Monday, March 31. 2008
It's very difficult to acquire new customers in any business and, from my personal experiences, it's extremely difficult to acquire new customers in the Australian communications business. Perhaps other companies find it easier than Exetel but, if the sort of money that is expended on advertising ADSL offers is any guide, that doesn't seem to be the case.
One of the things I wrote about in these musings was the increase in the number of credit card/direct debit 'declines' in the February and March monthly billing run - a new record, if that's the correct word to use, high. From its inception Exetel's collection processes have managed to collect virtually every last cent owed for the provision of services each month for over four years now. There have been a few months where we have not collected every thing that was owed but they were exceptions.
Since January we have seen that proud monthly performance not being achieved and as we reach the last day of the month today we will set a new record for the cancellation of customer services for non-payment for 30 days. While the number is not huge, around 30, it is more than four times larger than February which was the previous record.
A cancellation means that the end user has been without an ADSL service for a month and, should they now wish to obtain an ADSL service from another provider they will have the inconvenience of either signing up for a long contract or paying for a new line set up fee - as well as dealing with a debt collector attempting to recover money for Exetel.
I realise it's a tiny amount of money and a tiny number of people but I also think that Exetel is more efficient in this aspect of business than any other company so it seems highly likely that this scenario is being repeated by every other ISP and every other mobile and wire line communications provider.
It's also very early in the 'credit squeeze' cycle.
While Exetel operates a very clean payment system with its own suppliers we see many signs of those suppliers becoming more 'diligent' in ensuring that their bills are paid within their trading terms which seems to be an indication that they are seeing a deterioration in their customers paying them.
I suppose the recent 'spate' of "offers to buy" Exetel and the 'chatter' around the industry of major companies 'rationalising' their product and service offerings are further indications that things are getting financially tougher for many parts of the communications industry and it seems unlikely that these issues are restricted to this single industry.
It's impossible for me to extrapolate from the activities of our small company as to what is more generally happening across this industry let alone any other industry but there are many signs of business 'slowing' in terms that I can see and 'feel'. The main 'feeling' I am getting is from the rapidly increasing number of contacts I'm receiving from other people wanting to 'have a chat' about some topic or another. So far all these chats have quickly focussed on "how's it going for you?" type discussion. I haven't gained any positive impressions from anyone in business I've talked to for a while now.
It will be important, for everyone, to see what further signs become evident over the next few weeks and one can only hope the RBA has finished with increasing interest rates at its meeting later this week.
Sunday, March 30. 2008
I hadn't realised until someone close to me pointed out that I was now working longer hours than I had ever done in time that she has known me and that since having a lap top constantly in easy reach I have become even more involved in the detailed operation of Exetel than in the very early start up days. It's both the pleasure and the curse of starting up a business that you are inevitably involved in every detail of its operation.
It's true that I no longer remember the names of the first 100 ADSL1 customers we connected but I do remember some of them who are still with us and I still know many of the posters in the Exetel forum and some of the people who make comments about these musings. I was reminded of the intensity of this involvement when, instead of enjoying what was on the TV screen late last night, not that it mattered - I'm sure it was forgettable, I was posting on the Exetel forum and emailing various Exetel people trying to get three different customer's issues resolved.
A more pragmatic person than I obviously am would say that if I thought it necessary to provide such help I should put in place the paid personnel to provide it - which is absolutely correct - they would obviously be able to a much better job than I am capable of. However, the curse of the small business is that – ‘I'll just do this - it won't take a moment' ethos is why people start up their own businesses in the first place and then the tyranny of financial planning and restriction ensure that you continue to do many things that should now be done by other people long before the time you eventually come to that conclusion.
The other 'pleasure' reason is, of course, that you do get a lot of pleasure from helping other people and in doing so also help the business you are responsible for. I have a number of friends, of a similar age and background, who all hold very senior positions in large companies and whose working days are very different in content to mine – though from what I can tell not very different in length for the most part. I sometimes think about what would my days be like today if I hadn’t left IBM for such wrong reasons all those years ago? On balance my years with IBM were easily the most enjoyable of my working life and although I’ve had many truly enjoyable work experiences since then – the IBM days still remain my ‘favourite years’.
Although there is no ‘jet setting’, no hundred percent clubs, no sales training weeks and management training months or overseas work experience trips, working at Exetel is more enjoyable despite the ‘mundane’ nature of so much of what I do each day.
…and I now know why.
I had a fantastic 9 – 10 years with IBM from my very early 20s to my very early 30s but, I have to admit despite whatever IBM’s reputation may have been for ruthlessly getting blood out of a stone in terms of working hours/days I really had trouble filling in most of a morning, let alone a full day, with ‘work’ and I was always very successful in every position I held over those years. Although I and the sales teams I managed made and exceeded all sales quotas/targets with monotonous regularity nothing that I/we achieved really made the slightest difference to IBM’s objectives and continued success.
The contrast with Exetel is now, I spend almost every waking minute doing something that has a direct bearing on whether Exetel is successful in just staying financially viable and, on really good days, I may get to do something that actually inspires some sort of progress. A very big difference in what I personally feel though, of course, I fully understand that what Exetel is currently achieving is of neglible to nil importance in Australian life.
But, and I think this is the difference……
…….. by working in a small company you can AIM to make some sort of real difference which is why you are able to tell those close to you when they tell you “you’re working too long and too hard” that there is some real point now to the time and effort you are spending doing ‘menial’ tasks that you should have grown out of decades ago. I actually think what I do is important to more than keeping food on the table and this is only the second time I’ve felt that way in the whole of my working life.
Maybe no fool like an old fool also applies.
Saturday, March 29. 2008
...I wish someone had told me.......
I'm beginning to think that there's some sort of 'bush telegraph' that has a secret membership of which I'm not a member. I say this because over the past TWO days I've received THREE 'enquiries' about selling Exetel to another ISP in Australia and ONE from an Asian company wishing to acquire an ISP business in Australia. I cant believe the timing of these unsolicited 'enquiries' is purely co-incidental.
