John Linton's Personal Musings

I saw the iPrimus HSPA announcement yesterday which interested me greatly. I thought that the mobile carriers themselves were being hyper aggressive with their offers but they all pale in to insignificance compared to what iPrimus appears to be offering on a service they are buying from Optus. I obviously did an incredibly bad job of 'negotiating' the rates Exetel will pay to Optus for HSPA connectivity and data judging by the prices iPrimus has just announced. I think my abject negotiating abilities, as proved by the iPrimus HSPA end user pricing, is one more pointer to my inadequacy in my position - where did I put that draft resignation letter?

While I understand that 'smoke and mirrors' is the standard modus operandi of marketing done by companies such as iPrimus there is a core 'truth' buried somewhere beneath the disclaimers and other obfuscation which makes it difficult to see anything other than that iPrimus is prepared to take a goshalmighty loss on every HSPA service sold or that Optus are providing iPrimus with pricing at 70% less than they are providing to Exetel. Of course, there would be little doubt that iPrimus would sell a heckuvalot more services than Exetel would but......the pricing difference is so huge it makes my head spin trying to come to grips with it.

$39.00 for 6 gb of included data - if that is actually what the end user gets then that means that iPrimus is selling data at a theoretical price of less than $6.50 per gb assuming that there is no 'absorbed' monthly connection charge - around $5.90 if there is an 'absorbed' monthly connection charge. So if that's a sell price then the buy price must be less than that. Of course, the reality is that an end user on a 6 gb plan will use much less than 6 gb on average - ADSL statistics would indicate an average of around 60% of a plan's included allowance is actually used - but I wonder whether that percentage holds true when you include uploads and, relatively, low usage plans?

Of course there is the usual 'small print' including a modem charge of $220.00 which is a handsome mark up of over $100.00 from a Huawei delivered to your door price and then a further $10.00 if you don't also buy another mobile or wire line service........and probably other conditions that apply that weren't available at the time I looked for them (or I was too incompetent to find them).

In any event, none of that is the point. The point is that iPrimus, a reseller of a carrier's service, is now offering HSPA services at below the costs the carrier's are offering them for. Not really a big deal but a very solid indication that 'true' ADSL replacement services will arrive sooner rather than later in terms of the lower end of the ADSL market. There is little doubt that 3, Optus themselves and Vodafone will all continue to 'sweeten' the HSPA cost per gb pricing equations as well as ramping up speeds.

4 gb down would account for well over 65% of Exetel's ADSL1 and ADSL2 users and I think it would be a much higher percentage of all Australian ADSL users. You have to wonder what this will do to the 'planned' migrations of dial up users and the ROIs for ADSL2 roll outs? At the price and download levels being offered now for HSPA services, let alone what will happen in the near future, makes it difficult to predict the same take up of ADSL2 as would have been the case when those companies that decided to roll out their own networks made those brave decisions. I would imagine that all ADSL2 future expansion roll outs are on hold at the moment because of NBN but HSPA has made the future even more uncertain.

I haven't looked at what the other HSPA carriers and resellers are now offering in any detail as I want to leave it to 'the last minute' before making the 'first HSPA offers' availble so that we have as clear a picture as possible about what will be offered in mid September and then the 'Christmas Specials'. It seems to me, if I had to make a decision today, that the only way to compete with the current and likely near future offers is to use a price point of $A40.00 (or $A39.99) and beat whatever the 'included' allowances are at the time. The only way I can see of doing this is to bundle HSPA with a mobile service and use the profit on the mobile calls to subsidise the cost of the HSPA service.

That would make a $40.00 for 4 gb of HSPA possible (you could say 6 gb if the 'market' was at that level but the reality is that most users know their usage and 4 gb takes care of more marketshare than Exetel could ever service). You would then have to say that the customer must buy a mobile service from you at an additional $30.00 minimum monthly spend with call costs of 25 cents per minute (mobiles and land lines) with a 25 cent flag fall. This would have to be on a 24 month contract and you could make the modem available either 'free' or at a small monthly cost.

I doubt that such a 'bundle' would actually work out very well in terms of sales volumes but it is easy enough to see what lead to the sort of offer that iPrimus has just made - or at least I can see one way that would make such offers possible without losing too much money. A 'naked' HSPA offer is going to be much easier to 'sell' but it is not going to be saleable to the majority of the market when 'head line' offers of "6 gb for $A39.00" are going to be the norm. 6 gb would cost Exetel a great deal more than $A39.00 and we can't survive selling services below cost.

I can see that we have got a lot more work to do than I anticipated to discuss and finalise HSPA pricing and 'bundling'.

Lucky there's so much time available at the moment.

.............As If The CFOs and Board Members Of Dozens Of Australian Communications Companies Simultaneously Suddenly Understood the Realities Of Their Annual Reports And Cried Out For Changes. (with apologies to George Lucas)

Maybe it has something to do with TPG/SPT cautioning the ASX that instead of the "significant profit" it originally stated at the time of the 'merger' for FY2008 its actual results would be a $A31 million loss due to a raft of major write offs (oh dear - who didn't see that coming?) thus joining the list of negative news about communucations companies and their performance in FY2008. Maybe it is due to the fact that it's becoming time to face up to what happens to the NBN fiasco now there is going to some clearer time frame for that to have an impact that has to be more seriously considered? Who knows - but whatever it is, if in fact it isn't just a coincidence heightened by the start of the new financial year, it's resulted in a significant 'ground swell' of contacts being made with Exetel.

