In a year of regulatory change, economic uncertainty and strong activity in telecommunications overseas, how have TMT practices fared in Australia and New Zealand?

No one saw the Google Streetview van go by their place, cameras recording discreetly in a 360-degree sweep. But suddenly, everyone's house was on display on the web - warts and all - and there were howls of protest about privacy.

It is a moment that demonstrates how TMT often works these days. Technology evolves, and the law struggles to keep up. Behind the scenes, however, there are lawyers who are very much on the ball, making the deals that will facilitate yet more technology development. Along the way, undoubtedly, there will be regulatory issues, copyright issues, network access issues, to name but a few. These all fall broadly under the TMT umbrella of, but the drivers behind each warrant individual attention.

Transactional TMT work

Top-tier firms tend to deal with transaction-related TMT work rather than regulatory work and Peter Leonard, partner at Gilbert + Tobin, says that there's a good reason. "Over the last couple of decades, there's been a marked growth in in-house teams working for the service providers who can deal with the everyday legal commercial and regulatory work. Google, Ninemsn - just to name two - have got very competent teams to handle this kind of work." That doesn't mean that Leonard's team is out of the picture altogether, however, as they frequently provide support on more specialised matters. Leonard believes that many corporations have found the right size for their in-house legal teams. "It's generally gone as far as it can go. I think most companies now have a good sense of what work they can handle best and what they prefer to outsource."

So what impact has the credit crunch had on transactional TMT work? The answer, it seems, is 'watch this space'. "Most of these projects have a 'long tail', so we're still busy with work that was planned up to two years ago," says Leonard. But it's likely that there will be a slow-down in new projects. "The work we're most likely to see is more along the line of asset sales."

New Zealand firm Hudson Gavin Martin (HGM) is another that handles a lot of TMT transactional work, which - as partner Simon Martin points out - is not just limited to M&A. "It's true that M&A has softened, but there's plenty of other transactional work around - for example, work relating to the supply and acquisition of IT services, joint ventures, outsourcing, licensing, and so on," he says, "For example, a lot of New Zealand companies are quite active overseas and require advice on joint ventures and licensing arrangements with partners in places like Australia or Europe."

HGM partner Wayne Hudson says the economic climate has had a mixed effect, "There's work that still needs to be done as part of day-to-day business. And, there's the times when people want to take steps to protect their investment in technology and IP - for example, acting for secured creditors when a company has become insolvent. Use of escrow accounts is also up - this was something I used to handle as an additional service for a dozen or so clients but recently that number has gone well over 30."

Herbert Geer also has a lot of transactional work on the boil, but partner Graeme Hodgkinson reckons that the main activity is coming from larger concerns. "Transactions from smaller businesses - particularly newer ones - have slowed right down," he says, "most probably because they're having difficulty raising capital."

Business transformation and risk

The other type of work that has been keeping Gilbert + Tobin busy is in the line of 'business transformation'. "This aspect of the work may involve putting new technology into a company, or changing business processes through outsourcing or other fundamental changes to 'business as usual'," says Gilbert + Tobin partner Bernadette Jew, "You often get this happening as part of a merger or a demerger, or because a company wants to streamline its systems. It's a big growth area for law firms."

And, unlike companies who provide media or technology services, many businesses probably won't have  in-house legal teams who are specialists in outsourcing and technology, so they call on external counsel. "Business transformation is often a one-off event, so it's not typical for companies to have those kinds of legal skills in-house," says Jew.

"So firms are called upon to scope the work and structure the deals to create the right incentives for providers to do the job better, while creating contractual certainty and anticipating the risks involved such as project over-run on budget and time, scope creep and dealing with unanticipated change. So the contract is not just for doing a particular thing, but creating incentives for the provider to be innovative - and develop and deliver a better business outcome."

Regulatory work

Not surprisingly, there are less of the big M&A deals but Hamish Fraser of Truman Hoyle says that there's been plenty of regulatory and general advisory work.

"We haven't seen a raft of new regulation but the landscape is shifting and we're certainly expecting change," he says. "The National Broadband Network, 3G phone services and premium SMS services are just a few of the areas where there's considerable activity. We've also recently seen a new premium SMS code proposed by the Communications Alliance - the telecommunications industry body - rejected by the [industry regulator] ACMA, and the ACCC are taking an active interest.

