A closer look at Optus

  • Currently offers phone, broadband, mobile
  • Strong supporter of the NBN
  • A more streamlined future

Our site is Compare Broadband. It’s easy to sum up that we compare the different providers of broadband internet connections, from no fixed position: we compare them to each other. But realistically, the Australian telecommunications industry, encompassing phone, mobile, internet and even Pay TV, exists in comparison to Telstra. The very idea of ‘competition’ in the business of stringing-people-and-services-together in Australia begins and exists in relation to the presence of Telstra as a National Champion. Telstra is a Prince; the inheritor of largesse it did not earn, but which grants it an advantage that everyone else is attempting to overcome just to sit at the table.

So what is Optus then? Optus is considered a first amongst equals; the first to take up the challenge of competition, backed by foreign money. But really, Optus shares DNA with Telstra. Both are the descendants of Australian government institutions – Telstra of the Postmaster General, and Optus of Aussat. Aussat was a satellite communications provider, responsible for linking remote Australia, and Australia to the rest of the world for live TV.

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When de-regulation began, Telecom and OTC (the descendants of the Postmaster General, along with Australia Post) were nurtured and protected, being spun off into slow and patient public offerings, with an attempt to guarantee success. Telstra was offered as a chance for Aussie mums and dads to take part in the careful cultivation of a company that enjoyed the benefits of market competition (ie. making money), while being shielded from its vagaries (ie. competition). It accomplished this by giving Telstra control of the Copper Access Network (CAN), the giant web of copper wires that connects the nation together, along with the underground conduits they sit in, the exchanges that act as aggregation points, and the pillars that aggregate those connections to every street. Since no-one was likely to build infrastructure competed with one that was built over 70 years and funded by taxes, Telstra started with an upper hand that it enjoys to this day (but not for much longer).

Optus, by contrast, was not cultivated as a public dividend. Instead it was thrown to the highest bidders, and started as a consortium owned by logistics firm Mayne Nickless (24.99%), Cable & Wireless (24.5%), Bell South (24.5%), AIDC (10%), Investment firm AMP (10%) and National Mutual (6.02%).

Of that group, just a shade over 50% was Australian, with AIDC being a government corporation. The other Aussie companies were investment bodies, not really in the business of telecoms. The other 49.49% belonged to Cable and Wireless and Bell South, two enormous telecoms companies from the UK and US; C&W went all the way back to the British Empire, and Bell South went back to the days of Alexander Graham bell. Majority ownership was Australian, but majority know-how was firmly in the hands of foreign companies, for what it’s worth.

Down to Business

Optus’ first approach was to offer cheaper international and long distance calls. They could do this partly through satellites which they owned, but that wouldn’t last long. Most calls could be switched without the use of satellites. To compete, they would need to use copper access – but that was owned by Telstra.

It wasn’t long before Optus had to conclude that building a new network was in order. That would take time and money, money that had to be provided through services, and not taxes. But why would someone pay to use an Optus network still being built, rather than a Telstra network that just worked and was already in the ground?

The killer application was TV. Optus could build a next-generation network, using a mix of fibre optic (for big connections) and coaxial cables (for tricky, ‘last-mile’ connections) to deliver TV and telephony in one.

This gobsmacked Telstra momentarily. Telstra could get a license of its own, but how to deliver it? Copper Wires were not capable of delivering Pay TV the way Optus’ Hybrid-Fibre-Coaxial (HFC) network would be. Telstra couldn’t be seen to use a rivals network. So what to do? Build our own!

Thus began a rather dark chapter in Australia’s telecommunications history. Both companies raced to provide identical networks, and in pretty much the exact same footprint: densely populated capital cities. Moreover, Telstra didn’t want to render its copper network redundant by also offering phone calls over their cable network, so it simply didn’t offer it. This allowed Telstra to keep the highly profitable copper network going, while also stymieing Optus’ big chance at properly competing. By not offering calls on Cable, Telstra also resisted any suggestion that it should install Cable in regional areas – why bother when they have copper?

The next step for Optus was to look towards using their HFC Cable network to provide broadband internet access. Here Telstra pipped them as well, as they were capable of offering the same. Optus then tried to focus on mobiles, and that’s where it found its greatest success – cheap and easy mobile over a tower network roughly as big as Telstra’s.

