Defections erode sales at Telstra (International Herald Tribune / Fergus Maguire)

From the article: “The fixed-line unit, which generated more than a third of Telstra’s 22.2 billion dollars in sales last year, is headed for a “meltdown,” Trujillo said in a presentation to government ministers in August.

Fixed-line sales may fall as much as 6.8 percent this business year, following a 3.4 percent decline to 7.7 billion dollars the previous year, the chief financial officer, John Stanhope, said last month. Last year’s sales decline was the unit’s first.”

The article goes on to mention how the increasing monthly line rental costs for fixed line services and the constant price reductions of mobile services are causing people to turn away from fixed line services. The sort of call quality you get from mobiles is not quite up to the same standard as a fixed line but the suite of services being offered by networks such as 3 more than make up for the reduced voice quality. Once you factor in things like capped mobile plans it is clear for most people a fixed line service is no longer good value.

I’m curious to see how Telstra will react to the changing market. The only thing that could stop people moving off fixed line services is to drop the monthly line rental back down below $20 per month, or even under $15/month. Whether they can make a profit of that level of revenue is questionable, but it may well be better than no revenue at all.