Two of the Australian enquiries were from ISPs who have made approaches in the past and who have been told we aren't interested in giving away our business to them - they obviously look in a mirror too often when trying to gain an impartial view of their business acumen.
The third Australian company - well - I'm not sure what to say.....maybe they need to lower their prescription strength or alternatively check the bank balance they report to the ASX as, it seems to me, they couldn't afford the air fare to visit Sydney.
The Singapore company was probably just fishing for information so I didn't bother to reply to them and spam blocked the email address of the enquirer.
As we held a board meeting yesterday we briefly discussed the issue of what we would sell Exetel for in the event we ever wanted to do that. As none of us had any interest in selling Exetel we decided that we advise any future enquirer that the sale price, in cash only, would be $A30 million which we fully agreed that Exetel wasn't worth.
When I read these approaches, of which there have been over a dozen over the past three years, I always wonder what this industry is all about. Why do people want to buy other ISPs? I do understand the general "takeovers for the under fives" concepts of:
1) Economy of scale
2) Reduction of overheads
3) Optimising use of infrastructures
4) Better buying power
and all the rest of that sort of simplistic guff.
I've never seen a single Australian example of it ever working out.
All that seems to hapen is a long period of chaos resulting in customer and employee unhappiness, a loss of the 'customer base' followed by a slightly larger company with less assets than before the takeover/merger/whatever.
The one certain thing that occurs, every time, is that almost everyone involved loses.
Think I'm wrong?
Make a note to read the SPT/TPG merged entity ASX report in September 2009 and compare it to the September 2008 report.
If an ISP wanted to grow its customer base then the easiest way of doing that is, I would have thought, to use the money in advertising or 'freebies' to new customers rather than paying to buy another company's customers. I mean if you're prepared to pay, say, $A350.00 per customer you could offer 12 months free ADSL2 on a 24 month contract and buy a customer much cheaper and keep them longer so why try and buy customers from another company?
I guess I'm getting old and should have stopped working before now, perhaps long before now, based on the people I know of similar ages who have had similar careers. So the concept of taking a reasonable 'dividend' in terms of a buyout for my years of work should be very attractive - but it isn't.
When we created Exetel it was with the ambition of creating something very different to any ISP then operating (and as far as I can see operating today). We haven't got even remotely close to achieving that ambition so far and therefore there is a lot of work to do, and presumably a significant amount more time needed, to get Exetel to the point where it will have achieved the objectives we set out to achieve.
As this is the last 'commercial venture' I intend to be part of in my working life it would be a terrible waste to me to end a long working life by failing to achieve my last work related objectives for the sake of a few dollars that I don't need.
I can't see those objectives being achieved in less than another 12 to 18 months........ that may well be an optimistic assessment.
Friday, March 28. 2008
I attended a 'check point' meeting to look at the new facilities we are in the process of writing to provide better levels of customer service in terms of resolving issues perceived as problems by customers which aren't in fact issues that their ISP can do anything about. I was impressed that we have been able to do so much to simplify the process of bringing many different aspects of an ADSL services performance in to one simple interface and to display complex data in ways that are helpful and truly informative to the less technically minded customer.
Our objectives in developing this new customer support process are to allow an end user, who has no real technical knowledge, to understand exactly where his/her ADSL service may be performing below expectations and also provide the advice of what needs to be done to resolve the issues.
This system will, if it's successful, allow the end user to fix the two main problem issues with their service (slow speeds and frequent drop outs) 24 x7 x 365 and it will also allow them to understand what the problem is and how to avoid it in the future. As such issues comprise a little over 50% of all support issues dealt with by Exetel this project has great value both to the customer and to Exetel.
We will begin internal trials next week by our own support engineers and will shortly after that provide access to the Exetel Agents who support their own customers in various ways. We will refine the current system over the whole of April with the goal of making it available to end users, via the Exetel user Facilities, in early May.
One major issue the new process addresses is allowing the end user to see every aspect of the performance of his/her service by logging in to one screen. These include:
1) Current upload speed
2) Current download speed
3) Number of re-connects over the past 48 hours
4) Average speed achieved in the past 48 hours by hour of the day
5) Likely cause of any drop outs experienced - and recommendations on how to fix
6) Likely cause of any speed issues discovered by running the nominated tests - and recommendations on how to fix
7) Full fault ticket history of the circuit
8. Current status of any open ticket
All tests run by the customer are saved in the facility and in the circuit's 'history files' so, in the event that the issue isn't resolved then and there, a ticket will be automatically opened that contains the results of the tests run by the customer - and these tests are in the format that Exetel needs to pursue the issue with a carrier.
Like all of the systems we have developed over the past four years it is designed to provide more function at lesser cost than has been possible before the issues are addressed. We have been, relatively, successful in using automation to control and reduce costs in the operation of a communications business and I think this new addition to the operational automation 'suite' will be the last of the major 'breakthroughs' in revolutionising the optimisation of resolving customer 'fault' issues. If it does in fact reduce fault tickets by 50%while increasing prompt fault resolution 24 x7 then it will be a very significant achievement.
This latest addition to the on line/fully automated fault analysis and resolution processes, together with the already established ability for any customer to log a 'service down' fault by 1300 telephone will complete the ability of providing a 24 x 7 x 365 fault resolution service that is better than could be provided via a 'conventional' help desk.
Thursday, March 27. 2008
I was offered the opportunity of visiting the 'control centre' of a fair sized ADSL2 network recently as part of an ongoing discussion of, perhaps, sourcing ADSL2 services from another company at some not too distant future time. It was a very 'hush - hush ' visit for reasons known to the people who invited me but of no interest to me. I was also flattered by being invited to look at, what could be regarded as a competitor's operations though I accepted that there was an unspoken 'second agenda' behind the very interesting invitation.
I was very impressed, as I always am, by banks of display screens and network schematics with blinking indicators and performance graphs and other diagnostic screens 'manned' by intense looking people (clearly 'drilled' to make sure they impressed the visitor). I'd seen some of diagnostic reporting tools before as demonstrations when we were looking at buying ADSL2 DSLAMs but it was very interesting to see them used 'live' and to appreciate the benefits of having end to end access to a customer's circuit to find and fix problems.