At this point, Cable and Wireless bought out Bell South’s share, and increased its holdings to over 50%, regulation be damned. The government didn’t care at this point, and Optus was floated on the stock exchange in 1998 – a majority UK owned company with a focus on mobile, and a multi-billion dollar network of Cable that it barely used or promoted. Optus was going to become THE company for digital mobile and inner city business, for whom it offered direct Cable access and cheap, innovative mobile fleet plans.

SingTel

Australia, with its cultural similarities to the US, likes to think of itself as the main market economy of the Asia Pacific region – stable governments, large middle class and respect for the free market. China is it’s own thing, and far too authoritarian; Japan similarly has its sights set on the rest of the world; and the sub continent is too fractured, poor and under developed. And for the most part, Australia is something of a market leader in the Asia Pacific. But the big challenge to Australia comes from Singapore, which has a better bridge to the enormous markets of Asia than Australia has.

So while Australia thinks of itself as a big fish in the region, it overlooks the even bigger fish of Singapore, which sees Australia as part of its own sphere of market influence. As such, Singapore markets control the bedrock of Australian industry and commerce (by determining the regional oil price). And more to the point, SingTel, Singapore’s answer to Telstra, and with a mobile base of over 400 million subscribers, sees the Australian mobile market as a natural part of its territory.

SingTel acquired Cable and Wireless’ share in Optus in 2001, and aggressively transformed it into the mobile network of record. Cap plans flourished, free calls abounded, and the entire tone of the industry changed, as SingTel directed Optus towards a future where you could ditch the landline (and Telstra control) forever. Optus became lean and profitable, and established the market for Mobile Virtual Network Operators (MVNOs) – the wholesale access to competitors of Optus’ physical mobile network, to make money from the public desire for competitive pricing. Optus couldn’t beat Telstra, but they could work around them, by becoming the ‘Telstra’ of mobile.

This strategy boosted Optus’ profitability, and the company began a series of buyouts to acquire smaller competitors in both mobile and fixed-line.

Modern Era

Optus, now flush again, knew that the tide was turning from mobile to IP. So in effect, the progression had gone from analogue telephony provided over analogue equipment, to digital and analogue services provided over analogue equipment, to all digital services travelling along BETTER analogue equipment.

In other (much simpler words); the infrastructure in place would not be capable of carrying the type of services emerging in the marketplace. Internet Protocol (IP) is a broad term for turning any analogue service into packets of data, sent at high speed along the internet and repackaged at the other end by software.

What’s an analogue service? Any service where you send the full ‘thing’, untouched, to the other side. In the context of telecommunications, a traditional phone call is analogue; your voice is sent along a wire, and is amplified every few kilometers, until it reaches the speaker on the other side. Of course, when you amplify something once, it loses some fidelity; when you amplify it again, it gets distorted even more.

A digital voice call, on the other hand, takes your voice and turns it into a packet of data. Then that data is sent at high speed, and is ‘unpakced’ at the other end by software. They’re not hearing your voice; they’re hearing a recreation of your voice. If the software doesn’t understand something, it will fill it in with something it does know. As software gets better, it’s capable of more faithfully recreating the original packet.

So a phone call is quite easy to imagine as something analogue and/or digital. What about a book? Or a song? Or a drumkit? They’ve all been turned into digital material too, transferrable over the internet. In fact, almost every service right now is becoming available over IP – shopping, tax return filing, TV, medical services, education – everything except eating, really.

So, back to Optus – the copper access network owned by Telstra won’t be capable of carrying all of that, and Telstra has not done a fantastic job of acting as ‘benevolent dictator’ – it’s position as both wholesaler and retailer have gotten confused, and too often Telstra has been guilty of using its wholesale strength to bolster its retail strength. So the days of Telstra selling both the highway and the car are coming to a close.

Optus was a supporter of the original National Broadband Network (NBN) push, joining the original consortium proposing to build it. With everything going digital, a new high capacity network will need to replace copper, and there’s no reason to give that network to Telstra, or to let Telstra compete with it. As such, Optus and Telstra will be paid handsomely to abandon their fixed line infrastructure, and the NBN will not be allowed to compete as a retailer, selling services on its own network. It simply provides the highway, charging companies a flat access fee to jump on it, and then the companies can duel it out. 20 years after deregulation of the industry, true competition can begin, with no company having an advantage that can’t be overcome with better pricing and customer service.

