This month’s feature story on "Unwired" internet access must
worry anyone who has Telstra shares. Why? Because Telstra’s customers no longer
need a fixed line telephone service to obtain internet access. Up till now, if
you wanted internet access, whether dial-up via a 56K modem or an ADSL broadband
service, you had to have a fixed line telephone service. The exceptions would be
if you had cable TV, in which case you could have a cable modem for internet or
you might have used a satellite internet service. For the vast majority of
people though, a fixed line telephone was a necessity.
Of course, if you don’t need internet access and you already
have a mobile phone, you have not needed a fixed line telephone service for some
time. In fact, tens of thousands of people living in rented accommodation
throughout Australia have long ago opted not to bother with a fixed line
service. In doing so, they avoid installation charges which are hard to justify,
since they normally only require a few minutes work by a technician at the local
exchange. They also avoid monthly rental charges, high STD phone charges and so
For a person who makes very few phone calls, a prepaid mobile
is definitely the way go. There are no rental charges, you only pay for the
calls you make and incoming calls are free. Why bother with a fixed line
This is a world-wide trend, with the number of mobile phones
rapidly exceeding the number of fixed line installations. In fact, many
developing countries look to be leap-frogging the large infrastructure cost of
fixed lines and just adopting mobile phone services instead.
In Australia, one could foresee a situation where most private
individuals do not have fixed line phones – they would be confined to businesses
and organisations. And then you have to factor in the concept of "Voice over IP"
as described in last month’s issue – for virtually any telephone calls. Large
businesses are already migrating to VOIP for long distance calls and small
business and private individuals will largely follow in the future. So even if
they keep their fixed line telephone systems, they will be using VOIP and ADSL
to cut their long-distance phone costs.
All of which does not augur well for Telstra. It has an
enormous investment in its fixed line network in which it has a monopoly. But it
doesn’t have a monopoly in mobile phones where it is being buffeted by intense
competition by some very aggressive players. So unless there is some new
development which encourages customers to take up more services involving fixed
line telephones, one can only see Telstra’s fixed line revenues being severely
eroded in the future. Sooner or later, and probably sooner, the investment
pundits will realise this and the shares will go down accordingly.
This is yet another example of the inexorable march of
technology. At one time, steam engines and horseless carriages had a very big
market but they fizzled to nothing.
What can Telstra do? In the short term, it might like to buy