Telstra is the envy of many of its competitors today as a result of its successful and ongoing investment plans, so it was great to catch up with Tom Homer, who is responsible for developing and driving the business strategy across Telstra’s EMEA portfolio, at our Capacity Middle East event in March.
Business in the Middle Eastern region is almost nearly 100% done through the wholesale channel, he tells me, and to put this into perspective the European business he runs is 60:40 enterprise. But the conversation then focuses on how international business has really accelerated over the past five years.
The arrival of Australia’s National Broadband Network (NBN), the government-owned organisation that is taking over the local loop to go to homes and businesses, has really driven Telstra’s growth businesses internationally, organically and inorganically.
Its IP network is now ranked in the top ten Renesys Internet Index Ratings. “As a result of NBN, Telstra has become a big reseller of landline infrastructure in Australia and it’s going to reduce our EBITDA by around 30% because the asset is now owned by the government,” Homer tells Capacity. “It’s been happening for 10 years and it’s around 80% rolled out now, so we’ve been looking for new areas of growth.”
The power of TPN
One of the biggest drivers for innovation for Telstra has been the Telstra Programmable Network (TPN), he tells me. The TPN came from the Pacnet acquisition, which was completed in April 2015. It was a significant example of Telstra’s inorganic growth plans in recent years and it not only almost doubled the size of its international business but gave Telstra two key things, Homer says.
“Firstly, Pacnet was a very early mover in software-defined networking (SDN) and its SDN platform, Pacnet Enabled Network (PEN), which has now been renamed to the TPN, is a data centre-to-data centre SDN, so literally bandwidth on-demand,” he says.
“We now have around 300 customers on the platform. If you’re a carrier and you want to turn up 10Gb of capacity for a week, because of a cable break for example, customers can go straight through the platform in a very flexible fashion, rather than having to sign up to an archaic long-term contract.”
This SDN-driven technology was just one of the strategic imperatives of buying Pacnet. The other was Telstra’s ownership of a very significant business in China, called Pacnet Business Solutions China (PBS). It was the first and is now the largest foreign-owned IPVPN provider in China.
“We have over 200 people in China now and we’re running very significant networks for large European and US multinationals in Asia. It’s big-scale IPVPNs and big multinationals that are selecting us, as they want a partner that really understands China – but also they perhaps want to use a non-local player to assist them,” he says.
“Pacnet gave us significant scale. We are now the leader in Asia-Pacific networking and carry about a third of the internet traffic in Asia.”
Telstra is the leader in terms of US-to-Asia connectivity and it works with all the big OTTs, financial services companies and IT service providers, and all the carriers.
“TPN has given us burstable bandwidth that enables someone to buy capacity by the minute, hour, week, as much or as little as wanted on-demand through a portal,” he says. “That’s been very successful as we can connect to all the cloud players and also to our TPN-enabled 35 PoPs, which are well spread across our global footprint.”
Investing in cable systems
From a subsea and undersea point of view, Telstra has added substantial capacity and invested in a number of cable systems, which has reaffirmed its network, which now stands at more than 400,000km, as the largest in the Asia-Pacific region.
“We’re the envy of a lot of our competitors as we’re still investing. We talk to them about the sorts of new investments we’re making, whether that be in Southern Cross, INDIGO, HKA, PLCN. We’ve invested over A$300 million in the last two years in undersea cables,” Homer says.
Following Telstra’s purchase of Pacnet, the company has strategically invested in additional capacity and infrastructure to meet the increasing demand for data right across the Asia-Pacific region, carefully mapping its international paths and investment. Capacity demand on Telstra’s international network has almost doubled over the past two years to over 200Tb, which has been driven by the explosion of cloud computing, video streaming and e-commerce.
“We’re the leaders in subsea cable for intra-Asia and inter-Asia between the US and Asia, which is a very significant part of our business,” adds Homer. “A lot of what we do for our carrier customers is IPVPN and the purpose of our cable systems is high capacity links for heavy users like carrier backbones, big financial services and IT businesses. A big tranche of our carrier business is helping those carriers that don’t have an Asian network get to their customers.”
Telstra is growing and investing in the capacity and new cables but also new automated products which it’s overlaying on the top. In the carrier space, it’s just launched an exciting offer called Always On. This is an optional EPL feature and Homer believes this is “market-leading and I don’t think that anyone else is doing this”.
The hot triangle
It’s an automatic service that has near-seamless restoration of services in the event of a cable cut or damage due to a natural disaster. “It’s live now and is using some really cool software to make things easier for our carrier customers,” Homer tells me.
With its diverse, high capacity subsea cable network, Telstra is capable of offering a top level of resiliency and assurance across Hong Kong, Singapore and Japan. “This route is also known as the hot triangle,” Homer says. “It’s the busiest route in Asia and Asian cable systems are some of the most unreliable in the world – due to them being more likely to be affected by a natural disaster or from fishing. Telstra, with our diversity and resiliency, coupled with our Always On service can reroute traffic very quickly,” he notes.
“Traditionally what would have happened was that you’d see an outage and ring up and then you’d be at the mercy of the carrier to see how quickly they could reroute the traffic – within a few minutes, hours or days.”
Keeping its customers continuously connected and removing the pain of an extended outage from its customers, with almost seamless restoration of their services, is helping to propel Telstra to another level.
The solution offers increased visibility of the network, improving resiliency and provides flexibility and agility. This has helped Telstra to not only scale its network and boost capacity but also protect traffic and service delivery.
Game-changing tech
Telstra has also gone early on 5G and it already has over 100 base stations in place in Australia and “we’re just waiting for the handsets to catch up,” Homer says. The internet of things (IoT), alongside the accompanying applications, is another focal point that is growing in prevalence for Telstra. “With IoT, we’ll see a massive volume of small deals, almost like a consumer small and medium businesses (SMB) play.”
The market for SD-WAN has grown by 40%, but Homer says Telstra has seen over 80% growth in requests for proposals (RFPs) for SD-WAN, which is driving a significant increase in its internet traffic.
Telstra doesn’t launch its own satellites but Homer does think the evolving satellite communications space is an intriguing area of innovation. “Satellites are going to connect a lot of things that haven’t been connected before, such as planes.”
We’ll all have access to and experience much more connected live content – and there’ll be huge amounts of opportunity for the industry as all the base stations will have to be connected to something. “There’ll be lots of network opportunity for connecting the earth stations,” adds Homer.
Innovation and investment is engrained in Telstra’s company and culture but it’s also looked externally. It’s embraced it so much that it also has its own branded venture fund: Telstra Ventures.
“We’ve invested in 50 interesting software businesses, typically first and second-round funding.”
Some of the businesses it’s invested in include DocuSign, mobile security application Zimperium, and VeloCloud, the SD-WAN provider which Telstra subsequently sold to VMware in 2017. An Innovation Hub is also used internally and staff can submit ideas and they go to a vote. “It creates and stimulates innovation within the business,” Homer says.
It’s clear to see how innovation and automation are at the heart of Telstra’s DNA.
