Telstra is no longer odds-on favourite in the race to meet Australia's booming demand for telco services.

I have an outlandish $100 wager placed two years ago that says the Telstra share price will drop below $4 on at least one day before the end of 2007. For a glorious moment in the middle of April, just before chairman Bob Mansfield popped his corporate clogs, I thought victory would be mine as the stock headed south.

The bet is ridiculous, of course. My partner in this nonsense reckons it is the easiest ton he'll ever earn but laments the dissipation of its buying power by the time he gets to call the bet in. His confidence is justified, particularly in light of the recent third-quarter results released by our national carrier.

You do not need to read beyond the first paragraph of its fiscal announcement to understand this schizophrenic origination of government and private shareholding has the nearest franchise to printing money that anyone could desire. Its revenues rose $108 million, or 2.1 percent, to a staggering $5.13 billion to the quarter ending March 31. Its sales revenue increased one point to $5.014 billion. Mobile phones and Internet revenue - two technologies that barely existed commercially two decades ago - are the fuel of growth for Australia's biggest company.

However, in this age of booming communication demands, the bedrock of Telstra - its public switched telephone network (PSTN) - is flat. Long-distance revenue decreased 3.5 percent and volume dropped 6.6 percent. Telstra's reasoning for this drop is "product substitution". In other words, customers are avoiding copper wire and using either wireless or Internet technologies instead.

This slow but accelerating move from old technologies and towards new providers is the reason for the $100 wager.

It is meant to illustrate the point that communication innovation, which continues to occur at incredible pace, will eventually end Telstra's domination in Australia. And when more people understand that reality, especially the financial soothsayers who recently picked over the carcass of the Mansfield reign, then the value of the company, and therefore its share price, will face serious pressure.

A clarion cry of the embryonic post-Mansfield era has been for a return to core competencies where Telstra can focus on efficiency, margin and risk minimization in traditional areas of strength. This is little more than a strategy of sticking your head in the sand. It ignores new mobile, broadband and VPN technologies, among many others, that are all designed to reduce the cost of telecommunications, ergo Telstra's bottom line.

Companies such as BigAir, Unwired, Personal Broadband Services are emerging and will eventually begin to eat into the Telstra revenue base by offering broadband wireless connection - a new market that our national carrier does not even think exists. These young start-ups have a limited capacity to threaten an 800-pound gorilla but they are not alone. Network-focused companies such as Comindico and Primus Telecom are alluring to any organization looking to save on phone costs by using an IP network. Well-known competitors, including Hutchison, Vodafone and Optus, are not confined to the mobile phone game but are also opening new markets in high-speed data connections, too. And then there are technologies such as Skype, which is designed to provide free long-distance calls using IP telephony in the peer-to-peer (P2P) environment that is favoured by the music download sites.

Other alternatives are appearing around the world to offer cut-price calls across the Internet. One of them is SIPphone.com, which is named after the new IP telephony standard, Session Initiated Protocol. It is backed by Michael Robertson, a well-known IT figure and agent of change. He established MP3.com, which created the first copyright storm in the music industry, and Lindows, a cheekily-named Linux-based operating system and desktop suite that competes with you-know-who. With SIPphone.com, Robertson has already established an alliance with SingTel, which indicates we will probably be hearing a lot more from them in the future.