Thursday, January 31. 2008
.........the day the outlook died. (with apologies to Don McLean)
It's been a long time since I delivered newspapers but the words of Don McLean's song leaped in to my mind as I wandered back down the drive after picking up the paper this morning (not on the door step of course but in the gutter as usual).
I briefly scanned the business section on the short walk down the drive to the front door and what did I see as I slowly stopped in my tracks as I read?:
Tricom failed to settle its stock trades on time with who knows what consequences
Commander announced it was laying off 600 of its 2,000 employees
Some jerk in some union is proposing employers pay more superannuation
Some other union jerk is saying make employers pay long service leave annually
Another union has hijacked a UK Navy ship in Darwin Harbour because they refuse to accept their contract has ended and thats how unions can now act without the slightest fear from 100% Labor governments round the country
Labor is saying they'll force employers to pay 14 weeks maternity leave
Rudd is holding meetings for THREE DAYS with unions in Canberra to pay back for the election funding
The US is so panicky about a recession (quite rightly) they just cut interest rates a further half percent following the three quarter percent last week after their annual economic growth slowed in the December quarter to 0.6%
...oh and Jenny Macklin thinks the most important first agenda item for the first sitting of the new Federal parliament is to "say sorry" on behalf of who knows whom to who knows who for actions taken in the past before the vast majority of current Australians were born or had arrived in this country.
With a government now beginning to truly 'show its hand' I'm not sure why I bothered to start working today.
I am fully aware that I have a very inadequate understanding of the Australian (or any other country's) economy and how the multitude of intricately linked and highly complex events and issues 'play out' in terms of the tiny parts of the marketplaces that Exetel is involved in but somehow I don't think that raft of bad news that occupies three pages of today's business reports can be any thing but darkly forbidding in terms of the immediate and medium term future.
On the other hand, January, with one day still to go, continues to boom for Exetel in terms of new orders for every one of our services. We will achieve new records for 8 out of 10 of those services and one off revenues will also set a record as did the two recurrent revenue bill runs in January. I have no idea why this is the case as we have done nothing differently to the preceding few months and while January is always a strong month for residential ADSL sales it is usually very quiet in all other aspects of our business.
So what do all these mixed signals mean and what is really going to happen?
I haven't got the slightest idea....and that's really disturbing because it's my job to have a very clear idea about what we should plan to do for the immediate and medium term future to 'safeguard' Exetel against any 'bad things' that may occur. After thinking about it I also think that Exetel needs to slow its growth in ADSL1 and ADSL2 new customers and I will do something about that (increase new activation and churn charges) later today. I'm getting to the point where I also think it will be prudent to raise monthly charges for new customers if raising the activation charges doesn't cut the new applications to a level that I think would be more comfortable.
I think it's getting to the time that we must seriously consider winding back our plans for 2008 and put on ice all planned investment in new equipment for new ventures until it becomes clearer whether these twinks posing as a Federal government are going to/have already scared real business decision makers around Australia as much as they've scared me.
One thing's for sure - it doesn't augur well if you're a female of child bearing age looking for a job in 2008; which just reinforces that old caution - be careful what you wish for.......
Wednesday, January 30. 2008
Since Exetel installed its own VoIP gateways in late 2006 our VoIP business has steadily grown - we only offer VoIP services to our own ADSL, wireless broadband and SHDSL/Ethernet customers and since the introduction of 'naked' ADSL the growth has accelerated significantly.
Since early 2007 we have made small but growing profits on the provision of VoIP services which have justified the continual upgrade of the initial switches and line capacities. The very low costs of VoIP mean that you have to deliver an awful lot of calls to make any significant contribution to total monthly revenue but we have always looked on our investments in VoIP as being strategically important to Exetel's business in the second decade of this century (always assuming we 'make it' that far).
My attention was drawn to the latest ASX report from Engin:
which continues to show very large losses and, I imagine more worryingly for them, rapidly increasing personnel costs with very little increase in either revenue or numbers of subscribers.
If you look at the financial summary on page 3 of that report you see a very curious/worrying/horrendous set of numbers which state that revenue in the 6 month period ending December 31st 2007 increased by $A1.9 million (from $A7.9 million to $A9.8 million) over the previous six months BUT "Personnel Expenses" increased by $A2.6 million ($A4.4 million to $A7.0 million) in the same period! This, unsurprisingly, resulted in an $A1.6 million increase in the loss made in the latest six months from $A6.4 million to $A8.0 million. As far as I could see there were no 'explanatory notes' ameliorating what looks like an 'out of control' situation.
I always thought that it was an unusual business plan to offer a single service and when that single service is VoIP and its 'go to market' concept is via retail 'partners' I always believed it would never succeed - which in Engin's case it didn't with the company being bought by Seven after it had racked up too many losses for its original owners to keep funding.
The pressure created by Engin, on itself and every subsequent offerer of VoIP services, with its unlimited time STD calls for 10 cents (apochryphally caused by a printing error in the original advertising which was meant to be $1.00 instead of 10 cents and was noticed too late to change) is possible to deal with by a low overhead VoIP provider but not by one reliant on heavy advertising and the give away of margin demanded by retail chains (resulting in a half year remuneration cost of $A7 million and a 'marketing' cost of $A3 million that, in itself, exceeds total revenue before a minute of traffic is carried or billed).
Exetel's conservative/very conservative VoIP plans were/are based on not losing money while we first established and now continue to grow our small VoIP business and to use VoIP as just one of a set of 'integrated' services that will, over time, allow Exetel to deliver the least cost service across a wide range of end user services and deliver the economies that services that use the same infrastructures allow.
It seems inevitable that VoIP will now rapidly replace 'standard' wire line telephone services and whether that replacement is via IP over DSL or IP over mobile is irrelevant. Sometime in the not too distant future Telstra will have to reduce the prices it charges to the currently uninformed or 'unadventurous' users of wire line telephony to the current costs of the more aggressive VoIP providers. Whether they do this by 'stealth (the current promotions of low cost calls if you buy their DSL services and 'corporate pricing') or by general tariff cuts (unlikely) the end result will be the same over the next 2 - 3 years.
