Talking About a Revolution

The communications industry in Australia has undergone considerable expansion in recent years. At the centre of this change is the Australian Competition and Consumer Commission (ACCC), which is responsible for competition regulation of telecommunications in Australia. Stuart Finlayson looks at the current state of play in the telco industry.

The ACCC is in possession of a big stick with which to wield to any telco that is guilty of anti-competitive practices in the sector. Its responsibilities include regulating access to telecommunications services declared by it and enforcing telecommunications-specific anti-competitive conduct provisions.

HoR magazine spoke to an ACCC representative and asked firstly how it approaches this task.

"The Commission carries out these responsibilities, where possible, by encouraging self-regulatory processes. However, where intractable disagreements arise or anti-competitive conduct occurs, the Commission will use its regulatory powers efficiently and effectively."

Though keeping a watchful eye on the industry, the ACCC spokesperson says it is not its place to dictate how it develops, other than to ensure the guidelines are adhered to.

"Rather than actively shaping the industry, the Commission's role is to provide a setting where competition can flourish by breaking down the barriers to entry and harbouring competition in the telecommunications industry by discouraging and punishing anti-competitive conduct.

"However, in opening up access to certain bottleneck services and facilities, such as the local loop, by reducing entry costs the Commission can actively promote competition in what has been a monopoly area. Local loop unbundling and wholesale provision of services in particular have greatly promoted competition in broadband services in recent years."

A consequence of the opening up of the telecommunications market in recent years is the plethora of new telco providers offering competitive rates for various aspects of home and business users' communication needs.

Making the Right Choice

Small business must be cost conscious in order to survive and thrive. With communications being one of their major areas of expenditure, it pays to shop around for the best plan to suit their needs.

However, this can be a laborious process as there are numerous different rates and packages on offer. One carrier may offer better value in one aspect but poorer value in other areas. Imperative as it may be to get the best deal for your business, often smaller businesses do not have the time to find the best option or the expertise to work out how to reduce their costs.

One potential answer to this problem is to enlist the help of a consultant. A recent article by Sydney associate Graeme Cox from Expense Reduction Analysts (ERA) looked at how a company can use a consultant to make savings in the area of telecommunications. "The first thing that needs to be understood is that some consultants are tied to carriers, generally through the payment of commissions," wrote Cox. "While there is nothing wrong with that per se, it does give rise to the question of whether advice from such consultants is truly independent. On the other hand, there are consultants who are completely independent in that they receive no payments from carriers. Their entire fee is met by the client."

So, choosing the right consultant for the job is important, and the fee should not be the only criterion. Cox suggests the following checklist for a company considering the use of cost management consultants:

- Does the consultant have a demonstrated track record of achieving cost reduction?

- Does the company have the resources to deal with a company of your size?

- Is the consultant completely independent, with no payments being received from suppliers?

The Full Fee

Arrangements can range from a fee for service to a contingency fee (based on results). A consultant who receives his or her fee entirely from the supplier (the carrier in the telecommunications example) cannot be assumed to be independent.

"Where a contingency fee is charged, it is generally expressed as a percentage of the savings obtained over a period of one year, although shorter or longer periods can be involved," says Cox. "Percentages vary. The usual figure is around 50 percent, although lower percentages can be found."

While 50 percent might seem a large figure, Cox believes that it pays to examine exactly what is being received for that fee. Remember, from the consultant's viewpoint, he or she is bearing all the risk in proposing a contingency fee. If no savings are found, he or she does not receive any payment, and, even so, he or she will need to undertake a lot of work 'up-front' before being entitled to any fee.