I was more interested in the subsequent discussion on capacities and provisioning and their experiences with the difference in usage patterns from their previous experiences with ADSL1 capacities and usage. While having no way of knowing whether I was being told the complete or even some version of the truth it all made sense to me - but as the wise policemen of all popular TV shows would say "all really big and successful lies contain an element of the truth". Not to say that I was being lied to - just to make the point that I wouldn't have been able to tell the difference.
However I can tell a Black Diamond from a Blood Diamond and it did appear to me that at least parts of the back haul were provisioned at 10 gbps and a brief googling when I returned home did suggest that the other boxes were almost certainly 10 gbps Korean copies of the BD 10 gbps NTUs.
So...interesting that at least one ADSL2 provider (albeit at the early stages of their network utilisation) is providing contentionless customer to PoP back haul which some bigger usage networks don't seem to be able to do. I, briefly, discussed their experience in usage by customer profiles and was encouraged that the answers I got were far more in line with what we see at Exetel rather than what other, larger, carriers tell us should be the case.
Given the recent statements in the SPT/TPG merger document about "new ADSL2 connections produce pretty close to gross equals net revenue" perhaps those views are shared by all other ADSL2 network builders (does that mean there's more than one Holy Grail?). If so, then it would explain the desire, of at least one, ADSL2 network owner to attempt to more rapidly build network utilisation via a few wholesale customers who could, each, add 30,000 plus new connections in a short space of time with little or no support and absolutely no additional back end network costs.
While price is, obviously, a major issue in the provision of services it is becoming secondary to the ability of the carrier to actually provision their back hauls at adequate levels. My, not very factual, observations are that the back hauls being provisioned by 'older' carriers are being based on 'historical' ADSL1 provisioning data that simply don't reflect what happens with ADSL2 users - no matter how 'light' the ADSL2 user actually is. Unless there is a major, and rapid, change of view on the required back haul provisioning by at least some of the current carriers my view is that companies like Exetel will not continue to use their services due to the costs of addressing problems that are completely beyond the power/ability of companies like Exetel to address.
It's also very obvious that new infrastructures that start with 10 gbps back hauls and, by definition, are very lightly loaded in their early years are going to be able to provide contentionless ADSL2 far more easily than an 'older' carrier who uses their 'older' infrastructures to carry the newer ADSL2 services.
So maybe there will be some additional, or perhaps at least one additional, options for the provision of contentionless ADSL2 services in the near future?
Though, of course, there's always a catch - at least in my experience to date.
What the catch in this case is - I don't really have any idea other than what happens when the initial 10 gbps circuits are used up and the likely growth in customers above the need for that level has significantly slowed?
Black Diamonds don't cost as much as Blood Diamonds but they certainly aren't cheap.
Wednesday, March 26. 2008
I haven't seen this reported in the local press so maybe its just happened - I noticed it on the TV BBC World News (banner headlines under the main picture) earlier this morning as I was checking through the on line news. So I have no details and no idea of what it means or how it's to be implemented. (I'm assuming that the BBC World News is a factual service).
I'm not sure when censorship of such things finally disappeared from Australia in terms of books, magazines, movies etc but I would guess at the final remnants disappearing in the 1980s or around that time so why, some 25 years later does such a thing rear its head again?
I understand that Indonesia is a Muslim State with leanings towards Sharia style attitudes to a range of issues so censorship in such a society may well have a more widespread support level than in, say, a country like Australia. Apart from the, I would say almost overwhelming, difficulties of putting in place some sorts of automated restriction of "X" rated web sites what is the point in the 21st Century?
In Indonesia, or perhaps in many similar countries around the world, perhaps the ways such censorship can be implemented will not have to rely on technology but by a more intrusive policing of individuals that cannot possibly be put in place in so called 'liberal democracies'. (sometimes I wonder if there would be no theft in Australia if people convicted of theft had their right hands cut off? - makes you wonder what the Indonesans might do to people they deem to have infringed their new pornography laws?).
The Crazy Kevin/Simpleton Stevie version of this wowserism is about to be inflicted on all Australians in some unknown form in 'the near future' according to continuing reports from Canberra. As even those two twinks won't consider using the AFP or any other law enforcement agency to invade Australian homes and offices to enforce whatever it is they come up with they are faced with the sheer impossibility of implementing some infrastructure control methodology to eliminate access to whatever they define to be unsuitable material.
While the hot money is on attempting to enforce their idealistic nonsense via draconian impositions on Australia's ISPs even they will have to come to the realisation that it is impossible to implement even if it could somehow be afforded - any costing I can contemplate is horrendous for an ISP of Exetel's size.
But it begs the question of how do you 'police' a society that determines its own 'entertainment' in the private confines of its own 'locked bedroom'? Something Australian society, and the rest of the 'free world' decided some decades ago - it's not a government decision.
So now - turn the clocks back - but just how far back and to what sort of totalitarian State? The justification will be for the elimination of "child pornography", because no-one in their right mind would ever argue that a society's children must be protected in every way possible from the terminally sick, diseased and depraved minds and worse of that human detritus that preys sexually on children.
No-one would raise any objection to any realistic, or even slightly unrealistic, effort to rid the world of paedophiles. I certainly wouldn't either as a private citizen or as someone with shares in an ISP. The issue will always remain on how you 'control' an entity (the internet) which has been built from day one on the basis it must not be capable of being controlled (remember the initial premise for the internet was to build a communications structure that would still operate in the event of worldwide nuclear war!).
I really hope there is someone/some group of people who are far brighter than I am who can come up with a way to do that.
My fear, as someone with shares in an ISP, is that those idiots will produce an anti-paedophile scheme that's as impossible as their high speed broadband to 98% of Australians by 2009 - except in this instance Exetel will have to pay for their stupidity and constant tinkering until they abandon yet another of their pointlessly unrealistic grandstanding.