My email and inbound phone calls have been more 'interesting' than usual since I returned from my now almost completely forgotten holiday earlier this month. Apart from what is widely published in the Australian media (those parts relating to communications/telco topics) it seems that there is an intensifying 'unease' among the people with whom Exetel does business - in terms of supplying products and services or seeking to supply us products and services. I don't think I've ever had a two week period when I have been contacted by all of Exetel's main suppliers and almost all the possible suppliers with whom we've had some sort of dealings with over the past 6 months.

On top of those 20 plus calls/emails from suppliers and would be suppliers I've received almost the same number of calls from 'competitors' (small ones who aren't really competitors but are in one or more of the same businesses that Exetel is in) or from companies who are in similar businesses to those that Exetel is on the fringes of or is contemplating. The common theme of the contacts is the desire for the caller to get more business from Exetel (in the case of the supplier/would be suppliers) and in the case of the 'fringe competitors' to buy services from Exetel (bearing in mind that we have never been or put ourselves out to be a 'wholesaler' of services.

Two of the enquiries from 'small competitors' interested me greatly. They were to enquire whether we would 'out source' our support and fault logging/resolution services using the new facilities in Sri Lanka once they were fully operational and, more interestingly to me, if we would license our automated procurement and service activation software and our bill checking software. I was also interested in the 7 enquiries as to whether we would 're-sell' the HSPA services we have yet to activate and if not would we be prepared to sell the Huawei 'sticks' we have been negiotating for directly. One approach was to buy IP bandwidth from us which I found quite bizarre.

So what is happening at the 'fragiler' end of the communications supplier level? Why are people approaching a very small company like Exetel (who buys from wholesalers) to 're-wholesale' services and products? It makes no economic sense (we can't provide a cost/effective pricing under such circumstances) and as the people who approached us have no personal or other knowledge of us it seemed to hint at a degree of panic/desperation to make it known that they were in a position where it seemed appropriate to approach a company like Exetel and, presumably, other such companies.

Four of the non-supplier contacts were from 'intermediaries' approaching Exetel to see if we had any interest in buying communications companies (three ISPs and one VoIP provider). As I have never seen such sales ever work out to the buyer's advantage over the last 15 years (with the one exception of Connect.com's acquisition by AAPT I noted in a previous blog) we didn't waste the enquirer's time by indicating any interest though the more curious of our directors would have liked to have known who they were. Apart from anything else we aren't in any financial position to pay a few million for someone else's business.

It seems to me that a number of things can be determined from the recent media reports and the enquiries/contacts made directly of/with Exetel:

1. The large wholesalers are getting rid of/not accepting as new customers companies below a certain size or financial 'profile'.

2. Those same large wholesalers, partly from doing 1. above, and partly as their larger buyers increase their moves to their own networks are facing declining revenue outlooks for the new financial year.

3. The changes brought about by HSPA to the remaining dial up market is removing a much larger than expected revenue/high profit stream from those companies that still have a significant number of dial up customers who are now not 'automatically' moving from their supplier's dial up service to the same supplier's ADSL service.

4. The possible intensifying effects of HSPA and the NBN fiasco on some companies ADSL2 investments (including the effect of their dial up customers no longer being a 'certain' future ADSL2 customer) is causing some rapid recalculation of payback and ROI.

Whatever the reasons may be, even if its just a chain of coincidences exaggerated by me not being contactable for 4 - 5 weeks and the onset of the new financial year, it seems that caution is required for the forseeable future in determing any new 'investments' of our very scarce financial and personnel resources.

I have made a start on putting in place the assumptions on which Exetel will base its five year plan (1/1/2008 - 30/6/2013) and, as I suspected, it's really tough going. I spent the majority of yesterday attempting to put in some sort of realistic order my memories and records (what remain of both) of what has happened in the provision of communications services to the residential, business and government marketplace over the past fifteen years. My 'methodology' (if my random musings and scribblings can be dignified by that description) was to take the three markets and try and write down what had happened in the provision of services to those three markets in the last fifteen years splitting the fifteen years up in to five year 'sections' and also attempting to split the total revenues of each period up by the largest suppliers providing it at the time.

Sounds pretty straightforward and relatively simple until I tried to do it. Firstly my memory is nothing like as good as it needs to be and while I have written a lot of analysis over the past two decades I really struggle to find where I 'stored' it. Of course the internet is now such a valuable tool any person's records and memories can be quickly supplemented by endless searches. So, after, a pretty concentrated 10 hours I had made very little real progress - other than to have developed a splitting headache (never mind - two Neurophen and a large Martini dealt with that).

