Good Call For The Pair Who Took On Telstra
Sydney Morning Herald
Saturday June 8, 2002
When John and Trish Bucknell decided to compete with Telstra in the public telephone market, they put a whiteboard in their Balmain garage and wrote ``perseverance" across it in large letters.
And in the early days of establishing TriTel Australia, they found themselves making frequent trips to the garage to reinforce this message.
John Bucknell, a former senior product manager in Telstra's public telephone division, discovered some unexpectedly high barriers to entry when he set up in opposition to his former employer in 1998.
As the new kids on the block, he and his wife, Trish, a corporate marketing executive, knew they would find it difficult to sign up the shopping centre chains they had identified as their target customers.
But the barriers caused by Telstra's 100-year dominance of the market proved just as problematic.
Bucknell says Telstra operates about 35,000 public phones in shopping centres, streets and other locations.
There are also about 40,000``customer-operated" public phones, mostly the blue and gold phones owned or rented by shopkeepers, pubs and clubs, which operate the phones and collect the revenue.
In setting up against Telstra as an operator of public phones, Bucknell says it was a matter of displacing the incumbent rather than competing in an open market.
``The biggest hurdle was Telstra's incumbency," he says. ``They've had 100 years to establish themselves in this business. They've got all the street sites and had all the shopping centre sites until we came along, so anyone like us who comes in has to actually displace them."
Bucknell says public phone competition is also discouraged by the retail price maintenance of 40 local phone calls. This price has been held since 1994, meaning operators had a reduction of income to 36.3 cents when GST was introduced.
``To maintain that retail price maintenance is a very bad thing for the industry, as it doesn't give enough margin for other people to enter. It means you cannot afford to make any mistakes, because the margins are too skinny."
Bucknell also found it very difficult gaining compliance for the American phone he imported. It's simple and reliable and Bucknell says it ``operates on every continent on Earth, even in Antarctica, with no problems".
No public telephones are made in Australia. ``But the moment [the American phone] reaches Australia, you've got to modify them to make them comply with the Australian regulations. It's totally unnecessary."
The Bucknells took delivery of their first phone in March 1998 and worked through most of that year to gain compliance.
They finally had to fly phones out from the US because their first shopping centre was waiting for their installation.
Since November 1998, TriTel has installed 1000 payphones in shopping centres across Australia. Customers, who are paid a commission on telephone call income, include Westfield, AMP, Queensland Investment Corporation and Centro Property Group.
Bucknell wants to double the size of the business in the next three to five years and will continue to concentrate on what he calls the ``pointy end" of the pyramid.
``Shopping centres have the traffic flows," he says.
``It's not about having lots of sites, it's about having the best ones."
While TriTel sold the benefits of a phone that has been ``tried and proven throughout the world", it also offered a service seven days a week with a four-hour fault turnaround time.
``It's to our benefit because if a payphone is not working it's not making any money," Bucknell says.
Contractors are used to service phones in centres other than Sydney, where TriTel now has a staff of 10.
Phone booths, which are subject to minimal vandalism because of their internal sites, are manufactured in Australia to the Bucknells' design.
TriTel funds the cost of about $5000 for each phone and booth, and $5 million has been invested in equipment. Part of this has been funded from cash flow but Bucknell declined to reveal other funding sources.
``All I can say [is], if you have a good profitable idea, funding is available."
And contrary to common perceptions, mobile phones have not been the ruination of public phones.
Bucknell watches many people pull out their mobile, scroll through to find a phone number, then use a public phone because of the cheaper rate.
Bucknell says the real threat to public phones is the phone cards that mean people no longer need feed in handfuls of coins for long-distance calls.
TritTel has recently introduced its own long-distance phone card and stored-value card, partly to boost income and partly because Telstra's phone cards cannot be used on TriTel phones.
© 2002 Sydney Morning Herald