Meanwhile, a consolidation of existing regulations relating to telecommunications has occurred which has small and medium businesses covered, but these no longer apply to big business. "It's an important change for lawyers advising in this space," Fraser says.

Truman Hoyle, which has many clients who work directly with all levels of government is also keeping a close eye on a report that is foreshadowing changes to government IT contracts. "Government is a huge purchaser of IT, and the contracts are quite complicated so this is a development which could have a significant impact on our clients," Fraser goes on. In short, he says that clients are turning to firms to keep them informed in an environment of uncertainty. "There's a lot of movement in the regulatory landscape, and they need to know where it's heading," he adds.

And, like so many other areas of practice, IT lawyers are also seeing an increase in disputes work. "Between the advisory and the disputes work, we're as busy as we've ever been," says Fraser, but he's not writing off other types of work either. "If our clients can provide a service that has a genuine business benefit and can offer savings, their business will continue to be strong notwithstanding the credit crunch," he states.

Telecommunications

In the past two years, Herbert Geer  has more than doubled revenue from its telecommunications practice and Hodgkinson, who heads the firm's IP, technology and media group, attributes the growth  to shrewd recruitment of lawyers who are able to bring clients with them. In this regard, he also cites consolidation of existing relationships with clients, who have, in turn, recommended the firm to others. The commercial conflicts issue is particularly relevant here, too. "There is a shortage of true telecommunications experts and the conflicts problem inevitably comes up with the larger firms," he says. "Telstra for one has a very big footprint - and there are a lot of other players out there who aren't Telstra."

The regulated access regime to the Telstra telecommunications network has generated a lot of work for Herbert Geer. "Pricing is a sensitive issue," says Hodgkinson. "Telstra levies a certain rate for other service providers to access its infrastructure and if those providers aren't happy with the price, and the service is regulated, they can take the matter to arbitration. Our telco lawyers have been busy with these disputes." Hodgkinson adds, however, that the overall pool of work available to firms in this area hasn't grown. "There are a lot of [telecommunications] players in the market, but not necessarily any more than there were previously."

Employment market

There is a relatively small pool of lawyers with the requisite expertise in technology and telecommunications, and having clients with conflicting commercial interests is an ever-present danger. "It hasn't happened yet,
but we've come close a couple of times," says Fraser. "It's certainly something to watch out for." He describes the employment market for IT lawyers as still tight, but not impossible. "When we've been in the market, we've always been able to find the right people."

Commercial conflicts, says Wayne Hudson, are part of the reality of large M&A-based corporate firms in both NZ and Australia. "It's part of the reason we set up the firm and I remember, when it was launched, my first three transactions were all matters I wouldn't have been able to take up at my previous firm [Bell Gully] because of conflicts."

The Asia factor

Truman Hoyle promotes for overseas companies looking to do business or invest in Australia both online and in person, and this has been rewarded with an increase in inbound work from South East Asia and the west coast of the US. In the past year, for example, the firm has advised overseas service providers on the Australian regulatory regime. "The telcos in India are particularly bullish and for them, coming to Australia is a natural expansion of their business," he says.

About 20% of Gilbert + Tobin's TMT revenue is derived offshore and the firm is assisting Asian telecommunications companies in building new networks in Indonesia and Singapore. Leonard says that clients in Asia chose Gilbert + Tobin because of the availability of expertise, and a cultural and distance advantage. "Sure, there are many international firms operating in Asia, but their TMT expertise still tends to be concentrated in New York and London. The other factor is that Australia is closer to Asia geographically and by time zone, and many Australians have a cultural affinity with Asia - and they like working there."

Another thing working in the firm's favour is the comparative rarity of the requisite skillsets. "Australia was a pioneer in telecom deregulation and those skills are very much in demand," says Leonard. "Take our alliance with King + Wood, for example - they're a smart firm with great M&A expertise, but we can help them deepen their TMT practice." He is, of course, referring to Gilbert + Tobin's alliance with King + Wood, which was announced earlier this year. When asked how much work the alliance was generating, Leonard said the flow was "solid and encouraging" but it was still early days. "This is a relationship-based project and we are working hard to build strong relationships with our Chinese colleagues - and see where it leads," he says. ALB