A couple of things (other than how much easier it all used to be 15 years ago) became apparent out of the confused sets of 'facts' I rediscovered. The first was that there never was a time in the last fifteen years in the communications industry in Australia when small companies, with no exceptions over the past fifteen years, had ever made any contribution to end users (residential, commercial or government) in terms of new and better services or even of lower cost services. The second thing that this 'research' showed was that all innovation by Telstra (the colossus dominating every aspect of Australian communications service and cost) was only brought about by the expenditure of billions of dollars by three overseas companies - AAP, [not its subsequent incarnation - AAPT], Optus and Vodafone (and I realise that Optus began life as an Australian company but it only started to have an impact on Telstra's dead hand once it was acquired by Singtel).

All of the 'innovation' that other companies might claim to have brought to the Australian marketplace was/is completely trivial being simply various versions of one of those 'carriers' wholesaled services. In fact, a very good case can be made that the major "innovation" brought to Australian users has in fact had a massively detrimental effect to Australia's education and current and future operational standards - and actually I can't find a counter argument to that proposition.

It was a pretty depressing day that had started out so hopefully and so positively. By the time I administered (courtesy of my eldest son's excellent touch in blending gin and vermouth) a very necessary 'tonic' I had had enough of looking at the past and will try to find some reason that Exetel should continue to exist other than from the necessity of ensuring its shareholders don't lose their considerable investments (which they can't afford to do) and that closing on 100,000 customers aren't inconvenienced in any way. Those two reasons are massive enough to ensure the ongoing viability of Exetel but they aren't really an encouragement to spur greater and more effective efforts not to mention the "Arbeit Macht Frei" as the nice Mr Hess once thoughtfully had inscribed over the front gates of one of his projects.

So, finding a raison d'etre for Exetel's continued existence over the
coming five years is going to be way harder than I had expected - or,
to be quite frank, had ever thought about until yesterday. That's the
problem of attempting to seriously examine any aspect of a personal or
corporate life I suppose.

However, today is a new day, the sun is shining brightly in a clear winter blue sky and there will be new ways of looking at things and new reasons for doing the same or different things that have not yet become apparent. I've decided to abandon my in depth analysis of the past 15 years (not just because I found it depressing but because it was going to take me too long to fill in all the missing pieces in the required analyses) and look, in more simple terms, at the next five years in terms that make sense to me personally and would/will make sense to the people who have worked so hard and effectively to date to build Exetel from zero to whatever it is today and to also 'build themselves' to whatever they have become capable of today and where they can 'build' themselves to in the future. There is also the compelling need for Exetel's customers to continue to
see clear cut and more than sufficient reasons to continue to use
Exetel's current and future services and products.

However, I have absorbed the one major lesson I learned from yesterdays depressing analyses which is - if you don't have a spare $A 4 - 5 billion, forget about making any 'technology impact' - it wasn't possible over the past 15 years financially and before that it wasn't possible at all legislatively. All that has been possible since 1888 is to use the technologies that those multi billion dollar investors make available to 'wholesale partners' as part of their own grand marketplace designs. All that has happened to 'rival/breakthrough/competitive' infrastructure investments over the past 15 years is that they have cost their investors every last cent of their investment.

A little humility never hurt anyone - particularly when without humility you run the serious risk of endangering all sorts of other people's expectations and quite possibly their wallets.

...and become dishonesty? ...and does anyone care any more if that happens? (or did they ever care?).

I have been looking at the various HSPA offers from the current providers (carriers and carrier resellers) as part of the process of finalising the HSPA 'plans' that Exetel needs to put in place in the not too distant future. Unsurprisingly I was surprised to find just how difficult it was to work out exactly what was being offered and how much it cost. This is fairly sad for someone who has a reasonable IQ and has been around the communications business long enough to be able to grasp the essential elements of service 'construction' and the pricing elements associated with different 'constructions'.

The first thing I noticed was the dishonest ways at least two carriers now treat their "loyal customers" (sorry about using that phrase but it is something I constantly see in my day by day information gathering). Now it's an old but nevertheless truish observation that "the only thing a pioneer gets is an arrow in the back" but it seems this cynical view has reached new heights in communication service marketing.

The latest cynical, and it must be said bordering on the dishonest, scam is, of course, the offer of '12 months service at half price'. "What's wrong with that?" the unthinking person might ask - "seems a great deal?" ....and I suppose it is based on the concept that there's a mug born every minute and that no-one is numerate enough (or interested enough) in today's communication marketplace to get past the marketing scam. Which, I suppose must be true because so many people buy "capped mobile plans" which a moments analysis would show to be a complete rip off - but then the same people who developed those rip offs are now given the task of 'selling' HSPA.

Think about it for a few seconds. Why would a large supplier complicate a price by forcing the potential buyer to divide a number by two - especially a number that usally ends in "99 cents"? "Uh huh"! you say - "that's because the second (and so help me God!) sometimes the THIRD year of the contract will make squillions. Doubtless that's true but if you read the detail of the offer carefully, actually not really carefully because it's very obvious, you will find it's relatively painless to get out of the contract after 12 months.

So, nice try, but no prize.