....which makes it pretty essential for any company basing any significant part of its business activities on VoIP to consider what will happen when VoIP doesn't have the 'slam dunk' selling point of being a fraction of Telstra's costs?
.....and based on BigPond's current raft of 'special broadband offers' that scenario has to be taken very seriously.
....and the answer is.......well, for companies like Exetel the real advantage of VoIP telephony is the huge array of fantastic business advantages it gives a small company in terms of the affordability (via Asterisk et al) of all the voice functions that can be very inexpensively integrated in to data base functionality (auto dialing customers with installation and fault resolution updates etc).
So, like every 'go to market' advantage that exists at any point in time it is an inevitability that such advantages don't have an indefinite 'life'.
I think that we understand many of the ramifications of building a VoIP offering that will continue to deliver benefits to end users and to Exetel over the next five years but, from what I read in the media, there appear to be a number of 'major players' that need a radical re-think to their VoIP services and pricing positions.
Tuesday, January 29. 2008
I read a short piece in the SMH business section today about a Brisbane software development company selling its desktop to SMS software to a large Russian mobile carrier. In the same section was the report of Oracle buying BEA (a large middleware developer) for $US8.5 billion. There were references in that piece to the buying up of the three other major middleware development companies (Cognos by IBM, Business Objects by SAP and Hyperion, again by Oracle) - all for mega amounts of money.
When we first decided to 'create' Exetel we had the view that while we could build a pretty good communications company that would deliver the lowest price communications services in Australia what we could really do, if it all went well, was to create the best 'management' tools and systems needed to operate a business in the 21st century.
It was therefore a key objective to build Exetel from 'day one' based on what could be demonstrated to a future 'customer' in terms of the management and operational control systems that would be better than anything else available any where in Australia and the USA and Northern Europe. What better way to demonstrate business tools than by building the company based on them and being able to show what happened over a five year period in all the terms that a decision maker would want to consider?
Based on most commonly regarded keys to business efficiency, Exetel's systems already make Exetel ahead of 'world's best practices' in almost every major operational area and, without knowing more than is on the public record, significantly more efficient than any other ISP or comms company in Australia even at this early stage of the development of those tools. Exetel's revenue per employee, customer per employee, speed of response to major business transactions and problem resolution are what most companies only dream about.
Of course, there is a long way to go and four years of start up operation isn't anything to really hang your hat on in terms of demonstrating sustainability or even transference to another industry or marketplace set and I'm very definitely not getting 'ahead of myself' in valuing the Exetel software systems we currently use. However it is quite evident to me, again based only on my experience with other companies in the communications industry, that we have an integrated platform that can easily and continually be developed to refine and improve every aspect of processing and controlling a wide range of transactions for a wide range of products and services that is better, by far, than anything I've ever seen anywhere I've ever worked before.
Our original idea, and only vaguely outlined back in December 2003, was that we would build a unique 'best of breed' set of facilities (software, phone, management, control, dispersed operational, multi market, environmentally responsible, etc) based on open source components (MySQL, Asterix, Linux) and integrate what we could find on the open source 'market' (Help Desk, Accounting, SPAM filtering and so on) and then make them available to anyone who wanted them on an open source basis provided they in turn made their changes and enhancements similarly available.
While it would be nice to think we could sell the code for $US8.5 billion at some future time and maybe we would eventually decide to make the products commercial the original idea was not to do that. Our, pointlessly altruistic some cynics would say (or more likely they would use the "W" word), idea was to contribute to making business more efficient in Australia and therefore more competitive and in that way make a contribution to the country which has been so very good to us.
We are a long way from making the code of the things we do very well available as a FFU product but we will start in early February to publish some of the things we've found most useful and make them available to anyone who wishes to download them. We will continue adding to these downloads over the balance of 2008 to determine if there is any real interest in what we have created.
We will use a 'wiki' type distribution service and link it from the small and large business sections of the Exetel web site over the next few days.
Monday, January 28. 2008
I completed the Exetel 'proposal' to the mobile carrier with whom we've had the most dealings over the past twelve months which sets out what we could reasonably deliver over the next 8 quarters (starting April 2008). I submitted this a few minutes ago in conjunction with the two other companies with whom we have formed a very loose 'alliance'. we will meet with the carrier over the next few days to determine whether it is a 'go/no go' and then, if it's accepted, move rapidly to put the back end facilities in place to allow us to accept applications and to activate/deactivate connections.
Our submission is based on some 25,000 of our current customers (who use less than 2.5 gb of downloads per month) moving from their current Exetel Telstra based ADSL1 plans to new 3G, moving to '4G' over the next 18 months, plans at something like the following prices:
1 gb - $27.50 per month
2 gb - $32.50 per month
3 gb - $37.50 per month
Speeds would be around 2 mbps/512 kbps
VoIP would be included at 100 free cals (national and local)
Activation fee would be sub $100.00 (no charge on a 24 month contract)
No off peak allowance
We have 'committed' to selling an additional 100,000 connections over the 8 quarters (on top of the 25,000 'churns') which is less than the minimum requested by about 50% but our other two 'partners' have more than made up for our lack of 'bravery' and the total number is close to what the carrier originally requested.
We got a 'pre-approval' last Friday for the $A800,000 required for our 'share' of the gateway so the decision now lies with the carrier and, I suppose, our ability to deal with the many unresolved issues raised during the discussions to date.
While it's very much our preferred way of going (buying mobile data access from a major Australian carrier) we've arranged to meet with the US based 'minute aggregator' in Singapore in mid February following a very cordial meeting held in Sydney two Fridays ago. If they proceed with their Australian plans I think that could be an 'almost as good as' scenario for Exetel as the rates are a little better and we would be able to develop a one on one relationship rather than being the smallest of three as in the scenario I've outlined above.
