Telstra too faces serious challenges. Ever since voice was digitised, telecommunications companies have essentially been in the business of shifting data between users. The problem with this is that the transfer of data is rapidly commoditising, with a large number of alternative and interoperable access arrangements or gateways (wireless, optic fibre, copper) and network infrastructure (NBN, satellites, subsea communications cables) interconnected through the internet.
The risk for players like Telstra has always been that one day (soon) virtual Telcos would emerge, bundling fast data and seamless access points located within cherry-picked markets like our major urban centres.
A major problem for both AusPost and Telstra relates to their community service obligations. These are enshrined in the relevant Commonwealth legislation for both Telstra and AusPost, generally requiring both companies to provide an adequate service to all Australians, wherever they be.
The problem is that postal and telecommunications services to rural and remote areas, while of fundamental importance to those communities, tend to be a financial deadweight for the companies.
For example, one aspect of AusPost’s community service obligations is the provision of at least 2,500 outlets in rural and remote Australia. These are often integrated into local retailers, providing an important hub for communities, allowing access to mail, banking and financial services. Significant closures of these outlets would have devastating consequences for many rural communities.
Thus the government should proceed with caution with any plans to allow AusPost to split in two, and it should monitor carefully the implications of technological change on Telstra. For AusPost, selling the profitable parcels business would leave a legacy letters and services business that would almost certainly see declining use and huge financial losses into the future. For Telstra, the consequences of a myriad of new competitors cherry picking its profitable city markets, while ignoring the costs associated with ubiquitous infrastructure in the regions, could be calamitous.
Regardless of promises and projections, the temptation for AusPost’s and Telstra’s managers to cut services and costs to reduce (especially non-urban) losses could well be irresistible.
Nigel Martin is a lecturer at the College of Business and Economics at Australian National University.
John Rice is an Associate Professor in Strategic Management at Griffith University.
This story was originally published at The Conversation. Read the original article.