The answer is far more cynical. The people who offer '12 months at half price' usually (I couldn't find an exception but there may well be one) state the offer is only available to 'new' users (ignore all the other conditions for a moment). They do this because:

1) At '100%' of their new offer prices the offers are completely unsellable

2) At 50% they are competitivish with other suppliers

3) They need to 'meet the market' but don't want to have to offer generally lower prices which they would have to offer to the 'bunnies' who are already customers paying sky high prices for the identical service.

4) By offering a spurious "50% off" for NEW users they can compete for new customers while not having to cut the exhorbitant prices they are charging their old customers.

This theory comes straight out of Marketing Scams For Slimebags 101 (its a mandatory subject in the "Never Give A Sucker An Even Break" MBA. (in this contect MBA doesn't stand for Master Of Business Administration).

As anyone who contemplates buying a communications service these days has undoubtedly already noticed the number of symbols plastered all over the 'head line points' of the marketing blurb have reached plague proportions. I think I commented a while back that to work in "Marketing" you need a special keyboard so that you have got enough symbols to mitigate the lies the head line points are claiming with enough disclaimers (for those who actually read them) to keep you out of jail once the end user finally realises what he/she is really getting/not getting for their money.

So my findings on HSPA pricing is that irrespective of what a reader might infer from the main print of the 'ad' it simply isn't going to turn out that way when they 'get the product home'.

Communications company "marketing' today really does follow the P T Barnum dictum of "It's impossible to underestimate the intelligence of the average buyer."

Personally I think many of the ads I have looked at over the weekend haven't just crossed the line they have have go so far past the line it isn't any longer visible in their 'creator's' rear view mirror.

It seems that the customer testing of the Optus HSPA network is going well - as you would expect it to using technically competent broadband users. Our own personnel are also finding out interesting aspects of HSPA - not all of them positive of course as it's a service that because of its nature is dependent on location, building structure and usage by others in the area/closest tower.

As in the UK, but not as widely divergent, the performance varies even in the same location and by type of usage. As in the UK the initial latency is 90 ms or so and makes playing some games not possible but, strangely, doesn't seem to affect VoIP anything like as much as it might be expected to. The other great result, so far, has been the ability to use VoIP from a suitable mobile phone handset which will prove to be a very useful function if it 'holds up' over wider testing.

So, so far, the Optus HSPA service has lived up to the optimisitc end of our hopes for it. There is a lot more testing to do and on a much wider scale but - so far so good.

We now need to finalise the 'plans' we will offer when we release the service commercially. I was interested to see Telstra signalling that their initial sky high charging "because we can" plans have finally run out of steam (presumably because of competition from Optus and Vodafone) as set out in their media release:

http://www.telstra.com.au/abouttelstra/media/announcements_article.cfm?ObjectID=43222

I guess Telstra's lawyers are getting lax on checking the wording of Telstra media releases or alternatively Telstra has/have commercial espionage access to the detailed plans and actions of their mobile carrier rivals to allow a statement like this to be made:

"Mr Justin Milne, said customers value the wireless broadband service, which uses the Telstra Next G™ network, from Australia's leading internet service provider which is growing four times faster than its nearest competitor."

Now the 'new/lower' pricing that Telstra has announced is still way more expensive than that of the other three carriers:

BigPond Wireless Broadband plans effective 24 August 2008:

especially the absolute 'killer" of: Additional usage charged at $0.25/MB 

(which is a charge of $250.00 per gb over any plan's alowance).

...We Must Put In Place A Comprehensive Five Year Plan.

Not being Stalin, Fidel or Mao (let alone Pol Pot) and having no knolwedge of, or liking for, the structures of 'command' economies I find it strange to be contemplating such a concept - albeit for a tiny commercial enterprise such as Exetel. However, time passes so quickly when you're having the endless day by fun that is your lot if you're involved in being part of a start up commercial operation in Australia (or any other country I imagine) that, here it is, almost 5 years since Exetel 'opened its doors'. 

Hindsight is interesting in a pretty meaningless way but it can be vaguely useful in looking at where you are, in this instance in business rather than personal life, and how you got here and why you would prefer to be somewhere else with different infrastructures. I'm not criticising anyone within Exetel, not even myself, for the company not being ideally set up and positioned after almost five years - each decision that was made over the past 57 months was sensible at the time - on more than a few occasions it was the only decision available to be made.

As with all hindsight exercises you don't have to be too hard on yourself to admit that if the objective was to get where you are today you would have done it a lot better, a lot more easily and with much better results than you have actually done. Most sensible people would accept that and move on - which is what Exetel and the people who are involved with it are going to have to do.

Without 'going over the top' it is quite an achievement to start a business and have it survive for five years yet alone grow it to a monthly recurrent revenue of over $A3.5 million. However it is a magnitude more demanding and more difficult to repeat the process over the coming five years - in the event that is what is to be done. 

One main difficulty, spelled out in all the 'how to' texts I have come across over the years is that the first five years of building a commercial entity are based on long hours every day of total 'involvement' by the founders of the enterprise which are difficult to maintain over a second five year period.

The other major difficulty is that the founders run out of both time and ability/knowledge to continue to understand and therefore control/direct the increasing areas of operation of a commercial business much beyond whatever point they have reached after five years. Of course the exact timeframe may not be five years (it may be more or less) but it is more often than not around that period.

