20 years ago, prior to the investment in the national Information Superhighway, the Australian Media, I.T. and Telecommunications landscape was very easy to understand . Telecommunications was dominated by a Government owned monopoly (Telstra), I.T. was dominated by US interests (e.g. Microsoft, IBM, Apple) and the mass media was basically divided up among three family concerns Fairfax (Newspapers), Packer (T.V. & Magazines), Murdoch (Newspapers & Magazines).
Here is what has happen in Australia after the Hawke-Keating Government adopted the Clinton:Gore call for investment in the “Information Superhighway” back in the mid-1990′s.
- The local Telcos have attempted with varying degrees of success to diversify into media and I.T.
- The local Media has attempted with varying degrees of success to diversify by setting up joint ventures with global IT and the local Telcos.
- The global I.T. players have replicated their US strategy by seeking Joint Ventures with the local media providers.
- There has been an explosion of new providers and business models across and in between all 3 industry groups.
With all this activity there have been some interesting individual and portfolio investments. For Example:
- OneTel: the Packer/Murdoch foray into telecoms
- Foxtel
- CVC Capital Partners investment in PBL
This diagram illustrates just how much more complex the MobCon landscape has become for each of these market leaders.
By 2008 the major industry players had invested over (Aus)$75 Billion on their MobCon convergence strategies
Achieving this level of complexity requires significant effort and by 2008 the key industry players had invested over Aus$75 Billion in their ongoing efforts to capture their share of the newly emerging convergence landscape.
So, given all this excitement and activity, who has the winning strategy today?
If we take a look at the combined MobCon revenues of all the industry leaders we can see that it is the Telcos who are dominating the MobCon Landscape.
Share of MobCon Revenues in Australia for 2007*
Note: This chart illustrates the share of Australian MobCon Revenues (Including Advertising, Subscription, Licence and Service Revenues) as published by the market leaders in their annual returns.
* Within the total group revenues of (Aus) $26 Billion
What is really interesting is, that after all this investment, the revenue patterns show us that the media companies are still essentially media companies, the Telcos are Telcos and the I.T. companies are I.T. companies.
After 15 years the only thing these market leaders are doing differently is online.
Now if you closely you will see that online revenues represent 4.8% of the revenues across the Australian MobCon landscape in 2007. All of which means that Australia’s market leaders have invested over Aus$75 Billion in search of a new market opportunity with annual revenues of less than Aus$1.25 Billion.
Not great business by any measure and this is reflected in the performance of their individual share prices over the past decade. For example Telstra’s original $3.3 Billion investment in the information superhighway failed to deliver any long-term shareholder value and this is probably why the Government is having to provide funding for the new Aus$43 Billion National Broadband Network.
Commonwealth Bank vs Telstra share performance since 1998
Indeed the Sydney Morning Herald has reported recently that the $25 Million McKinsey-KPMG report the Rudd government has commissioned clearly illustrates that the NBN could only be undertaken by government and it would need to be operated as a legislated monopoly.
Japan is one of Australia’s strongest trading partners and so it is worth while exploring why the two countries pursued very different strategies in the first wave of the Information Superhighway.
In 1999, at the height of the dotcom boom, Japan took a radically different approach to the challenge of the MobCon.
In the USA, Europe and Australia
- Governments profited from selling the Wireless Spectrum to the highest bidder. (e.g. In 2000 and 2001, the 3G licences in the UK and Germany were given out for $58 billion and $78 billion, respectively.)
- Technology providers focused on developing objects and messaging (ie Software: Web Sites, Web Applications, Browsers etc)
- The stock markets and venture capitalists invested heavily in the promise of the dotcom
In Japan
- The Japanese Government created a wireless commons.
- Technology providers focused on developing gadgets (i.e. Purpose built mobile phones and wireless gadgets)
- The carriers focused on providing both the world’s best wireless telecommunications infrastructure and a stable and secure payments network
After the dotcom boom Japan invested in MobCon Gadgets. Silicon Valley in web 2.0 applications
While innovation in the USA and Europe stalled when the dotcom boom collapsed Japan went wireless. Choosing Mobile Commerce over eCommerce and so by 2007, when Apple launched the first iPhone, Japanese consumers were already spending over US$1000 per year on Mobile Commerce. (Much more than what US consumers were spending online at that time)
In Japan consumers happily pay per view for content on the personalise applications they have purchased for their fashionable mobile gadgets. Each of the transactions managed by the telecoms provider as part of their monthly billing and network access fees.
In return Japanese consumers are rewarded by having access to the most technically advanced and efficient wireless data network in the world. That’s why, for the past 3 years, more people in Japan access the web through cell phones than through PCs.
Today the Japanese continue to enjoy the social and economic benefits of having invested their communications strategy in the clouds. More importantly the Japanese continue to be among the world’s innovation leaders in mobile communications technology.
Unfortunately after 15 years of travelling down the information superhighway and over $75 Billion in private investment Australia cannot lay claim to have any of these competitive advantages. After all, if you exclude News Corp. from the mix, Australia doesn’t even have a company worthy of the label “Global Internet Brand”. So the $43 Billion Question must surely be what will the Rudd Government’s proposed investment in the National Broadband Network do to ultimately change this position moving forward?
[Updated 15-9-2010]
Further Reading:
- Why it will take a lot more than Fibre to improve Australia’s Health System
- Top Ten Myths behind Fibre Policy – Peter Cox
- NBN: the wrong policy for Australia - Malcolm Turnbull
July 1st, 2011 → 11:29 am
[...] finding pretty much mirrors the studies I conducted on the Australian internet economy back in 2007. Share of MobCon Revenues in Australia for [...]
August 3rd, 2011 → 7:40 pm
[...] This of course is a lot harder to define. Why? Well simply because, unlike the US that is awash with Dot.Com success stories like Google, Yahoo!, Amazon and eBay and So.Me Start-ups like Facebook, Zynga, Groupon and Twitter, Australia, like much of the rest of the world, has very little to show for all its energies and investment in the Internet (See Digging out the value buried in Australia’s $43 Billion National Broadband Network Plan). [...]