Whether either of these two arrangements will turn out to be implementable and then the volumes required met is, of course, not possible to predict. However three obvious things have come out of our search for a data over mobile solution:
1) It's going to be expensive to set up.
2) We won't be able to do it by ourselves.
3) There are very, very few other parties that we would be able to form a workable 'consortium' relationship with.
I've learned a great deal about many things in this, to date, fruitless exercise not least of which is the increasingly shorter life wire line will play in any form of telephony or data carriage future.
It will be an exciting few weeks.
Sunday, January 27. 2008
We had a meeting with one of our banks late last week to discuss their 'almost final' ofer of borrowing facilities which we enquired about late last year when we were considering the best ways of acquiring either/or our own wireless or fibre network, an owned rather than leased office floor space or even leasing one or more large capital equipment purchases we were/are considering. We have operated Exetel, to date, with no overdraft or any other kind of borrowings and have paid 'cash' for all of our equipment as well as providing Telstra with a $A1 million bank guarantee.
We can continue on in this way for the foreseeable future as our one major capital purchase has been offered under unbelievably attractive vendor finance terms and, looking at the current economic outlook with the very high likelihood of continually increasing interest rates and probable liquidity issues facing virtually all the lenders, this is not the best time to borrow money according to all conventional thinking. Most people that I talk with say make the most of the fact that you're fortunate enough to have no finance or bank debt and see what happens over the next 6 - 12 months.
I made these points to our bank visitors who were then at great pains to point out how advantageous it would be to borrow money to expand when most competitors would be under pressure to cut back their spending and take a more conservative view of 'investing/planning' growth in a tough outlook period.
I was quietly amused that I had reached the time of life where I was the most conservative and cautious person in the room acting like the most negative of the financial controllers I had ever had to deal with in past positions where I would always be the high risk and damn the consequences proponent in any investment scenario.
I was thinking about how to make this decision regarding infrastructure investment earlier this morning and have not been able to even find a scenario in which I was either comfortable with or which posed no downside - it all continues to look far to uncertain to me. As far as I can see, and I've mulled this investment over for almost three months now, all I can see is high risk with a very uncertain pay back period. With the 'magic' of spreadsheets I have been able to model and re-model the investments needed in all sorts of ways and every way I try results in uncertainty at best and financial disaster in too many circumstances.
Before I met with the bank I had come up with only way that I would recommend Exetel would take the risk, at this very difficult time, of investing the $A4 - 5 million it would take to build a realistic infrastructure in Sydney, Brisbane and Melbourne which is to share the cost and the infrastructure with a non-competing other enterprise. If that becomes possible then the 'math' becomes a 'slam dunk' - it pays for itself from month one and will pay back the investment in less than 18 months - well inside all the 'bad thing scenarios' I can currently think of.
So like all really tough decisions it can be made incredibly simple - depending on your view of things. My reservations about all 'partnership' deals will make it hard to actually go ahead but so many of the projects we are currently looking at only make 'risk' sense if the risk is shared with someone else.
I have made some tentative approaches to one Hong Kong and one Singapore based company who have an interest in investing in an IP distribution network in Australia and will visit both of those companies in the middle of February. Of course, the most likely result is that those, much bigger than Exetel, companies will decide to build such infrastructures by themselves and are simply expressing interest in talking with Exetel as part of their investigations of how to do this in Australia - that wouldn't surprise me at all. But, it does allow me to continue to consider this option because commercially it makes sense and it would eliminate the financial risk.
As both the banks we deal with seem quite anxious to provide us with loan facilities it seems a shame to have to disappoint them.
Saturday, January 26. 2008
I was mulling over the various bandwidth contract renewal options and new proposals over the last few days. As with all such processes you are inevitably reminded of the really bad decisions you made when you signed the previous contracts locking you in to spending far more than you should have over the past two years or so. What I thought were good decisions obtaining good pricing turn out to be really bad decisions causing significant financial pain over a long period of time.
So, I suppose, the good news is that Exetel can, in the next few months, begin reducing its spending on IP bandwidth by around $130,000 a month when all current contracts are either transferred to more realistically priced competitors or the current suppliers work out that losing $A500,000 of our current spend (and the obscene profits they have made while ensuring that Exetel barely managed to stay 'alive' over the past two years) is more problematic to them than providing the same bandwidth at 30% less than their current pricing and at least retaining a big chunk of business that is still very profitable to them - something we know for a fact having gone to the detailed trouble of agonising over whether we would commit to buying an STM16 direct from Southern Cross.
We are still favouring a 'joint venture' with another company who is interested in buying SX STM16s but needs a 'major' customer (amazing to think that term can be applied to Exetel) to commit to a large percentage of the first STM16. That pricing would deliver a cost to us of around $A150 per mbps within 18 months which is around the time that the new PIPE cable may become available at prices that will be interesting to see at that time.
Bearing in mind my less than brilliant decisions of the past in selecting bandwidth contracts I'm hesitating more than usual over these decisions and certainly won't be signing anything longer than a 12 month contract. I'm more than a little sick of Exetel's personnel working so hard and efficiently to ensure that other companies have an easier life by overcharging small companies such as Exetel. Four years ago it was very much a case of 'beggars (start ups) can't be choosers' but things are a little different in January 2008 than they were in January 2004.
One sobering thought is that the amount of bandwidth 'consumed' by an Exetel user today is almost 2/3 more than the average of a year ago. This is partly due to the increase in ADSL2 users and the general increase in usage of all types of customers. We have managed to ameliorate the effects of this growth with the Allot 2250 smoothing P2P demand which, along with the off peak strategies of the ADSL plans, has allowed an incredible level of efficiency in band width usage. Similarly the P2P caching has made a difference to the peak usage period by providing another 200 mbps at the most heavily used peak times and up to another 400 mbps in a small part of the off peak time.