Exetel's 'life' to date has been based on one year's relatively detailed planning for each of the next 12 months with a second year in broad concept with no firm detail. As with many start up enterprises (as far as I've observed) much of the planning is heavily modified each month/week/day of the time the operation stays in business. So Exetel has always started each successive financial year with a pretty detailed plan but has almost always had to change many aspects of those plans as each year progresses.

So, less than three months in to the current financial year, we need to put in place a long term plan for Exetel partly because we are now faced with making some very serious investment decisions which means that we have to commit large sums of our personal money to Exetels future well being and partly because we are going to have to manage the company very, very differently if we look forward 5 years to what sort of company and what sort of size company Exetel might be if it's still a discrete commercial business (or set of businesses) in July 2013.

I have no real idea of where to start in putting such an overall plan in place. If Exetel still exists in July 2013 I am having trouble visualising in any meaningful way what the Australian communications industry will actually be - either in what services will be delivered or what sorts of companies will be delivering them. To put that wimpish statement in some sort of perspective, try going back to 2003, 1998 and 1993 and write down your estimates of:

1. Total revenues of the Australian commuications industry at June 30th in each of those years

2. Major services by percentage delivering those revenues

3. Names of the top twenty companies involved in earning those revenues

4. Names of companies that have existed over that 15 year period that are no longer are involved together with the reasons they are no longer involved.

5. List the top 20 companies involved in providing communications services today and predict what they will be doing over each of the next 5 years.

Any information that anyone cares to share with me on all or any part of that research wil be greatly appreciated.

Lucky its a pretty cold and miserable weekend in Sydney.

VoIP customers for Exetel continue to rapidly increase for as I have no doubt they do for every other ISP who provides either their own or a re-sold VoIP service. I was reviewing what Exetel needed to do last night in terms of improving its VoIP service, not in terms of quality which I can never tell the difference between toll and VoIP via Exetel, but in terms of removing the remaining barriers to a 100% take up by our broadband customers. Of course there will be the never ending 'price pressures' but the two main issues, for us, are PSTN number portability and equipment cost and ease of set up and operation.

In 'rummaging' through my memories of my personal involvement with VOIP and 'compression' I can still remember the first demonstration of voice telephony over a standard PSTN telephone line that had been 'boosted' to 2 mbps x 2mbps in Chicago in 1993 with the voice signals (4 concurrent conversations) sharing the same infrastructure as data. It worked very well and within two years similar 'boxes' were becoming avaialble in Australia via an enterprising technology importer. I can remember selling voice services over VPNs between a company's various offices in early 1996 very successfully then using the 'huge' bandwidth of 64 kbps and 120 kbps ISDN services.

The quality of the service, mostly, was very good to excellent and the savings, in those days of Telstra/Optus only charges for inter-State calls, paid for the whole VPN ignoring any benefit from the data services component of the solution. Over the next few years the technology continued to improve and the cost of the 'boxes' required to make it work continued to fall until it was no longer some sort of technology 'magic' only affordable by large companies with lots of IT skills and IT budgets to match but was an increasingly common implementation across a wide range of commercial and government organisations.

I think the various VoIP equipment providers have been saying that "This year will be the breakthrough year when VoIP will really take off" since 1995. I've heard those statements every year of my working life since that time - but not recently - but I can't remember just when I stopped hearing that statement. The reason is, of course, that VoIP has become the voice system of choice by almost every commercial organistion over the past 2 - 3 years and no decision maker who gives it even cursory thought would use 'standard' voice services. This is't just a 'price consideration' it's because VoIP offers features and flexibilities at very low hardware prices that not even the most expensive of 'standard' PABXs can provide.

Today, of course, VoIP is also very commonly used by an increasing percentage of broad band users and, in Exetel's case, it's not uncommon for 40% of our daily broadband activations to also choose to use Exetel for their VoIP service (and as I don't believe Exetel customers are likely to only use Exetel's VoIP service that woud indicate that probably over 60% of broadband users who buy from smaller ISPs such as Exetel are now using VoIP ), as opposed to those people who chose to buy from Telstra/Optus/AAPT who remain wedded to the wire line rip off money.

So as I was attempting to work out how we could raise our VOIP user ratio to 100% of our broadband users the two major 'barriers' narrowed down to people wanting to transfer their current PSTN number to their VoIP servce and reducing the cost of the "ATA" or whatever preferred VoIP connectivity device to a point where neither issue was a barrier. I have always understood that transferring a PSTN number to VoIP was possible but the processes were 'clunky', took time and were a support burden and also there was no, 'clunky' or not, process to transfer that number from VoIP back to PSTN. Other ISPs have solved those problems (or costed in the costs of the 'clunkiness') and Exetel will try and overcome the current difficulties in the not too distant future - so that particular 'barrier' will disappear.

The cost of the 'ATA' remains an issue as Exetel isn't in a position to give the device away for 'free' a la Telstra, Optus etc on a "24 month contract" or some other contrivance. Fortunately VoIP chipsets and connectors are increasingly being built in to broad band modems so the second issue will also disappear over time. Naked ADSL has significantly increased the 'general' use of VoIP and, subject to it being technically feasible, I would think the take up of HSPA will further increase that take up.