Tuesday, March 25. 2008
....one of those questions most people ask themselves at least once a year - usually when they wake up and realise it's their birthday once again - and so it is for me today. Where did it all that time go and why did I waste so much of it doing things I should never have done?
Oh well.....not being someone who is very 'philosophical' nor someone who dwells on the past (except after too much red wine) that phase of the one day of the year is usually over within a few minutes and in any of the days I can remember never lasts past the time it takes to have a shower and glance at the morning paper over a cup of coffee.
My glance at this morning's paper included the page opposite the cryptic crossword which includes the obituaries (I wonder if there's some association between people who do cryptic crosswords and people who read obituaries?). The whole of today's obituary section was taken up with the reporting of the death of Clyde Cameron (SMH page 14) but what struck me was the smaller/back and white photograph of the five main ministers at the beginning of the Whitlam Government:
Rex Connor, Clyde Cameron, Jim Cairns, Gough Whitlam and Lionel Murphy.
Can there ever have been, in the history of democratic government, a more inept and stupid bunch of people assembled in one photograph who had the power to destroy a wealthy and happy country in so short a time? (yes - probably that infamous record will be broken in 2010 but that is still in doubt).
For those people who are too young to have first hand knowledge of what each of those idiots did between 1972 and 1974 I suggest you spend a few minutes with Google as I'm pretty sure that the Australian education system would not have even given a precis of their stupidities. (those schools that actually teach Australian Political History at all).
The obituary, always written respectfully, cannot catalogue the disasters perpetrated by Cameron in full but it does contain some facts:
1) Enacting legislation in the first two years of the Whitlam Government causing male wages to rise by 43% and female wages by 60%.
2) Enacting legislation that gave preference in employment to union members.
These two pieces of class warfare genius (it should be remembered that Cameron was made a Cabinet Minister with an education that ended before his 15th birthday) plunged Australia into recession with massive layoffs driving unemployment to the highest level since the depression causing Whitlam to move the uneducated Cameron from Labour to Immigration where his most famous contribution was to refuse a visa to an Indian Chef on the basis that "there were plenty of shearer's cooks looking for work".
Shortly after, Treasury ran out of money and the subsequent election saw that bunch of loonies thrown out in a landslide - but the damage they did in less than three years burdened Australia for the next two decades.
As it is my birthday I recalled that I actually voted for Whitlam/Labor and therefore was, in a miniscule way, partially responsible for all of that misery. It was the one and only time I've voted for the ALP and I have no excuse except that I was very young and completely politically uneducated - something I still am I suppose.
Youth, like being given the vote at 18, is wasted on the young.
So it took me longer than most March 25th's to get my mind back to current day reality.
Today we will begin the very complex process of doubling Exetel's ADSl user base over the next 12 months and, after a four day long weekend of rest there can be no better state of mind to be in.
I'll talk with Steve later this morning about a rough agenda for the whole project and put the first two or three actions in to place.
It will be an exciting few months.
Monday, March 24. 2008
Exetel has a few very good ViSP clients and has been slowly developing the on line resources that provide the same services to a VISP as Exetel itself has in diagnosing and solving an end user's problems. We have taken this development very slowly as we are quite aware of the strange situations that have arisen over the past five years by other companies providing such services to very small companies or to larger companies who don't see the provision of ISP services as being their major source of revenue and profit.
The examples of the almost insane way that Veridas operated a VISP business and the, in some ways, even more careless way WTG operated a similar business are stark reminders that supporting small companies, or companies that aren't dedicated to the very difficult processes of selling and then delivering ADSL and other communications services can end, very easily, in financial disaster.
Telstra tried and ultimately failed to make such a business work and I get the feeling that several other larger ISPs and carriers have made attempts that have not worked out. So, obviously, this sort of thing will be a total breeze to such a large and experienced company such as Exetel!
I think we can grow our VISP business as part of the program to more quickly build our customer numbers in the States and Territories we need to activate new PoPs in. Our experience to date for a variety of reasons, is largely positive and although we've had to assist one of our VISP customers overcome some, relatively brief, financial/cash flow issues we have been encouraged rather than discouraged by the progress we've made to date.
It's pretty obvious that, in all States and Territories, we will have to make more efforts outside the 900 ADSL2 enabled exchanges under the dead hand of Telstra which means concentrating our efforts in regional areas of Australia for the most part and I, personally, am very happy to do that having a great love of the smaller country communities that comprise most of what is the very best of Australia - views I formed when I first came to this country and consolidated over the first ten or so years of my working and social life here.
We currently have over 100, productive, Exetel Agents outside the main capital cities and a further 50 productive agents on the 'fringes' of the main capital cities. These agents contribute a significant percentage of new ADSL1 customers each month and our view is they may be able/willing to more than double that contribution should we be able to present an attractive financial and business solution to them - we would also hope to be able to attract current VISPs to move away from their current provider over the next 12 to 18 months.
As we ramp up the support hours and days during which we provide end user support we woud also be able to offer VISPs a support service that would be financially atttractive to them and, perhaps, solve one of their current major problems. We believe that, in conjunction with the constantly evolving on line diagnosis and reporting tools that are aready in place it's more than possible to offer a level of financial benefits together with support benefits that have never been offered before to VISPs.
We would need to ensure that we didn't make the same, similar or different mistakes to those that caused the demise of Veridas and WTG and whatever caused Telstra to end its VISP program whic, from what I can see were:
Poor credit risk assessmet
Poor credit control
Heavy handed/bullying 'too late' credit control
Inadequate on line processes
Inadequate billing systems
Inadequate support systems
Greed in believing in 'pie in the sky' forecasts
Stupidity in believing that their VISP's problems weren't their problems
Some four years ago, in the first few months of Exetel's existence I made the point to the key people who had started up the company that in the future, assuming that it survived and became successful, I woud expect Exetel to grow by 'franchising' in regional Australia rather than by Exetel just becoming bigger of its own efforts. That has never been possible to date, largely because Exetel hasn't become successful enough to implement such a program so far......
......but, now, may be close to that time.