Even so the usage per customer is way up on a year ago and continues to climb. The peak delivered bandwidth in January 2008 has been 1.950 gbps compared to the peak in January 2007 of around 1.0 gbps. Apart from any other consideration we are having to add a third GigE link to the border routers as we will need more than 2 gbps before the end of February.
The decisions aren't becoming any easier and the temptation to 'play it safe' is significant. On the other hand 'playing it safe' will cost around $A80,000 extra a month and I'm not sure I want to do that for another year. $A960,000 in Exetel's bank acount would be money that can be spent very usefuly.
.......but then there's the risk of a 'joint venture' with a company smaller than Exetel........though, come to think of it, Exetel was a company with no track record four years ago so have I got some false views here?
There must be a better way to spend Australia Day - and I notice I missed out in the honours list again!
Friday, January 25. 2008
Exetel completed its six monthly review of the career plans for each of the 30 full time people we employ over the past four days. Our current concept of this process is to send each person a questionnaire which they complete and send back and then sit down with one of Exetel's directors to go through their answers to the various questions and discuss anything else that either the employee or the director wishes to raise. In my personal experience no company I've ever worked for (except IBM in the 1970s) ever had such a process but I've used it for most of my working life in an always evolving, and hopefully gradually also improving, format/form.
The value of such meetings, as with all meetings between two people in commercial life, is dependent on the amount of thought put in to the meeting 'agenda' prior to the actual meeting. As always there was a range of effort from the 'none at all' to the well considered responses and thoughtful questions - as you would expect.
We tabulate a part of the questionnaire that deals with the individual rating a number of aspects of their employment with Exetel which we compare over time with previous career reviews. The results for this six monthly review were mostly slightly 'more positive' than the July 2007 review (the scores are 0 = totally unhappy to 10 = completely happy):
Current Position - 8.00
Progress (Last 6 months) - 7.55
Peers - 8.41
Current Manager - 9.27
Future Prospects - 7.82
Based on these 'results' compared with the results of similar processes I've been involved with in previous companies there is very little that Exetel need be concerned about in the general operation of the company. However, as always, there were a number of people who expressed concerns with various aspects of their individual roles and/or particular aspects of the ways in which Exetel operate. So the directors/owners are able to look at each individual career review document and make whatever changes/adjustments they believe are appropriate to the ways in which we operate Exetel and also to individual's job responsibilities and future directions to more closely match their current/changed job aspirations.
Small companies like Exetel have very little/no 'fat' in their staffing structures and even the most inexperienced 'manager' knows that someone who is happy in what they are currently doing and is happy that they will continue to be happy in developing their career in their preferred directions and time frames is going to be more of a 'contributor' to the overall objectives of the company than a person who doesn't believe they are in this desired position. So meeting every employee's current and immediate future expectations is THE first requirement of any manager in a commercial enterprise (I'd say in any enterprise but I don't think that's actually true in Australia).
As this process is so simple and straight forward you would think it would be easily accomplished by any commercial entity. My experience in companies I've worked for and also in companies in which I've had a senior management role is that not only isn't it easy, it's almost never possible beyond the sort of size that Exetel is now or the sort of size that IBM was in Australia in the 1970s. I don't know of any other explanation for why individual employee career planning is not an integral part of any commercial company's management focus - but the observable fact is - that it isn't.
My personal view is that people who own and manage their own companies have an intensely real interest in ensuring that the people they hire are the 'right' people and that they look after the people they hire with more very real interest and care - in some ways as 'extensions' of their own families - hence the 200 year old appellation of 'small family business'.
My observations of Australian companies that grow beyond 50 or so employees up to around 500 employees that each step along the employee growth path (say increase in size of each 50 employees as a reasonable estimate) the competence and 'caring' of the management of the company's employees falls alarmingly to the point where at around 450 employees the 'managers/supervisors' of every group of employees within the organisation has fallen to a point where over staffing is likely to be between 50% and 100% greater than is needed and employee happiness would not register above around 6/10.
Multinational companies are 'wealthy' enough and sensible enough to realise that hierarchical management structures need 'policing' and often put in place 'cross company' personnel review processes to overcome the short comings of hierarchical companies (endemic inadequate 'middle' management/supervision). Those companies generally tend to be larger than 500 employees (the sort of size where a 'human resources' function has built up to the size where the overheads of such a process can be afforded/'lost') and more likely larger than 1,000 employees.
I could be quite wrong but that is my personal observation over several decades of working fairly intensely in the Australian IT/Communications industry.
The reasons that I have been thinking about these issues is that, depending on what happens of course, Exetel will begin to reach an employee level where the efficiencies and 'happiness' that we currently enjoy and on which any level of success we have achieved to date is based on, will begin to erode.
We have begun the processes required to change the way we manage the company, and therefore the people within the company, which I believe is essential for a small company to survive and then continue to grow as it loses the efficiencies of 'ownership management'. I think, among all of the other difficulties that 2008 is already bringing - the quality of personnel development will remain the difference between continuing 'success' and some form of 'less than success'.
Thursday, January 24. 2008
....which is quite the reverse to the effect heavy rain has on many parts of the communications industry. (apologies to Peggy Lee for my probable misquoting of her song).
Australia is a truly cruel country, not at all as Donald Horne described it in his dyspeptic opening to his "third rate" book:
"Australia is a lucky country, run by second-rate people who share its luck."
The current widespread flooding in Queensland and many other areas of Australia is just one more repeat of the cycle of drought followed by flood followed by bush fire which is all too common an experience for many Australians.
I have no problem with his description of the people who have 'run this country' for the past 100 or so years other than to question whether those people being described as 'second rate' isn't vastly overestimating their displayed dedication, application and basic intellects.