So my conclusion was that I could see that over 80% of all Exetel users would be using VoIP by mid 2009 and perhaps as high as 60% would be using Exetel's VOIP - even if we did nothing more than make the 'porting' of the PSTN number available. Pretty good result for effectively doing nothing. I didn't make much progress beyond that point in finding a way of increasing that theoretical percentage from 60% to close to 100% - not being in a position to give anything away to accomplish such a result.

It's actually nice to see that VoIP has become as universally used as the die hard pioneers always said it was going to be - they, eventually, have been proven correct and all their reasoning was correct.

I don’t pay much attention to the various machinations and comings and goings within the communications industry at the ‘gossip’ levels but I couldn’t help wondering whether the recent spate of various different announcements by all sorts of different companies on diverse subjects had any sort of common root cause.

So just consider whether these various ‘announcements’ actually show that something is significantly changing in this country’s communications industry:

Commander finally gets wound up by its creditors

Unsurprising you might very well say - and you'd be correct. However the timing of the 'plug pulling' is the interesting thing. One interpretation would be that the financial institutions didn't want to write off their 'dead' loans prior to 'balance date' (the end of the financial year) and therefore left the minimum amount of time before being forced to acknowledge their money was never going to 'come home'.

No issue in itself, but it very likely isn't the last of such decisions by lenders around the country and does signal there will be less patience than ever with companies that fall behind on their repayment schedule. Definitely a single swallow not making a credit wind back for over extended communication company borrowers - but maybe a 'cloud no bigger than your fist on the horizon'.

Telstra’s loud mouth Burgess quits with a very unlikely ‘reason’ given

Sure his wife's mother may be terminally ill and it may be as simple as that - stranger things have happened - but it isn't likely. What is much more likely is that his unrelenting attacks on the government of the day and Australia's legislation and regulatory bodies had reached the point where even Telstra's board realised that it was completely counter-productive and told El Sol to dump the chump. If that's the case it is one sign of a more compromising approach by Telstra to dealing with the Labor government caused by the need to find a way out of the NBN fiasco.

Telstra decides that it’s best interests are served by giving “3”
access to its 3G network to allow it to survive without investing
outside the main cities

A 180 degree turn on the previous Telstra attitude that "3G will not be wholesaled". Obviously the thought of Hutchison/"3" doing a deal with either Vodafone or Optus was the main factor which, for the first time, shows a crack in El Sol's (Phil Burgess) attitude of "all wholesale customers are parasites" and together with the decision to wholesale the other "absolutely not for wholesale" ADSL2 service to PeopleTelecom indicates some quite significant change of view by Telstra.

Futuris announces ‘there is no future in Australian Telco industry and will sell off its investments in Amcom, iiNet, Westnet etc after only very recently investing more money in them and previously stating they were “here to stay”.

Again the timing is the important thing with the preliminary balance sheet and P and L for FY2008 now likely to be with the Futuris directors showing, well, whatever they show. One of the things they obviously showed was that there was no future in Futuris investments in the WA (and perhaps wider) communications industry and they had no faith in Amcom/iinet/et alia showing a greater return on their investment than it had reached at this time (assuming there was any return on the investment at this time). By announcing they were looking for a quick sale Futuris is either indicating that it is in an unhealthy need for some quick cash or it knows something that means it is likely to get less money in the future from a sale as it could right now. (no other interpretations can be put on such a volte face in public statements and the unseemly desire to 'get me outta here").

Internode’s founder/MD announces he will quit the post and concentrate on ‘contacts’ and general advice because the “broadband industry is plateauing".

Irrespective of what the man says - there are absolutely no signs that broadband sales are 'plateauing' generally though they may well be doing that for over priced providers in the ongoing tough pricing scenarios that continue to abound. The timing is consistent with a board looking at the preliminary 2008 results and 2009 plans and saying - "Hmmmm - don't like what I'm seeing for last year and have little faith in what you're saying about next year." Maybe Internode's CEO is the first of the CEO's I alluded to in a previous musing having to explain why his recommendations, even if that means to himself, to invest heavily in ADSL2 DLSAMs hasn't turned out as he said it would?

SPT’s share price continues to spiral downwards (now 16.5 cents) having lost almost 70% of their ‘value’ since the Soul/TPG ‘merger’

What is happening to 'investor belief' when the share price in a company is trading at less than a Price/Earnings ratio of 2? Only two things can be happening for a share price to slide, spiral downwards as the 'merged' TPG/Soul price has done. The first is that a significant shareholder (i.e. a shareholder with sufficient shares to keep selling no matter how many are bought) keeps getting rid of their shareholding at any price or the second is that one or other of them is 'manipulating the SPT share price for some future 'buy out' advantage. Of course there might just be a smallish and inexperienced shareholder who has got some misguided share buying/selling strategy wrong. One thing's for certain a share price that falls by so much in such a short space of time isn't a positive sign of anything. One thing's for certain - SPT won't be reporting a profit for the last trading year despite their repeated statements that they make a profit each month.

