Telephone Systems

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1. Introduction

This is the traditional service that most people have access to in their home and business. It is the rare company that does not spend sizeable sums of money paying local and long distance service bills. Before the introduction of mobile phones and data services, long distance and international call charges were typically the largest telecommunications expense in a firm. While competition and changing technology have reduced the magnitude of the expense, it is still a significant outlay for business.

By identifying programs that best suit your calling patterns and volume requirements, you should be able to save anywhere from 5 to 35% off your current bill.

This buying guide is designed to give you the facts you need to select the right carrier for your firm.

2. History

Prior to 1987 voice services in Australia was a monopoly provided by three government enterprises Telecom (now Telstra), OTC (Overseas Telecommunications Commission absorbed into Telstra) and Aussat. In 1987 the government introduced the first steps to a competitive environment with the establishment of an independent regulator Austel and allowing competition in value added services.

The Telecommunications Act of 1991 restructured the Australian telecommunications industry to provide for two full service (voice, mobile and data) carriers - Telecom and Optus. The 1991 Act also determined that Vodafone would be the third mobile provider. Optus purchased Aussat and initially used Telecom infrastructure to begin its operations while building its own network infrastructure. At the same time, the Government directed that the GSM standard for mobiles should be used by all three mobile carriers.

In 1993 a number of companies began to buy wholesale network services from the full service carriers and retail disaggregated services to business customers. The largest of these resellers was Axicorp which was purchased in 1996.

In 1997 the telecommunications sector was opened to full competition and Telstra partially privatized. Cable and Wireless purchased Optus. By the end of 1998 there were over 20 licensed telecommunications carriers controlling facilities in Australia and a significant number of companies reselling the network services of the full service carriers with the objective to churn the Telstra monopoly services. The benefits of this competition were significant savings in telecommunications costs for Australian businesses although there were some negatives namely:

  • delays in transferring services from Telstra to the new carrier or reseller with impact on customer service delivery
  • billing problems largely associated with previous point
  • customer service problems for reseller customers

In the past few years, the long distance market has continued to become more competitive. Excess network capacity has allowed smaller carriers/resellers to lease high quality long distance lines at low rates. This has placed downward pressure on rates offered by all the carriers, particularly for smaller businesses.

3. Industry Overview

The players in the voice services market can be categorized into three major tiers. Telstra and Optus are the full service tier 1 telephone companies (often referred to as carriers) with their own infrastructure. Telstra with its legacy of previously being the only provider, holds the largest market share and relies heavily on advertising and promotions to market to business and customers. Together with large direct sales force and a multitude of channel partners both these companies are the dominant players in the industry.

A second tier of carriers consists of companies that may have some network infrastructure (eg network switches at strategic Points of Presence (POPs), DSLAMs for broadband services and IP switches to offer value added services to specific market segments) but still rely on resale of Telstra and Optus services. These include companies like Powertel, AAPT and do not offer the breadth of service of the big two.

A third tier of companies consist of many smaller firms with a more regional or local focus. These firms almost always act as agents for the tier 1 and tier 2 carriers attracting customers using aggressive pricing, alliances or local sales reps, innovative bundling of network services with telephone systems and other products like Plasma TV s/IT equipment/photocopiers as well as multi-level marketing arrangements. Some of these companies have been very successful in quickly building a large customer base. While some of these resellers do not have the capability to offer the full range of value added services a business may require, others have relationships with a number of tier 1 carriers and can tailor the best solution for your business.

There are also consultants who, based on your telecommunications objectives, can analyse your phone bills and negotiate with the various carriers to deliver you the best value solution for your requirements.