I remember when I first heard a Telstra help desk person tell me that my BigPond ADSL problems were "probably due to the rain" that I almost burst out laughing at such a truly lame shrugging off of responsibility by some "help desk script reader". Later that week the Telstra engineer who dug down to the junction box connecting our house to the bearer running down our street showed me that indeed the 'pit' in which the connection occurred was indeed full of water and the insulation on the connection was defective causing the intermittent line problems as the rain filled the pit and then 'magically' repaired itself as the water slowly seeped away.
Since that time I've been more aware of the physical limitations of the aging infrastructure that is used to deliver 'essential' communications services to residential households and businesses. In my individual case the Telstra engineer said that the cable in the street had been laid in 1936 and the cable junction box connecting my house was an extension of a main bearer connection installed in 1963 - in his terms "relatively modern for this part of Sydney".
So you get a mental image of cable contractors over the decades laying cable and terminating building block connections to pits and trenches that have been dug in dry summer weather in topography that then existed which in the case of new 'suburbs' was about to be radically changed with the building foundations of new houses, the addition of swimming pools in back yards and the ongoing road repair/widening activities as well as new gas and water lines and the subsequent repairs to those structures and then drenching rain followed by scorching drought in continuous cycles.
It makes you wonder how anything works at all for very long and puts in perspective the plaintive 'my WOW pings are sooo slow - let's change ISPs to someone competent' scenarios that are the inevitable consequences.
These issues have re-occurred to me over the past few weeks as the drenching rain that has fallen over many parts of Australia and has caused so much very real and very serious distress to so many real people is matched, a more unforgiving person might well say 'drowned out', by the 'mewling infants' who bombard ISP and telephony call centers bemoaning the catastrophe that their deprivation of reliable internet is causing them and, verbally, aggressively with the addition of some truly dreadful 'language' demanding that "someone must do something about it" - like what?...change the weather? (I do hope the new Labour 'government' does actually deliver on one of its core election promises and re-introduce English language teaching in to schools sometime soon)
I made an observation to Annette more than 10 years ago that the internet was going to become the most dangerous 'drug of addiction' the human race has yet provided itself with and it was likely to make the negative aspects of heroin look benign before very long. I think that time has been very truly with us for some time now with so many people, and mainly very young people, almost in a state of withdrawal if, for whatever reason, their internet is unavailable to them for more than a few hours.
I wonder if there's a set of call centres dealing with complaints about beach closures due to the Easterly and residual cyclonic effects that have made beach going a pretty iffy proposition since Christmas?
Wednesday, January 23. 2008
I received an email last Thursday requesting information from the journalist who wrote this article:
I provided some brief answers to the questions in the email but didn't receive any request for clarification and his foreshadowed telephone call never eventuated and I can now see why.
If you bother to read the article (it's mercifully short) it appears to be a 'free' advertisement for iPrimus who are "planning to introduce "naked" ADSL "soon". I was amused by the claim by the iPrimus spokesperson that they had actually been delivering it to business customers since 2000 as that is such transparent BS - of course - EVERY provider of business DSL services has been providing DSL over standard non dial tone lines since DSL over PSTN first became available around 1998!
So much of that little article was about how iPrimus, InterNode and some company called "Adam" were "about" to provide "naked" ADSL that I wondered why the article was written when:
a) That's not exactly 'news'
b) No pricing was given
c) No coverage was given
d) No advantages over current 'naked' ADSL services were even claimed
iiNet, as far as I know, was the first company to provide 'naked' ADSL and has been offering 'naked' ADSL for some months and even Exetel has had customers using 'naked' ADSL2 since mid-December 2007. What's the big deal?
One of the comments in the article:
"Like iPrimus, Internode will also offer the option of an Internet-only plan without VOIP. This will be followed later by a voice and data bundle."
was both a nonsense and, it appeared to me, a deliberately untruthful and pointless statement - obviously the vast majority of 'naked' ADSL users will use the service for VoIP (it's the main attraction of 'naked' ADSL). As far as I know iiNet offers "free" unlimited national VoIP calls and Exetel includes 100 national calls (effectively unlimited for 99% of users) and there is no "extra charge" for these services other than the end user having the equipment that can utilise VoIP - so a "bundled" VoIP service is a great cost advantage to those users who take it up and only a 'disadvantage' if the ISP is offering a 'naked' ADSL service at an inflated price.
To release a 'naked' ADSL service without an included VoIP offer (and of course some users will prefer to remain with their current VoIP provider) is pointlessly stupid - it doesn't cost anything if the ISP already has a VoIP service and the actual cost of the calls (like the cost of the other IP traffic) is costed in to the plan. OK the estimated cost of the calls could be deducted from the plan cost but and a "VoIPless" plan could be a few dollars lower cost but what's the point? VoIP calls are currently 'standardised' at 10 cents anywhere in Australia and there's little end user advantage/disadvantage in using any other provider's VoIP service to make such calls.
From what I can see of the early stages of take up of ADSL2 without a usable PSTN telephone service there are two main advantages which will mean that a person to whom this service is available will prefer it to a service that is based on also having a standard telephone service:
1) The customer will like the advantages of a slightly lower cost for the base services (at least currently the ULL needed to deliver 'naked' ADSL is some $8.00 more expensive than sharing the line with a telephone service - LSS) and the much lower cost for the telephone calls.
2) The provider will like the advantages of not having to provide assistance and resolution of telephone service faults. While the CSG is not particularly onerous the demands of a customer who has trouble making telephone calls is significantly more demanding that someone with ADSL issues.
If iPrimus/Internode et alia think that introducing 'naked' ADSL2 sometime in the future is somehow newsworthy it must be a very slow news day - that horse bolted some months ago.
Tuesday, January 22. 2008
....and, no, I'm not referring to some possible denizens of Oxford Street but one of Lewis Carroll's more imaginative creations.