Sunday, March 23. 2008
A few weeks back I had a conversation with a similar sized ISP to Exetel who lamented that he had arranged to sell their ADSL1 customer base for $200.00 per customer but the owners wanted $250.00 per customer so the deal had fallen through. At the time it made me think that there must be some truly foolish people in ISPLand as, for the life of me, I can't see how you would ever get your money back, let alone make any profit out of paying that sort of money for customers who, at the wildest extremes of over priced plans, would be lucky to make $10.00 a month in any real profit and probably much closer to $5.00.
Of course, I understand the concept that at some level of business, particularly if you aggregate your ADSL, mobile and land line spends, you will get some accommodations from either Telstra or Optus but I would think such discounts would be unlikely to exceed 15% - if that - however I don't know.
Similarly once you get your IP needs up towards 2.4 gbps you can certainly get some major savings from buying in to either SX or another cable supplier and achieve some very significant bandwidth cost savings; but those savings are beginning to rapidly dwindle with the new 'round' of IP price cuts from the major cable providers and their 'partners'
I remember smiling when I read the price paid by EFTel when they bought the customer base of the bankrupt aaNet - which looked to be around $100.00 per customer with the total customer base actualy not only NOT making any money but losing a great deal of money each month - as it turned out I probably underestimated just how money losing that base was when you look at EFTel's subsequent 'profit' results.
Of course nothing is going to even vaguely get close to the stratopheric price per customer that was originaly paid to MalcomTurnbull et al for Ozemail - something like $A850 a customer - Malcolm Turnbull certainly found his 'Alan Bond' and even the price subsequently paid by iiNet to buy a much more realisticaly 'sized' "Ozemail" some years later was over $A300.00 per customer and more like $A400.00 whenthe 'dust had settled'.
Where is the common sense in these sorts of transactions?
Economy of scale? That has to be the answer somewhere but I can't begin to see where it would be delivered.
Why am I wasting my time on thinking about such things on a not unpleasant Easter long weekend?
The main reason is that I'm trying to work out what Exetel might have to "pay" to build the 5 locations in which we don't have PoPs to a level where it can be financially justified on an ongoing basis.
One 'approach' woud be advertising which is something I haven't seen any sense in for over ten years and still don't see the sense in today.I looked at the various ads by Telstra, Optus and TPG in yesterday's and today's papers and still can't work out how anything that Exetel could afford would be able to make any impact on the giveaways being offered by Telstra and Optus.
Ignoring the cost of preparing the ad and then the insertion costs the 'give aways':
Four months free over the life of the contract
you begin to see how some people think that an ADSL customer is worth $250.00 to buy - because these freebies plus the advertising cost would add up to more than that (at least at the prices that Exetel has to pay).
So my mind was diverted down this path - how much could Exetel afford to pay/sacrifice to double the current ADSL1 user base overall in Queensland, NSW and Victoria and quadruple it in the other States and the two Territories?
For the past two years we have been pursuing a quite different operational plan that was aimed at building other parts of the Exetel business while maintaining a very slow growth in the ADSL1 business -something that has been accomplished with some pain but accomplished none the less.
I think it would be very, very dificult, to grow the ADSL1 business in one year to double the size it has taken to grow it to over the past 4+ years but then I also see no reason why any particular number can't be aimed at if there is a realistic rationale. Constructing the rationale and then building the components that would allow the rationale to become real and then executing the various aspects of the overall plan would be tricky but then so is everything else in business - scale is seldom the issue - only the validity of the concept.
So the negatives can easily and clearly be identified as:
1) Telstra's targetting of ADSL1 users in the 900 most 'popular' Australian exchanges.
2) Optus give away advertising frenzy.
3) ADSL2 generally being flogged to all and sundry by those ISPs/wholesale customers of those ISPs who have ADSL2 capabilities in some subset of the Telstra 900 exchanges.
4) The push by the mobile carriers to take the bottom end of the ADSL market
5) Declining discretionary incomes across much of Australia
Pretty formidable negatives when you write them down like that.
So - positives...anyone....anyone......
.....it will need a lot more thought.
Saturday, March 22. 2008
I spent some time looking at the options available to Exetel in terms of continuing to provide ADSL1 services outside QLD, NSW and VIC yesterday. It seems to me that whenever I have settled on a clear direction for Exetel, or take some satisfaction in the belief that we have, again, safely navigated our small company through some tricky circumstances and can now have a slightly easier working life yet another very difficult problem presents itself. However, having overcome that pathetic and fortunately mercifully short, bout of self pity I did look at our various options.
The problem is a simple one - we have paid a pretty hefty price to Optus to back haul ADSL1 traffic from the ACT and the Northern Territories, Tasmania, South Australia and Western Australia to our Sydney PoPs to avoid the costs of settig up PoPs in those areas of Australia. Economically it wasn't very atractive to do this but it suited us at the time (April/May 2005) and, in terms of Queensland and Victoria, it did enable us to build up a financially viable customer base to open activate our own PoPs some two years later - in mid 2007 for the customers in those two States.
If Optus were to cease providing these ADSL1 services to Exetel over the next 6 - 9 months we wouldn't, at current rates of customer growth in those areas, have enough ADSL1 customers to do anything but lose money by activating additional PoPs in Darwin, Hobart, Adelaide, Canberra and we'd barely break even in Perth (because we have a growing SHDSL business user base in that city). The sensible financial decision would be to withdraw from offering ADSL1 services from those areas when/if Optus cease offering the back haul services.
In fact that could be averred by any reasonably financially competent person to be the ONLY decision that can be made. So that would be a 20 second decision making process instead of the three plus hours I spent on it yesterday.
I didn't achieve much in my hours of considerations but, courtesy of one reader's suggestion, and the usual range of the more obvious "triumph of hope over experience" ideas there seeme to be some reasonable things to work on. I worked out that, optimistically, we needed 2,500 ADSL1 customers in each location to operate at a profit – the only issue therefore was how to get an additional 1,600 ADSL1 customers in each loaction over the next 12 months.
