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Telstra COO Exits After Spate of Network Crashes

Robert Clark
News Analysis
Robert Clark
7/28/2016

One network crash might seem unlucky -- eight seems downright careless.

After a string of major outages in Telstra's core network, COO Kate McKenzie has stepped down. Officially, McKenzie is retiring after 12 years at the largest Australian telco, but, as the public face of the company's response to the outages, her departure is seen as inextricably linked to them.

McKenzie, a former career civil servant, publicly took the rap for the faults, issuing a number of apologies during the unprecedented bout of crashes between February and June.

Among the worst were the 2G, 3G and 4G networks going off-air for several hours in February, and a similar event the following month. In both cases, Telstra Corp. Ltd. (ASX: TLS; NZK: TLS) offered customers one day free of mobile data as compensation.

In May it was the turn of the NBN and DSL networks. McKenzie attributed it to a failed DNS software update that caused a number of servers to fail. This time the operator sent free modems to customers who required them.

Telstra hasn't revealed just which vendor's gear was involved in the outages. But a review of the network in early May, led by a consultant from Tech Mahindra Ltd. , also included experts from Ericsson AB (Nasdaq: ERIC), Juniper Networks Inc. (NYSE: JNPR) and Cisco Systems Inc. (Nasdaq: CSCO).

At the end of that review, McKenzie announced plans to spend A$50 million ($38 million) on increased redundancy for the core network and on improving network monitoring.

In late June, CEO Andrew Penn committed another A$250 million ($189 million) from the existing capital budget to improve the reliability of the core and mobile networks and to increase ADSL capacity. As if on cue, the network fell over the next day, with business and government customers across Victoria affected.

The networks have held up since then. Telstra has not publicly acknowledged any link between the failures, but its increased spending on the network core suggests under-investment is one of the issues.


For more fixed broadband market coverage and insights, check out our dedicated broadband content channel here on Light Reading.


Some analysts are connecting the problems to the controversy-ridden NBN project. The plan to build a nationwide high-speed broadband wholesale network is being driven by NBN Co Ltd. and funded by the government, but the uncertainties and delays are having an impact on Telstra's investment cycle.

"The fact that failures keep recurring is a clear indication that the problem is complex," analyst Paul Budde told Light Reading. He said under the NBN project, launched in 2009, the intention was that NBN Co would take over the Telstra copper access network and replace it with FTTH. Since then "Telstra has been under-investing in its landline infrastructure."

"Subsequent changes in the plan, along with ongoing delays, have meant that the massive increase in traffic has still had to go over the old Telstra network, a network that has not been upgraded to a point where it can cope with such high increases in traffic.

"It is not too difficult to conclude that the infrastructure and the services that are being delivered over it are failing to handle the increase in user demand."

McKenzie's position is being temporarily filled by former COO Brendon Riley while a search is conducted for a permanent replacement.

— Robert Clark, contributing editor, special to Light Reading

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