Exciting markets opening for telcos

Aug 20

John Davidson

 

Russ Bate thinks there's never been a better time to get into the telecommunications market. It's not what anyone would call a popular opinion.

 

Vendors selling equipment to telephone companies have been among the hardest hit by the US economic downturn and the bursting of the high-tech bubble. Shares in Nortel Networks, one of the biggest suppliers of telecommunications equipment, have plunged a frightening 99 per cent in the past two years, yet Bate, who lived through the boom and the bust as the Australian boss of Sun Microsystems - a company itself hit hard by the dot com implosion- thinks it's still a market worth getting into.

 

Which is what he's done. Having just retired from Sun after 30 years in the tech industry, Bate last month joined the board of CR-X, a Melbourne-based technology start-up which provides software to telcos.

 

The software helps phone companies ensure they're properly billing their customers by cleaning up transaction data as it comes out of switches, readying the data for processing by the billing system. CR-X can also be used to analyse transaction data, testing it against business rules to ensure that calls are charged in the most profitable fashion, the company says.

 

Bate is hoping telcos will see it as an ideal post-boom investment, gleaning maximum revenue from existing customers without the need for the boom-time style capital investment that might be required to increase the customer base.

 

"Almost literally, dollars are falling out on the [telcos'] computer-room floor, somewhere in between the switch and the billing system ... because of the failure to pass accurate data between the data sources and the billing system," he says.

 

"This is revenue that has no cost of sales. This is billing that the telcos are failing to do for services that they're nonetheless already providing over a network that they're paying for.

 

"Given the huge amounts of revenues that are generated by large telcos, it doesn't have to be a significant percentage [of bad data] for it to be a reasonable chunk of dollars. It's an ideal time to be targeting that market."

 

Anyway, CR-X wouldn't be focusing on the US market, the site of the worst of the telco carnage. Instead, after building up an Australian business (so far the venture capital-funded start-up has announced only one customer, the satellite phone company Iridium), CR-X will focus on emerging markets, such as China and India.

 

"Regardless of what is happening here or in the US, you must remember that the world's two largest countries are going through a telecommunications explosion," Bate says. "China and India have huge potential.

 

"One of the biggest problems Australian software companies have had in the past is that they have gone to the US as their first overseas market, but there's a big barrier to entry there: the 'not invented here syndrome' is rife across the US.

 

"US corporations will always view anything developed outside the US as, I won't say second class, but they need far greater convincing that [foreign software] is as good as what they do at home.

 

"China is a far more open market. Their concern has been principally with getting things that do the job, and they don't care where they are written."