Optus’ CEO Paul Sullivan states, with no prompting or encouragement, that there may be three ‘reversals’ of strategic direction in the communications industry over the next 2 years.

Never a bad thing to 'cover your bets' and Optus has a lot of bets placed at the moment with some of them (NBN bids with a consortium and alone, Reversed 3G decision, Interesting FY2008 financial results) looking like they do need a 180 or so. However never a good sign when the CEO of Australia's second largest telco is saying that he doesn't know what might happen in the immediate future.

....and these 'announcements' are only from the last few days.

Of course, there could be no sort of relationship at all and they are just the usual over reporting of randomly meaningless micro detail that exists in all industries at all times.

Somehow I don't think it's as simple as that.

A colleague referred me to page 57 of the August 7 - 13, 2008 edition of BRW which was an article on the performance of Australian call centres providing 'sales assistance' to prospective customers. The article was headed "CALLING, NOT LISTENING" with the sub heading of "RUDE, UNHELPFUL AND FLOGGING PRODUCTS YOU DON'T WANT. THEY'RE THE CALL CENTRES FROM HELL".

Now, I have no idea of the real credentials of either the writer of the article (Adam Goodvach) nor the credibility of the organisation that did the research (Global Reviews). The article describes Global Reviews as "does quarterly benchmarks of call centres .....making tens of thousands of calls in the process" - so perhap it is a credible analysis. What caught my colleague's eye was the fact that in the list of the ten worst call centres surveyed, five of the ten were ISPs:

2. Internode

4. TPG

5. Unwired

8. Soul

9. Primus

In stark contrast, in the list of ten best call centres there was, at number two, Telstra BigPond - the only ISP on the top ten.

Obviously this survey was on the various companies call centre capabilities when people called in with SALES enquiries - it wasn't how the call centres performed in terms of handling support calls and requests. However it seems quite odd that 50% of the worst ten sales call centres should be operated by ISPs and only one ISP was rated as being very good.

My interest was not in how badly five 'competitors' were rated by an unknown organisation but how Exetel's sales answering services would fare in such a survey. For over a year Exetel offered no telephone sales enquiry answering service for a range of reasons that appeared to be valid at that time so we have some realistic statistics as to what happens between not having a telephone service avaialble for sales enquirers and having such a service. However we have no statistics on how effective, or otherwise, answering sales enquiries are within our company - other than that our sales increased after we resumed a telephone sales enquiry answering service.

That may sound strange (as strange as this survey finding 5 large ISPs having really bad sales enquiry handling services) but it may come from a common set of situations. Having only thought about it for the time between reading the article over 'breakfast' this morning and now, I have no real answers but I think the reasons may be related to:

1. ISPs are technically based companies with little internal sales abilities or even interest in sales processes.

2. The ADSL market has been a boom market since the beginning and new sales have been pretty easy to acquire and few ISPs have given much thought or interest to the 'sales side' of their call centres.

3. ADSL was a difficult service to provide (and therefore buy) initially, and for quite a long time, and many ISPs had to use 'engineering background' personnel to handle 'sales' enquiries effectively.

While none of the above reasons apply to today's marketing environment it is pretty hard to make changes to large call centres (or any large operation) within a commercial enterprise. There are all the obvious reasons for this being the case not least of which is that call centres produce endless call answering statistics of how well they are doing and few decision making managers within large organisations are capable of understanding what's going on in their call centres until some newspaper writes up a 'complaint article' sourced from disgruntled customer comments - but that is only going to apply to support call centres (a la Dodo's recent slagging off in the media).

No media are going to write an article on how people are not getting sales information from a call centre; not least because no-one who 'suffers' is going to care about their treatment - they just buy from someone else.

So what does Exetel do about this article's claimed information? Easy enough to say - "that doesn't happen here". Such a view is unlikely to be true. So what do we do? I suppose it's a 'action jogger' in that Exetel has always had engineers answer sales enquiries (because of 3. above) and we have never reviewed that situation since January 2004. Just goes to show how careless even the most involved decision making management can be. So it is a reminder that it's long past time to actually build a sales enquiry call centre service that is premised and based on being purely a sales operation rather than something a new Exetel employee has to do so they can move on to 'proper' engineering responsibilities.

One more change to Exetel's operational processes to be added to the never ending list.

Exetel will begin doing 'field testing' of the Optus HSPA service today and over the coming 4 weeks will test the service in every State and the ACT (but probably not the NT as we don't have suitable testers there). While our, by necessity limited testing will not be definitive it is being done to ensure we understand the current contentions (if there are any) and other factors relating to this stage of Optus' HSPA roll out. Our testing to date has shown the expected mix of results and, if anything, the results are not as good as we had expected - and certainly not as good as I achieved throughout the UK using TMobile.

This is not particularly worrying at this time as Optus has made many public statmements on the status of its roll out and how, at this stage, there is a lot of building and upgrading to be completed before the end of this calendar year and even more to follow in the 2009 calendar year when Optus is saying it will push the HSPA service into the remaining rural areas of Australia. While it's seldom wise to believe what any carrier says about the future there is little doubt that the competition between the three major mobile carriers plus Three will ensure that none of those carriers will want to lag too far behind in the delivery of faster speeds and increasingly wider coverage.