Optus’ Place – Now

Optus hosts internet connections in 350 exchange areas around Australia, which it has pledged to expand upon in small doses, even as the NBN will come along to render their network redundant.

Optus can still offer HFC Cable connections to many customers in major urban centres, at single dwelling premises. Optus long ago shrugged off connections to Multi Dwelling Units (MDUs) like apartment blocks and high rises, but for many blocks where all the units are on the ground, they seem to take a case-by-case approach. It’s always worth pushing it when you enquire, if you want to enjoy Cable speeds. For these connections, you can also get a telephone service that operates over the Cable connection.

For fixed-line connections over copper wire (ADSL2+), Optus uses the Telstra Wholesale network to provide the connection from the house to the exchange. At the exchange, a customers connection is switched to an Optus DSLAM network point, where it switches to Optus’ national fibre network.

Optus Wholesale offers access to its DSLAM network to several providers, most notably MyNetFone (1300 106 571) who use it to provide Naked Broadband exclusively.

For mobile broadband and mobile phone service, Optus offers 3G 2100Mhz access to most MVNOs, on what’s known as the Optus Open Network. Optus can offer slightly faster data speeds than most resellers, for which it charges more; but these faster speeds are only available on a limited basis in major regional areas anyway. Optus Open Network resold connections are excellent value compared to Optus direct, but Optus direct offers a vastly greater range of available handsets.

Optus and Vodafone will be co-operating in the building of Optus’ 4G network, while Vodafone replaces its own 3G network with 850Mhz – the same frequency used by Telstra NextG.

Optus’ Place – Future

Optus has pledged a re-focus on fixed line, especially with the NBN looming. They appear to be dropping their heritage as a ‘top tier’ provider, with complicated bundling and premium pricing, and opting for a leaner, more streamlined approach. While Telstra’s early NBN prices have been vastly out-of-step with the competition, Optus has released NBN pricing that is cheap, fair and packed with value.

Optus has recently inked a deal to migrate its 500,000 HFC Cable customers to NBN fibre, in preparation to shut down its HFC network for good. Optus’ days as an infrastructure provider for home phone and fixed-line broadband are numbered.

With Vodafone struggling, it’s conceivable that Optus and Vodafone’s mobile partnership will turn into a merger down the road, with the new entity offering a mix of 3G and 4G networks, while the fixed line divisions of both Vodafone and Optus focus on providing broadband via the NBN. This would need approval from the ACCC of course – Vodafone and Optus might be minority players here in Australia, but on a global scale, SingTel and Vodafone are giants compared to Telstra.

Conclusion

Optus is profitable right now, and has a consumer-friendly outlook to the future. It will need to continue its support of the NBN to see its plans come to light in fixed-line, and will need to pick up the pace on a 4G roll out to compete with Telstra in mobile.

Optus’ most competitive offerings – Call 1300 137 897

Fusion Bundles – The focal point of these bundles are the included calls, which can include calls to mobiles. These per-min charges make up the bulk of unexpected excesses on large phone bills. These plans comes with good sized amounts of data as well, but will need to update soon to compete with providers who offer Unlimited data

Mobiles on Plans – Optus offers decent mobile plans and coverage that is holding up ok, even as people are quick to condemn in the face of the Telstra network going from strength to strength. The main selling point, however, is the range of top-flight handsets on reasonably priced plans. Here’s a breakdown of the best phones on their cheapest plans (plan price and monthly handset payment included, 24 month contracts only):

Samsung Galaxy S3 - $47 per month - Android
iPhone 4S 16GB- $48/month – iOS
iPhone 4S – 32GB - $68/month - iOS
HTC One X - $50 per month- Android
Nokia Lumia 900 - $40/month – Windows Phone
Nokia Lumia 800 - $35/month – Windows Phone
Motorola RAZR - $50/month – Android
BlackBerry Bold 9900 - $60/month – BlackBerry OS7
Samsung Galaxy Note - $65/month - Android