Very simple really – despite only getting half that number over the previous two and half years and ignoring the fact that mobile data plans and ADSL2 have reduced the marketplace for ADSL1 already and will continue to do that.
All it needs is some 180 degree thinking and a lot of luck. So my current short list of actions to be undertaken starting within the next week are:
1) Put in place a much increased referral bonus for al current Exetel customers in those areas to recommend Exetel ADSL1 to friends, colleagues and family members.
2) Increase the commission to agents and add a sign up bonus of $50.00 a customer.
3) Find more agents in those areas.
4) Provide additional services in those areas that would increase per customer revenue.
5) Look for VISP opportunities.
6) Talk to Optus about ‘buying’ their ADSL1 customers in those areas.
7) Pursue the discussions with another ISP who approached Exetel about buying its customer base
8. Talk with Aurora about possible use of their new network in Tasmania
9) Talk with the Tas, NT and ACT governments about an ultra low cost public service and schools ‘package’.
10) Produce a new ‘killer’ business plan for small and medium business.
I think that with a lot more thought we will be able to come up with a lot more ideas than this brief effort produced and, in many ways, it will help all other aspects of our business to become much more ‘aggressive ‘ in promoting our services in all parts of Australia.
It wasn’t as hard as I thought it would be once you begin to dissect the problem and produce some month by month targets.
Like every thing else in life I suppose.
Friday, March 21. 2008
As you may know, Exetel started it's ADSL business in January 2004 and for the first 15 months only offered ADSL1 services in NSW via the single POP Exetel had in the Sydney CBD.
From April/May 2005, Exetel offered ADSL1 services in all other States and Territories using a service offered by Optus (who in turn had some, still unclear to us, collaboration with a third party called iSeek).
This was an advantage to Exetel in that it allowed us to offer ADSL1 services Australia wide without the expense of activating and maintaining PoPs in each state and territory capital city.
It had some disadvantages in that we paid more than we would have paid Telstra direct for ADSL1 services and we had no control over the provisioning of back hauls. There were other operational disadvantages but they were to be expected.
In mid 2007 our number of customers in QLD and VIC had grown to a point where it was financially justifiable for us to establish Exetel PoPs in Melbourne and Brisbane and begin the process of transferring all Queensland and Victorian customers from the Optus/iSeek service to a direct Telstra service with Exetel.
That has now been accomplished (at a very significant cost to Exetel). It is good for the Queensland and Melbourne customers in that we can now ensure that the backhaul/bandwidth provisioning is not going to be an issue in the future as it appeared to be in the past.
We don't currently have the same economy of scale in the other States and Territories and we may never reach that economy of scale on current indications given the increasing availability of ADSL2 and the rapidly growing take up of HSDPA type services.
However, we get the 'feeling' that Optus may not continue to offer re-sold Telstra services via wholesale for much longer (6 - 12 months or so) in line with their decision last year to stop selling Telstra ADSL1 via their retail operations.
So we are faced with a 'no win' decision (if in fact Optus does decide to discontinue offering ADSL1 services at some future time).
We can lose all our customers in those three States and two territories where the service is currently provided by Optus to us or we can spend a considerable amount of capital as well as losing money each month to continue offering ADSL1 services to our customers in those locations.
Not attractive choices at the best of times and especially unattractive in difficult times such as these.
A more ‘conventional’ company than Exetel (and certainly one run on the sole basis of making money for its shareholders) wouldn’t hesitate over a choice such as this for more than a few micro seconds.
However, Exetel isn’t a ‘conventional’ company so it is something that we need to find a sensible but ethical solution to and that means finding a way to continue to offer services to those customers who have been good enough to support us in the past by choosing Exetel over the bigger and better known ISPs who operate in their locations.
We have already made a decision to activate a PoP in Perth based on our need to provide services to the Perth operations of businesses who buy VPN and other solutions from Exetel whose head offices are in Sydney, Melbourne and Brisbane. The same needs don’t really hold true for the other States and Territories though.
In the end I have little doubt we will in fact open PoPs in all Australian State and Territory capital cities – I just don’t know, at the moment, how to justify this to the other more sensible people who play major parts on deciding on Exetel’s policies and, more importantly, expenditures.
Thursday, March 20. 2008
I see that dimwit Conroy is still rabitting on about 'porn filters' or whatever the heck it is he seems to think is important and mumbling about "initiatives in the budget" - I suppose he has to have something to take his mind off how he's going to explain away the non-delivery of the "high speed broadband to every Australian within 2 years of a Labor government being elected".
I only reference that clown because of the gradually increasing intrusive email and post I am receiving 'demanding' that I (on behalf of Exetel of course) comply with various concepts that interfering do-gooders associated with the crazier elements of the Labor party seem to think a small ISP like Exetel should be doing.
Over the last three days alone I've received 4 emails, one fax and one letter from various organisations "requiring" meetings to ensure that Exetel is complying, or is about to comply, with their various crazy recommendations regarding making 'the internet' a safer place for children or a safer place place for corporate bottom lines.
I'm thinking of getting some T shirts made with a rip off the the "Do I Look Like A ******* People Person?" logo substituting 'people' with 'meeting' as apparently my loathing for 'face to face meetings' isn't well known enough (but then how could it be to the sorts of twinks that have been writing to me lately - I've never heard of them).
So I have ignored all of the requests on the assumption that there is no requirement for a relatively busy private citizen, even a private citizen that participates in running a commercial enterprise, to be "required" to meet with persons unknown to be lectured to about topics of zero interest - of course I may have missed the fact that the current bunch of loonies posing as a government of a democracy may have passed some legislation compelling people to listen to their idiotic rantings - anything is now possible apparently. I suppose a government that can try and enact legislation to obtain corporate trade secrets is capable of anything.
Have they read the constitution? Silly question when you look at their educational and work history back grounds I suppose - most of them would be pushed to comprehend there is one.