As Australia's 'technical' press slowly tries to re-focus on the realities of the "core" promises made from the safety of opposition by the new 'government' the disparities between sniping at the previous government and actually carrying out something different is now beginning to become more apparent - even to the writers in the more technically challenged press - this article for instance:
in which Conroy's ridiculing of the previous government (and very explicit criticisms) shows what difference a day makes (or more properly what difference there is between the luxury of cherry picking criticism from your armchair and the cold winds of being the one responsible for making 'political' decisions costing real money with inadequate alternatives) as neatly set out in that article:
"Conroy has always said he would honour the Opel deal if the consortium met its obligations.
His problem is that much of the Opel network will use copper-based ADSL2+ broadband and largely untested WiMAX wireless technology.
Conroy has publicly ridiculed WiMAX, and its US-based proponents, such as computer chip giant Intel, have done themselves no favours with serial delays in making network equipment available."
So the new Labour government will have to decide what it's going to honour of the previous government's remaining promises (which includes personal law suits against government ministers) and how it deals with its absolute promise to deliver a new fast IP network without Telstra (pretty much an impossibility) and......etc....etc.....
That little dilemma has used up his belief in one of his six impossible things before today's breakfast.
I wonder whether he will authorise the $A1 billion to OPEL by the end of January or whether he will find that he will now also be sued personally by Optus and Elders as well as by Telstra? Maybe he will re-read "How To Win Friends And Influence People" as well as "Alice In Wonderland".
I only looked at that article as Exetel must now make some very tough decisions on the time and resources we have invested in determining how we could deliver faster IP services (including IPTV) and what we would need to invest in what technology to be able to do that. We have continued to have communications with the favoured DSLAM manufacturer so that if the Labour FTTN/H proposal turns out to be the pipe dream it seems inevitably destined to become we could make a prompt start on that project should we still believe that it's sensible to make such a, to us, very large financial commitment.
We are also getting much closer to deciding on which, if any, of the possible data over wireless solutions we could realistically afford and would meet the requirements of Australian users post any new FTTN actual delivery time frame. My favoured solution is still too financially demanding for me to recommend it but there's still a possibility that the terms can be made less onerous if one of two initiatives we have proposed become acceptable to the carrier.
So, apart from everything else that needs to be done in this very difficult time of this very difficult year, these two decisions must be made before the end of February and will take up all of my time and a fair bit of several other people's time.
I really would like to have an IP over wireless solution in place and deliverable by the end of March and also be able to deliver the first 'real' IPTV before the end of June.
.....I think I said that in January 2007........
Monday, January 21. 2008
.......and by that I don't mean that Naomi Campbell is short of lucrative engagements in 2008.
There were two short articles in this morning's 'electonic press' that were relevant to the changes that will inevitably occur in the ADSL business this year and also relate to some actions that Exetel has been taking for over two years and that we expect to complete, all going to plan, by early 2009. The articles separately commented on AAPT's ongoing downsizing of its 'call centres':
"AAPT has slashed more than 600 jobs - more than a quarter of its workforce - at three call centres in Victoria and Queensland, as it centralised its call centre operations in the inner-Sydney suburb of Glebe."
and the demise of EMI and the parallels to the communications indutries:
""In communications, voice has been the cash-cow product, but prices have collapsed - just as in the music industry with CDs. On technology, just as vinyl was replaced by the CD and now MP3 files, so in communications traditional PSTN has been superseded (although not replaced) by GSM and now VOIP. Turning to delivery channels, just as retailers no longer stock CDs (you buy them on-line today, if at all) communications channels to market are changing too (telecoms services are now bought in the high street), with the internet growing in importance too. And finally, business models are changing. Per unit (minutes or megabytes) billing is a thing of the past."
There seems to me to be little doubt that most of today's ADSL suppliers have business models that are exact replicas of BigPond's original model when they introduced ADSL to Australian users when it was an iffy and complex service. They have large call centres (far too large for their respective customer bases) and hierachical management structures and still spend more money on advertising and marketing thn can ever be recovered in profits from the customers attracted by that marketing.
For the non-BigPond ADSL providers they are still, almost overwhelmingly it seems to me, living in the past in that their call centre/management/advertising structures were built based on the fact that margins on ADSL and its associated services were 'fat' enough to cover those costs due to BigPond's ridiculously high priced ADSL price structures - the 'price umbrella' they 'sheltered' under.
Today's realities are:
1) BigPond "selectively" sells broadband services at prices BELOW those offered by the majority of 'independent' ISPs.
2) ADSL modems are plug in and work and don't need complex installation procedures.
3) Something like 35% of all 'new' users to an ISP have previously had broadband previously and are familiar with how it's set up and how to do minor trouble shooting.
4) 70% of 'adult' broadband buyers rely on a friend, relative or colleague's recommendation to select an ISP and almost all of those rely on the same friend/relative/colleague to help them with any problem with setting up and trouble shooting their service.
For an ISP selling broadband and related services to grow, or even remain where it is, in 2008 is going to mean that it will, almost certainly, have to contend with lower ARPU for broadband resulting, for most, in lower nett profit per user and any thought of bundling lucrative telephone line rental and associated call charges will only lead to tears before bed time (or ceasing to exist by the end of the calendar year).
THe brutal reality of 2008 is that no 'independent' ISP is going to be able to offer either a 'real' lower price for 'broadband services' than BigPond (even if the 'real' price in fact continues to turn out to be an 'apparent' price) and that no 'independent' ISP is going to be able to outspend BigPond on advertising or activation give aways.
It seems to me that to succeed in 2008 an 'independent' ISP is going to have to offer a better 'product' than BigPond and justify its 'higher' cost on the additional benefits rather than relying on BigPond (as in the past) being so expensive that no-one with the slightest knowledge of what's on offer would ever consider buying from them.
This will have to be done with, for most 'independent' ISPs, lower prices than in the past and, almost certainly for those few ISPs that actually make them, much lower profit per user.
I think, as with AAPT over the past 18 months or so, there will be a lot of current ISP 'middle management' looking for new career directions in 2008 and, probably, a fair number of 'senior' ISP management too - along with around 60% of the personnel currently employed in ISP Australian call centres.
