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A former head of OzEmail and the Microsoft Network in Ausralia, Milne is now the telecommunications giant’s group managing director of voice, broadband and media.

It is a new title intended to deal with an old problem: how to stop the telco’s millions of fixed-line and broadband customers wandering off to other carriers.

Milne describes his unit as a “grown-up version” of what BigPond (Telstra’s internet service provider) was a year ago.

“We very much believe that as media changes and grows, the telco business becomes more about what you do on the pipes than the pipes themselves.”

Combining content (media) with infrastructure (fixed and mobile phones, as well as fixed and mobile broadband) as a way to retain customers and charge them more is not new. Big telecommunications companies the world over have been grappling with the challenges and opportunities of convergence for years.

“Gradually, what telcos have done is reinvent themselves — even though they’ve been incredibly slow do so at times — through the power of their balance sheet and the power of their people and the necessity of trying to hang on to the huge business they’ve had,” says the Telstra executive.

“Large telcos need to embrace this stuff, and media is one of the next things they’re looking to reinvent themselves around.”

So does Milne subscribe to theory that incumbent telcos — whose old job was to build faster and more useful communication infrastructure — can’t succeed in the new media business?

“That’s what farriers and blacksmiths used to say before the Model T Ford,” he says. “But when the Model T Ford came along, it was the end of the line for farriers and blacksmiths.”

Never mind that to some analysts Telstra is the farrier in that metaphor, not the Model T, given that its shortcomings were laid bare at its interim results briefing this month when chief executive David Thodey downgraded profit guidance for the third time in six months, and admitted the decay in the fixed-line telephony business had spread to other parts of the empire, including broadband.

“It is critically important for us to really address this,” Thodey said at the results briefing, before singling out Milne, who joined Telstra in 2002, as someone who “can really make a difference”.

It won’t be easy. Telstra’s revenue from its fixed-line services fell 6.9 per cent to $3 billion in the six months to December — a slump that was not offset by growth in the mobile and broadband divisions.

Meanwhile, increased competition in the fixed broadband market meant 30,000 customers went somewhere else for the half.

Telstra’s directories business, Sensis, which is overseen by Bruce Akhurst, was also affected by the advertising downturn, with revenue down 7.3 per cent to $959 million, while pay-television operator Foxtel is facing slower subscriber growth. (Foxtel is 50 per cent owned by Telstra and 25 per cent owned by News Limited, publisher of The Australian. James Packer’s Consolidated Media Holdings has the other 25 per cent).

These are operational challenges that will be around long after Telstra’s tortuous negotiations with the government over the proposed national broadband network are completed. And while every media business faces competitive threats — as markets fragment, consumers flex their muscles and new entrants such as internet television evolve — Thodey has now linked content with the success of the pipes, whether fixed-line or broadband.

Milne says Telstra has been at the vanguard of new media in Australia since Ted Pretty arrived from Optus in 1997. Pretty, who oversaw Telstra’s ill-fated dot.com forays, including Sausage Software, ran a number of more successful businesses, including Sensis, before resigning in 2005 after Sol Trujillo replaced Ziggy Switkowski at the top.

“I’m reasonably happy but I hope not complacent,” says Milne. “I’m happy because one way or another through a succession of regimes at Telstra, and CEOs including Ziggy and Sol and David — all of those CEOs and the boards behind them have supported an appropriate level of investment in what’s broadly called new media.”

Telstra is betting it will be able to recover some of that fixed-line and broadband revenue through two bits of new technology that combine the various parts of the business.

The first is T-Hub, a device that attempts to reinvent the home phone (and get some of those fixed-line customers back) by grouping a wireless telephone, a 17.5cm touchscreen and access to the internet.

It would most likely sit in the kitchen and offers services such as BigPond’s address book and calendar, BigPond and Sensis content and internet services such as YouTube and Facebook. It can also act as a news centre through internet radio or even be a digital photo frame.

Telstra has been consumer testing the product, and Milne says the feedback has been “extremely encouraging”.

The second device is a digital set-top box called the T-Box. This will allow people to pause, rewind and record TV, and gain access to BigPond internet TV channels’ downloads and content.

The T-Box is one of several set-top boxes expected to compete with established players such as TiVo and Foxtel IQ this year as internet protocol television continues to establish itself.

Milne says there are big opportunities in IPTV, but he — like almost every other media executive in the world — warns that quality content will be crucial to attracting and retaining consumers.

For example, Bigpond now has the online rights to sports such as AFL, NRL and V8 Supercars. Milne says services based around this kind of content will become more important and he expects Telstra to co-operate with free-to-air networks as the rights for the football codes are negotiated over the next 12 months.

Milne argues that internet TV will not have a detrimental effect on a Foxtel subscriber base already battling the new digital channels offered by free-to-air television networks.

“IPTV is in my view not going to be pay-TV delivered via the internet,” says Milne.

“It’s going to be a different media experience to what we currently understand as Pay-TV, in other words Foxtel.”

Milne says it is more helpful to think of internet models such as YouTube that don’t “feel anything like Foxtel”.

“Foxtel is a pay version of free-to-air TV — it’s an extremely good one,” he says. “Foxtel is a wonderful service loved by lots of Australians, including me, that gives you access to a huge range of services you don’t get from free-to-air, but I think internet TV won’t be that. It will be something different.”

So what will it be?

Milne says the answer probably hasn’t been invented yet, and that new ideas are borne of new technology. “Nobody thought of Twitter when the mobile phone was invented, but here it is.”

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