There was an article in The Age yesterday:

http://business.theage.com.au/business/optus-making-up-lost-ground-on-the-3g-battlefield-20080818-3x6n.html

that references Optus's disadvantages in timeliness to market with 3G and their efforts to close the gap that they allowed Telstra to build up. There are scant facts in this piece but it does gain emphasise how iportant 3G is becoming vis a vis ADSL and cable broadband - not least in the amount of spending all mobile companies are doing compared to the spending on ADSL2 infrastructures. Some idea of the relative importance of HSPA compared to ADSL2 (at least in the eyes of the carriers) can be guaged from the amounts of money they are committing to broadband over mobile compared to the amount of money they are committing to ADSL2.

The other telling point, if you want to look at it that way, is that the three major mobile carriers are all committing to HSPA coverage of "98% of Australia's popultion via HSPA" compared to the largest ADSL2 roll out by Telstra of 900+ exchanges (out of around 5,000) with the next largest carrier being Optus with a little over 400 exchanges. Right now HSPA speeds are far less than ADSL2 and will remain that way for around 2 years - and 2 years assumes that all the 'promises' regarding higher speeds of HSPA and then LTE are actually delivered over that time frame.

However, as I said some 10 months ago (and throughout my 2 year 'quest' to find a sensible and cost/effective HSPA solution for Exetel) there is little doubt that a sensibly dimensioned HSPA service makes a NBN 'tender' not only redundant but technologically a dinosaur that would be obsolete before it was even half built out. I wonder whether it's too late for CK and ESS to 'wrench' their current 'tender' process round so any money the feds dish out could go to a faster delivery of LTE to the majority of Australians?

No....that would be too sensible.....

I was interested to read about the new 'slimmed down' pricing that both Optus and Vodafone have announced for their own retail HSPA services:

http://www.australianit.news.com.au/story/0,24897,24202957-15306,00.html

and, of course, I worry about whether when Exetel gets to be able to deliver the HSPA services we plan that the analysis we have done about how to make a wholesaler's value adds work effectively Optus and Vodafone won't have, again, cannibalised the HSPA service offerings. If I'm reading the signs correctly they are in the process of rapidly abandoning their previous views of how HSPA services will be used and therefore what the actual take up will be for them. This is inevitable (nothing like the reality of money over the counter to administer a cold shower to marketing theory) but it lessens the value of the offerings that we had decided upon and the markets we had selected as being easiest for us to compete in. Pity about that but it was inevitable.

As far as I can see there are only a very few non-carrier HSPA offerings (via wholesale carrier customers) at the moment and most of those are just re-sells of the carrier plans themselves. Layer 2 services (what Exetel will be basing its HSPA services on) have yet to be put in place by Optus and Vodafone has only had them for less than two months which would explain that - mostly. It will be interesting to see how the remainder of the ISPs who still have some realistic revenue from dial up customers address the 'threat' to their previous comfortable view that when dial up customers are ready they will move to their ADSL service? At $15.00, or less if you believe the advertising, those dial up customers can get a much faster HSPA service and use it anywhere they like which makes ANY dial up user crazy not to move to HSPA if they can't afford ADSL and the hassles that often accompany using ADSL.

I think Vodafone and Optus may have finally woken up to the fact that HSPA (at least right now) is truly the way to take over the remaining 3,000,000 (or whatever the real number is) dial up users rather than trying to position the current performance of HSPA as a true competitor to ADSL2. Maybe in 2009 that will be the case but right now HSPA is a real 'silver bullet' to migrate those poor souls still on dial up to a much faster and cheaper service.

I'm looking forward to the 'field trials' of HSPA and even more looking forward to actually finding out whether the assumptions I've held for over 2 years are going to prove to be correct. It will be even more interesting when Optus is able to deliver 7.2 mbps down theoretical speeds.

A recent quote on the future of HSPA/LTE:

Mobile Broadband continues to gain momentum as more and more operators upgrade their 3G networks with HSPA technology and

a growing number of advanced HSPA handsets and modems arrive on the market….. HSPA is the baseline for mobile broadband

globally and has a strong supporting eco-system. GSA confirms that 198 HSDPA networks have entered commercial service in 86

countries, which means that 90% of WCDMA operators have now launched HSPA. Network speeds are evolving with 125 HSPA

networks i.e. 63% supporting peak downlink speeds of 3.6 Mbps or higher, with 45 networks i.e. 22% supporting 7.2 Mbps peak or

higher. 36 HSUPA networks have launched in 27 countries with a further 25 HSUPA network commitments. GSA recently announced

a 150% annual growth in the number of HSPA devices with 637 HSPA devices launched by 110 suppliers, including mobile handsets,

notebook PCs, data cards, embedded modules, USB modems, and wireless routers. HSPA is a mature technology generating

significant traffic and revenue growth and user devices are mainstream. (Source : GSA, 18 May 2008)

XXX rated for language but, for adults, very amusing:

http://www.youtube.com/watch?v=JAMSHG3ngT8