....but that could never happen.......could it?
Sunday, January 20. 2008
I became inerested in 'web marketing' in the late 1990s and have been involved with it to a greater or lesser extent ever since I had my first, very modest, commercial web site put up in early 1998. Since then, and especially from the very first day of Exetel's existence as a service provider I ave spent a lot of time on developing my understanding of how to use web sites in every aspect of a commercial undertaking.
I spent a significant part of each day either thinking of ways of improving the use of the web in our current business or using the data provided from the various web tools we have in place to help make changes or different decisions. I find I use web derived staistics in every, not almost every, but every dscision I'm now involved in. This is partly because we create specific metrics to help in decision making but more importantly its the much more hard to capture and interpret 'trends' that I personally use to guide much of the decision making in which I' involved.
I still remember on my first, ultra modest web site the developer was very proud that she had included a 'hit counter' that dispayed the nuber of times the web site had been accessed. Ove the last ten years I''ve evaluated and used many different web metrics software packages and have become far more adept at using what are now very sophisticated, and very precise, web information 'gatherers'. For many years I lsted after something as sophisticated as 'Netmetrics' (a now defunct but at the time wonderfully powerful web hit analysis suite that went far beyond anything I had seen up to that time). I never had the money avaialble for that level of software so for several years I used a service from Webstats and that was very useful in the past and for the first year or so of Exetel's existence but, as I began to need more detailed information it was not able (at least it wasn't the last time I looked at it) to deliver what I wanted.
In the last days I was building Swiftel and in the early days of Exetel there was a pretty consistent correlation between web site visitors and new ADSL orders - 5% of vistors signed up for a service. That quickly fell after the first few months of Exetel's existence and is now a very tiny percentage of the 750,000 unique 'visitors' that came to the Exetel web site in December. So for the past almost two years I've been using different 'hit collectors' and looking at a much narrower range of 'visitors'.
This has helped change various aspects of the web site to simplify the 'paths' an enquirer takes to reach the information they are looking for (the 'golden paths' in the defunct NetMetrics web analysis software). It's aso allowed me to get a much better idea of what types of people are visiting the web site and by feeding the IPs used by peope signing up on the on line order forms a range of information is provided on the source and demographocs of people who sign up with Exetel and also various other classes of people who visit Exetel's web site on a regalr basis.
One interesting minor report I have been runing for over 18 months now is identifying various company's 'employee' address ranges and producing a series of analyses of how many people from various organisations visit the Exetel web site, how regularly and if there is any correlation between events (date/times I nominate) their visits and those events.
It will need a lot more refining to produce a truly accurate picture but it gives some intersting broad statistics over time.
One thing that has changed so dramatically upwards over the past 6 weeks that it's impossible to mistake is the increase in the number of 'employee IP addresses' that are now visiting the Exetel web site multiple times a day from Optus, Internode and AAPT - now averaging over 400% more than in November and October 2007.
I guess they've run out of ideas of their own?
Saturday, January 19. 2008
Well, the financial press was even gloomier to read today than yesterday with every bleak detail of how the Australian ASX has been reduced by 11% so far in 2008 and how that's pretty much the case on share markets around the world. Those stories/analyses were matched by the predictions for ongoing bank interest rises and the start of more 'regualtion' of 'Australian Industry' by the new 'government'.
Not what you want to read on a Saturday morning when you have other things on your mind. While I don't doubt that some recession in the USA will affect Australia and as I am basically numerate I can see that slashing the value of Australian companies by 11% in 13 working days is a fair indication that the future is far from rosy I'm mindful that there were over 1 million cars sold in 2007 and there were record retail sales in the Christmas period - up by a substantial amount on any previous Christmas period.
Another, far more important, issue to me is that Exetel has already had the best two week orders received period of its 4 years over the first two weeks of January and even more amazing has had its best ever MONTH (in two weeks) in terms of business DSL/Ethernet service orders received in a period during which many business decision makers are on annual leave. Perhaps I'll take the word of these experts overthe overwhelming economic data:
However the highlight of the week for me, despite the great pleasure I got from seeing the record order streams maintained each day was the delivery of the alpha version of GURUS on time and being everything I'd hoped it would be at this early stage. I'm always impresssed when software projects (especially 'green fields' ones) are on time but I was even more impressed at what I can now do at this early stage of development.
The alpha version was mainly aimed at monitoring sales progress across the current 10 services that Exetel delivers and it does this extremely well reducing the 10 - 15 minutes I normally spend at the start of each day to a glance at one number on a screen and then two mouse clicks to be presented with the snap shot of what I must pay attention to together with the base information I need to start to address any sales issue.
Of course, sales issues are always the easiest to address (which is why we started with them) but, nevertheless, a ten minute time saving on monitoring one of the ten aspects of Exetel's operations is a very significant efficiency gain. I had a 'play' with the alpha version and, of course, immediately found problems and omissions but nothing that was not immediately rectified and that in itself gave me great confidence in the way the coding had been done.
I will annoy the developers over the next few days to get this, small, aspect of GURUS working to the point that it will replace part of my daily routine and then we will move on to an alpa version of the customer service aspects of Exetel's business followed by the other 8 areas we want this system to control.
If the rest of this, very long, development process goes as well as it has over the past two months I believe we will have better methods and processes of operarting a commercial enterprise than exist anywhere else on the planet and we can also transform the speed at which new managers learn to manage as well as reducing the time taken to manage any aspect of a commercial organisation.
I remain very excited about this project and what it will deliver to every person invoved with Exetel (employees, customers and suppliers) and it certainly is a bright shining light among the doom and gloom of what is shaping up as a very tough time for all Australians.
If it works out anything the way I think/am hoping it will then we will make the code available as open source to anyone who wants to use it.
That's a way off yet.
