From: gnb@baby.bby.com.au (Gregory N. Bond)
Subject: Re: Cream skimming considered beneficial
Organization: Burdett, Buckeridge & Young, Melbourne, Australia
	<1992Dec11.034141.3723@trl.oz.au> <chris.724049855@suite.sw.oz.au>
	<1992Dec16.084913.165369@dstos3.dsto.gov.au>
	<chris.724480987@suite.sw.oz.au> <summer.724484681@murillo>
Distribution: aus
Date: Thu, 17 Dec 1992 01:07:55 GMT

>>>>> On Wed, 16 Dec 1992 05:44:41 GMT, summer@mullian.ee.mu.OZ.AU (Mark Summerfield) said:

Mark> [....]  I *do* know
Mark> that I don't -- Telecom's service, performance and efficiency has been
Mark> steadily improving for some years *without* competition.

But with the _threat_ of competition (or privatization).  It wasn't as
if the whole thing took a week; the threat has been there for years
and Telecom has been gearing up to meet the threat for years.  No-one
doubts that Telecom has dramatically lifted its game in the last
couple of years, but I am forced to wonder why this didn't happen five
or ten years ago before the privatization/competitor discussion
started.....  I mean, if they were so overstaffed three years ago that
they have lost so many people, why were these extra bodies ever hired
in the first place?  Surely they were just as surplus back then?

That said, the whole Optus thing was 99% driven by the white elephant
booby prize of AUSSAT; the economic rationalist arguments was largely
a convenient facade and an opportunity for the Government to point and
say "Look, we're doing micro-economic reform".  (An opportunity
notably absent in other, more important, areas such as transport.)

Had the Frazer Government been a little less gung ho about the
satellite business in the late 70s there would have been no pressing
_political_ need for Telecom competitors (at least in the core
local/STD business).  There never was and still is no sound business
plan for satellite services (except for the artificially imposed usage
of pay TV) in the local context.  Fibre can do almost all of it and
cheaper, too.  The only thing fibre can't do easily is remote TV
access, but is it worth the zillion dollars AUSSAT cost?  Not likely.
AUSSAT was _just_ meeting operating expenses before it was sold, and
that is not including the hundred million or so per year for interest
payments.  Had it been a private company it would have been insolvent
ten times over.  (They had debt:equity ratios well in excess of 10:1.
A listed company with 2:1 ratios is considered on the verge of
receivership and a very, very poor investment risk; 1:1 is considered
undesirable in the current conservative environment.)

Who would buy voice or data service from AUSSAT (with the 1/2 sec RTT)
when Telecom had terrestrial services at the same rates?  When we
spoke to AUSSAT a few years ago, they were in the business of selling
circuits that were run on Telecom Megalinks, and only ever used the
satellite as a backup!  The exact "cream-skimming" that Optus is
accused of, this time by a Government-owned body.  No surprise that
one of the first things Optus did was start laying fibre. Why did they
do this if satellites make any sort of business sense?

As an aside, Optus is 25% owned by Mayne Nickless, an Australian
company (you know, the armoured car people); another 26% is (I
believe) owned by other local institutions.  The remainder is
currently held by overseas companies (Cable & Wireless and Bell
South).  The plan is to float Optus once the business is established.
This will probably result in local institutions owning at least half of
the company, so Optus will end up as much an "Australian" company as
most others.  (E.g. Coles/Myer is about 1/4 owned by K-Mart).

Disclaimer: BBY has some sort of corporate relationship with (one of
the owners of) Optus.  I, personally, have had no contact with Optus
other than as a potential customer, and the above is my personal
opinion, using information gleaned from media reports only.
--
Gregory Bond <gnb@bby.com.au> Burdett, Buckeridge & Young Ltd, Melbourne 
That's *Mister* Chief Pointyhead to you.
Newsgroups: aus.followup