastructure and send out the bills anymore."According to Baghdikin, Telstra's core competencies lie in the provision of hardware infrastructure, not in managing client relations or targeting specific markets.
"We want to focus more on the channel. We need channel partners with clearly defined roles so they can target specific markets. Products such as Internet access can be sold by the Harvey Normans of the world, while business procurement products have to be sold through specific consultancies," Baghdikin said.
"Telstra is starting to find different channels to sell core business. We can supply the products but we need channel partners to sell the applications and make the services relevant, from large consultancies to two-person Web developers."Baghdikin explained that it is precisely this broad range of partners that is leading to channel management problems. While the high-end integrators seem happy enough with Telstra's channel policies, and the low end are adopting a "we'll take what we can get" attitude, mid-range channel players are increasingly frustrated at service levels.
Scathing as they may appear, the attacks launched against Telstra are invariably tempered with a recognition that its channel relations are improving, albeit slowly.
Overall, Cable and Wireless Optus received a good report card from integrators surveyed, although it seems the consensus is that smaller resellers and integrators are being steamrolled by the telcos' "big-company" focus.
One of the main criticisms is that, due to a lack of experience with the channel, the larger telcos focus on marketing rather than developing partnerships.
"I often think that these companies are more interested in forming partnerships than actually working on these partnerships. You have to get very close to your client base. It is not so much about marketing per say as it is about understanding and selling and the telcos haven't really picked up on that yet," commented one integrator.
John Caelli, general manager of integrator and solution provider Source Integrated Networks, pointed out that the major telcos are too big to provide appropriately tailored services and have thus far been unable to make appropriate use of the integrators' strengths. He suggested the key for the channel lies in developing partnerships with the smaller telcos.
"The services we require from telcos are limited, they are only part of a package so they shouldn't require too much work. Integrators really need to go where the products are the most exciting. To stay ahead we need to be looking at application service provider (ASP) facilities that are being offered by the telcos," he said.
"Ultimately we are providing services to our clients, so we need to have close relationships with different providers to be able to tailor packages to suit the market."One such mid-range telco is Powertel. With a firm focus on an integrated IP and voice platform, the company is busily building a fibre optic network along the eastern seaboard, branching out into regional hubs.
Powertel investor and media relations manager Sonya Crosby explains that the aim is to provide a technological and managerial platform that allows for the changing nature of telecommunications services.
"We aim to provide for the whole business-to-business relationship in a streamlined process. Technology and management platform is designed to allow for both traditional telecommunication services as well as the new world of Internet protocol services. We are looking to package broadband services with added value end-of-enterprise solutions," Crosby explained.
The proliferation of smaller telcos has opened up huge opportunities for the channel, not only in terms of a greater variety of broadband offerings, but also in terms of the IT infrastructure of the telcos themselves.
One channel company well positioned to take advantage of the telco boom is Quadtel. Ivan Hurwitz, Quadtel national sales manager, describes the company's frenetic sales pitch: "We already have relationships with every big ISP and Telco in Australia. We are in discussion with all of them, some of them haven't dealt with us yet, but we want to make sure that they know we are here."In order to capture this market, resellers like Quadtel are looking into a variety of non-traditional value-added services. The entry price for telco infrastructure is prohibitive to say the least, and in order to get products to market, resellers and vendors are increasingly offering "pay-as-you-earn" financing options which allow nascent telcos to overcome set-up costs.
Resellers who use clever financing may be onto a good wicket targeting the telcos. Integrators in the bandwidth market will have to shop around to find appropriate services and target these to their own clients. In the end, it is up to the telcos themselves to keep up with an ever-expanding, increasingly competitive market.