Friday, January 18. 2008
I just skimmed the financial press this morning as it seemed to be full of gloom and doom and I can do without that on a Friday morning. From what I could see the bad news was evenly split between the views that the latest Merrill Lynch sub-prime write down was a further indication that the US economy is actually in recession and that the 9th consecutive day of falls on the ASX is a clear sign that the Australian economy will quickly follow as Australian companies and exporters lose orders from the US and China and, almost certainly, Japan. There's a possibility that won't happen but it seems more likely than not and therefore any planning has to take in to consideration what a 'significant slow down' in the Australian economy may bring to such a minor part of the economy such as data communications.
My memories of how last two 'significant slowdowns' affected companies involved in supplying data communications services are that residential customers stopped being able to pay their monthly bills and business customers began to go out of business owing months of back service payments. Applications for new services slowed substantially and suppliers started calling multiple times a week seeking assurances that their invoices would be paid BEFORE the due dates.
It was all very, very unpleasant.
There is clearly nothing the current Australian 'government' could do about ameliorating any of the affects of a 'business slow down' - they will spend the next 12 months blaming the previous government for any problems that arise and then say that "global trends are beyond our control". No assistance from those people under any scenario.
So a prudent management of a small company that operates at a little over break even will need to look after itself and therefore its own customers entirely via its own planning and initiatives. The CFOs of the majority of company's will hold sway in these times and the most common actions they will almost certainly take would normally include:
1) Freezing hiring (pursuing 'down sizing')
2) Not replacing employees who resign
3) Freezing all new capital expenditure
4) Attempt to lock in all interest rates on current borrowings
5) Increasing pricing
6) Decreasing credit terms
7) Cutting off supply to 'at risk' customers - accepting no new 'marginal' customers
...all of these actions, collectively, guarantee that any likely 'financial slow down' will be more severe and last longer than if they allowed their businesses to continue as 'normal'.
I tend to agree with those people expressing the opinion that Australia's situation is going to be more difficult in some ways than it is in the US. According to the same financial press over the last few days Australia now has record employment with the result that 'skilled' personnel are very hard to find and becoming more and more expensive resulting in upward pressure on inflation that, using conventional 'wisdom', would normally mean that the RBA would put up interest rates early in February which in turn would inevitably make recession in Australia even more likely.
I also read the current Federal Treasurer's statements that the 'resources' boom that was entirely responsible for the last government's 11 boom years has ended due to the effect the US slowdown has had on China's economy and things will get even tougher (due to the actions/inactions of the previous government).
So....what to do.....and is the sky really falling?
One sensible thing to do, beloved of tough CFOs, is to put up prices enough to suggest to those customers most sensitive to price in their selection of a data service (and therefore most vulnerable to a change in economic circumstances) that it's time to look elsewhere and move to another provider before any 'business slow down' can affect their ability to make their committed payments.
I'm not sure that Exetel has a CFO that tough but I wouldn't mind betting that some other data communications companies do (those that actually have a CFO tougher than their CEO that is).
Thursday, January 17. 2008
We held our 47th board meeting last night which is a fair indication of the disciplined approach we have taken to running Exetel since we made the decision to change the direction of the company a little over 4 years ago. We have held a board meeting at roughly the same time for each of the 48 months of Exetel's existence except for July 2007 when Annette and I were overseas for virtually the whole of that month. There is no statutory requirement to hold a board meeting more than once a year but we deemed it to be prudent, if not essential, to hold very regular board meetings in the tumultuous and financially challenging periods which every 'start up' commercial venture must go through - and we have certainly had to deal with some major 'challenges' throughout the past four years.
Our board meetings these days are more relaxed affairs without the continual 'crises' that seemed to characterise much of the first three years - and beyond. That is a very welcome change/development as its really very wearing to have to deal with ongoing problems and difficulties for, literally, years on end.
Some things never change though.
Annette's yearly request for a salary increase for Exetel's working directors was, as it has been in all but the first year, turned down despite Annette's logical points that every other Exetel employee has had their remuneration doubled in that period. Just one of the problems of assessing your own performance totally dispassionately.
Similarly we had a bit of a chuckle over the latest offer to "buy Exetel" before moving quickly on to more realistic considerations.
We reviewed the large number of statutory obligations we are burdened with (payroll tax, superannuation payments, PAYG tax deduction payments, tax itself, workers compensation insurance, general insurance, federal police 'assistance' warrants etc) and satisfied ourselves that everything was compliant and up to date.
We noted, regretfully that although we had advised eight employees that their remuneration would be increased in January not one of them had even acknowledged the increase let alone expressed any thanks for it. Perhaps they each felt they should have got a much higher increase?
We discussed the necessity/viability of increasing the prices of ADSL1 plans but deferred that decision until we were able to offer a replacement 3G/4G plan.
The progress on integrating the Net Enforcer and PeerApp P2P controllers was discussed along with the estimates of what the new Akamai caching cluster would deliver and what this might mean in terms of modifying the additional IP bandwidth forecasts.
We tut tutted over the monthly revision, always upwards, of new capital expenditure required and briefly discussed the necessity of moving from the tried and true 'modular' model based on Cisco 7301s to the more 'monolithic' move to using Cisco 10000s.
We noted that all parts of the business were experiencing an unusual 'spurt' in new orders and activations above and beyond what has happened in previous 'Januarys'.
We approved the first of the funding donations to fauna protection and briefly discussed the other proposals being considered.
We briefly noted our satisfaction that Exetel had yet another record revenue month - the 47th consecutive increase in revenue of Exetel's short 'life' to date.
...and we enjoyed another very pleasant meal in one of Sydney's better restaurants while we held the board meeting - the only 'perk' we allow to the directors of Exetel.
The minutes of the meeting were issued earlier this morning as they always have been and the various decisions made at last nights meeting have been disseminated to the people affected by them or required to put them in to effect - again as promptly as they always have been.
Such parts of the detailed running of any business are seldom, if ever, considered by anyone other than the directors of a business but I think Exetel is as good as any commercial enterprise in how it operates the key reviews and decision making of business operations.
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