Irrespective of my 'head in the sand' approach to dealing with these 'initiatives' it seems pretty clear that we (the Australian public - not just the poor benighted ISP part of Australia) are about to be "nannied" to death by a bunch of grand standing wowsers who know much better than each individual Australian what they should and shouldn't be able to access via the internet. The fact that "policing" the internet can't possibly succeed and that the cost of any attempt to do such a thing will be ruinously expensive (for every one involved) is not something that these people are capable of understanding.
Apart from the resurgence in Labor party intrusion in to the operation of the internet in Australia there is a concurrent increase in the various copyright protection association's correspondence with ISPs generally - at least I hope it isn't just with Exetel.
Exetel, as far as I can determine, operates a more comprehensive and more highly responsible set of processes to deal with claims that various people connected to our network are breaching/have breached copyright at various times. I think that we have in place as comprehensive and as effective copyright protection processes as any law, Federal or State or Territory, requires of us and we comply with all requirements of those laws to the 'letter'.
Sometimes an Exetel customer will bluster and threaten us for dealing with claims of copyright breaches in the ways we do (maybe half a dozen a year) but that has never proven to be a problem - such offended people have two clear choices - deal with the claim directly with the person making the claim (under the anonymity of an Exetel provided email address) or find another provider. It has worked well at Exetel and I don't see how it can be improved and I think it's doubtful that more than two or three end users have decided to accept our offer of a termination free churn away over the past four years.
However, I get the feeling that there will be more effort put on both nannying and policing the internet in Australia until the current 'government' gets buried in the real issues of running a small country and doesn't have time for the current nonsense.
For people with young children there are a plethora of products available to ensure kids from 3 - 12 don't get in to 'trouble' on the net. One that I've seen recommended several times this year can be found here:
Wednesday, March 19. 2008
.....and I'm not sure why that is or what to do about it.
With the latest US catastrophe (Bear Stearns, fifth largest investment bank going broke) forcing US interest rates down to 2.25% (don't you just wish) and the Australian stock market down 20% so far this year I'd have expected to have seen that magnitude of bad news reflected in most of the new orders/retention rates in at least some of the services and products offered by Exetel by now.
Not the case.
Heading in to the Easter long weekend and the various holidays associated with this time of year, I would have expected to see the usual slight downturn in order in takes negatively affected by the financial bad news that has been omnipresent since November 2007. However, a record January was followed by a record February and March (allowing for Easter) is looking pretty much the same - across all services and products. Taking in to consideration our own decision to stop selling the AAPT/iiNet based ADSL2 services (around 10% of our total new ADSL order intake) the orders remain strong and, within three days, the loss of the AAPT/iiNet ADSL2 orders has almost been fully recovered by a 10% increase in the other ADSL orders - despite the fact that this time of year generally sees a slight decline in orders received.
I know that there is nothing we have done to 'improve' our offerings in any remarkable way and I still see the targeting of our ADSL1 customers by Telstra and the appeal of TPG's 150 gb off peak downloads dividing up the churns away from Exetel at the same rate - but not increasing any more. Puzzlingly, I'm now seeing an increase in churns to Exetel to the highest daily rates for over 12 months.
What is going on?
Perhaps the 'resources boom' continues to provide so much money to so many people that the bad news just isn't registering?
Perhaps, in reality, there is no bad news other than media hype?
I'm beginning to think that we've been over cautious over the past three months and a down turn in the Australian economy isn't going to happen after all and we'll somehow be magically protected from the problems in the USA - despite the Australian share market falls. In the mean time it makes planning for anything more difficult as all planning has to be based on some underlying marketplace 'health' assumptions.
I see that 'luxury' new car sales in Australia are at new record levels which, apart from anything else, seems to indicate that some large section of people see no reason not to spend their money on non-essentials.
The restaurants I go to seem to be even more crowded than usual and the staff/owners with whom I have some acquaintance all say that their business is good - so spending on another non-essential doesn't seem to be affected. (I couldn't get a table at Sydney's top restaurant for my birthday on the Tuesday after Easter - always a very slow night - which means something).
Maybe business will remain good for the rest of this financial year at least?
So what does it all mean? I absolutely have no idea and I also have no idea of where or how to look to try and get some understanding of what it all means in terms of the types of businesses we are in.
Perhaps it would be better just to have an extra long weekend and forget about the whole thing? Seems to work for some people I know.
Tuesday, March 18. 2008
I was given a copy of the SPT/TPG notice to shareholders yesterday by my father in law (who received it being a shareholder in SPT). It was a really interesting document if only because it provided the first 'public record' figures about TPG - and remarkable figures they are.
I don't know who Lonergan Edwards are - the 'author's of the report to shareholders, but I'm assuming they are reputable and competent. Some figures that are of interest would be:
Customer Base As At 30/6/07 (page 52)
ADSL2 - 82,582
ADSL1 - 78,294
Dial Up - 38,870
Strangely though, the total number of customers actualy decreased from 30/6/06 to 30/6/07 (from an average of 193,533 to an average of 187,226).
Advertising Spend Currently
$A300,000 per month
Last Dividend Paid (for FY2007)
$A18 million in November 2007
Not given as a figure but quoted as "reduced by approximately $A700,000 a year, despite headcount increasing by 20% due to opening of Manila call centre".
Jarring Notes In Balance Sheet
Current Assets - $A23.1 versus Current Liabilities - $A41.7
Cash = $A16.4 but pre-paid money = $A9.4
In section 90 on page 52 there is the most impressive set of figures which shows that TPG more than doubled its EBITDA from $A9.8 million to $A21.1 million from FY06 to FY07. Truly remarkable. But not as remarkable as the forecast EBITDA increase projected for FY2008 - up to $A48.5 million!!!
The reason for this massive projected increase (no customer growth was mentioned as far as I could see) also struck an even more jarring note - even more so than the balance sheet.
In explanatory note 104 (page 54) the reason given for this massive increase in profit was the ingenuous statement that:
"Thus, to a point,the incremental revenues from new subscribers predominantly flows through to EBITDA"
and also noted (must be a typo):
"..in the seven months to 31st December 2007 (? - odd accounting period) TPG achieved revenue and EBITDA of $28 milllion and $15.5 million respectively and is on track to achieve ts forecast FY08 EBITDA."
Obviously a company that achieves a revenue of $28 million in 7 months isn't going to achieve another $113 million in the next 5 months so either I've totally misunderstood this statement or it's been poorly proof read. However the authors of this report obviously believe that TPG has achieved the Holy Grail of business endeavour - they can add customers at no/little additional cost for the foreseeable future.
Gullible? Writers of such reports are seldom gullible. So they must have formed this conclusion on the advice from TPG that because TPG have now deployed SX IP bandwidth and dark fibre back hauls there in "no incremental cost" in adding new customers (of any number). Simplistically that could be so - as long as you have never operated an ISP and you haven't looked at the current situation with the ISP you are reporting on. For that explanation of the ability for TPG, or any ISP, to add customers with no additional infrastructure to be true it must presume that enough infrastructure is already deployed and being paid for that is sufficient to double the ADSL2 user base.
Looking at the Balance Sheet, TPG have included the 'purchase' of a 2.4 gbps SX IP link and dark fibre connecting their DSLAMs that could be 'lit' up to 10 gbps but isn't likely to have been 'lit' to more than 1 gbps on much/all of it at the moment. I can't possibly know any more than I read in the documentation so TPG may well be buying additional IP bandwidth from other sources - despite the implication that no more cost would be involved (which invalidates that assumption).
So does TPG really provide ADSL services to 160,000 customers on 2.4 gbps of IP bandwidth (It takes a little over 2.2 gbps of IP for Exetel to provide services to 55,000 ADSL customers). Maybe the TPG proxy/caching facilities are so comprehensive they can multiply the 2.4 gbps of direct feed into several multiples - that would be a working assumption. I'm sure that the auditors and report authors thoroughly researched those assumptions and, in any case, 30/6/08 is only a few months away when the accuracy of the forecasts will be determined by actual results.
So, a purchase price of $A250 million for a business generating almost $A50 million in EBITDA? A touch expensive but not really when/if you're also buying a business that has demonstrated the ability to double its EBITDA not once but by 30/6/08 twice in the last three financial years - no company in Australia has done that in recent memory.
Any downsides? Just one - if you're the buyer not the seller.
Just how long will ADSL2 continue to be viable given the fabled FTTN/FTTH and, more importantly, the affect of HSDPA and its successors on the Australian data service buyer. No point in paying five times current earnings if the earnings may in fact be non-existent in two years time.
(PS: and don't forget you also purchased the right to keep paying for the DSLAM, back haul and IP costs for up to another 11 years)
After reading this report I'm even more of the opinion that this definitely qualifies for inclusion on the list for the sale of the century.
Monday, March 17. 2008
As those of you who may have read these musings over the past 8 months or so may remember I have written several times about Exetel's desire to offer services over 3/4G/HSDPA/Whatever and have constantly alluded to my continuing failure to be able to find a suitable solution. I think I've also referenced some of my more startlingly bad decisions over the last four years. Well, for once, maybe one of my decisions, albeit a negative one, is better than average - the decision not to become involved in the re-sale of one of the Australian mobile companies data over HSDPA services despite being tempted.
The reason I say that is the latest (at least I didn't see it before this weekend though the ad is dated 1/2/08) Optus "Unplugged" ad for its HSDPA service offering a $19.95 service with 1 gb included (with four months of a 24 month contract free giving an effective cost of $A14.50 a month).
Glad I didn't walk in that trap.
The trap? A 'wholesale' offer of being able to buy a 1gb service for $16.50!
Of course there are 'catches' but the average customer isn't going to notice those just as they don't seem to notice/care about the same catches when buying mobile plans with free handsets.
Doubtless the other download allowance plans will subsequently feature in similar ads in the near future at similarly reduced prices making any notion of wholesaling such a service sheer nonsense.
Similarly I was recently offered the 'opportunity' of buying a Vodafone 'wholesale' service but that was even easier not to consider because it was being offered at costs ABOVE the then current Vodafone retail prices and God know;s what those current retail prices will become by the time the "Easter Special" prices roll around.
With both Telstra and Vodafone promising 14.4 quickly followed by 28.8 mbps data over mobile speeds before the end of this calendar year or early in 2009 there seems very little doubt that the four mobile carriers are Hell bent on 'capturing' their 'fair' share of the data over mobile market and, based on both the size of the advertising spends and the ever lower pricing of the services they will cut a deep swathe through the current low end of the wire line based ADSL1 and ADSL2 user bases of other providers.
I would have said that this projection won't come about because if the prospective customers for these services actually comprehend what the 'fine print' says these deals are nowhere near as good as they look, but as I said, 15 years of mobile phone selling has shown that the majority of customers for such services don't understand, more probably don't care about, the ts and cs - only the head line rate.
I suppose there is an opportunity of 'bundling' other services (a la the current Optus ad) to actually drive up the margin like the requirement to bundle a telephone line at $34.00 a month (and people actually fall for that?) together with the sky high call charges that go with it or a similarly over priced mobile service.
But Exetel has never done business that way - so it's not something we can consider. I did do some work on how additional services could be bundled in to a data over mobile offering but, at least to date, all I see is a month by month reduction in the prices offered by the mobile carriers themselves so that any 'plan' I could come up with 'today' would quickly become pointless as the ongoing war of attrition is fought out over the balance of this year and on in to the future.
As long as their war is being fought out there appears no likelihood of any wholesale opportunity becoming available as the carriers themselves will be able to sell/give away as many services as their provisioning systems and personnel can deliver and their network structures can support. The situation I referred to of continuously lowering of prices for the services makes any wholesale concept pointless - in fact maybe the Americans currently running Telstra are correct in forming the view that wholesale is to be avoided if regulation doesn't force you to do it - at least in the Australian communications industry.
I will, have to, continue to look for a way of providing mobile data services but I'm no further advanced today (in real terms) than I was when I started over 18 months ago. Talk about fruitless exercises.
So (as with Richard Kimble) "the search continues".
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