Monday, May 31. 2010
.....one of the more difficult months in Exetel's short 'life'.
With a day to go we have hit 8 out of 10 of our 'product revenue targets' and we expect to meet the very tough business link sales, 70 new services, target later today. We have already met all our 'financial' targets (though we didn't reach $A5 million revenue for the month) so its been a good month in those respects but it has been quite a difficult month in almost every other respect as we begin to move the company from the direction it has followed since January 4th 2004 to not providing 'the most for the least' for the high download part of the ADSL2 and ADSL1 market sectors and continue the move to providing different services to residential markets generally. 'Habit' is hard to break whether by an individual or by a commercial entity and even being an integral part of the planning for these changes - I find it as hard as anyone else withiin Exetel.
I spoke for quite some considerable time yesterday to a 'party' who called me 'out of the blue' to determine Exetel's interest in buying his company's business user base which was overwhelmingly SHDSL and wire line telephony customers. As always with such transactions the price being asked was much higher than we would be prepared, or could afford, to pay but we had an amicable discussion for 30 minutes or so having become acquainted at one of those 'get to know you' events organised by a big accounting firm some three years ago. Apart from thinking this was the right time for him and his two partners to get out of 'the business' he could see what is obvious to anyone in this part of the business/market - that SHDSL was a difficult technology to keep selling where Ethernet was available and his wholesale supplier had yet to provide a sensibly priced alternative...though as I pointed out to him he could always approach AAPT - which for some reason he said they had not thought of doing....presumably there were reasons for that he did not wish to talk about. It was a useful chat because you don't often get the chance of discussing issues with people who do pretty much the same as you do.
He said the reason he had called me was that his company had lost 'a few customers' to Exetel recently and he couldn't believe the prices we were charging. He, like so many other suppliers with long term SHDSL revenues was still charging nearly $A1,000 a month for a 2mbps/2mbps service and had become reliant on the gigantic profits from those sort of prices and found it difficult to understand that a 10mbps/10mbps service was being sold for $A700.00 per month - and was also horrified that there was a zero install cost for such a service where he was used to install fees North of $A2,500. When you look at it like that it's a pretty bleak 'picture'. I give him a contact at AAPT to approach to see what he could get in terms of the sort of pricing that would allow him to compete but I think the problem may well be that he couldn't comfortably exist with the huge revenue reductions (and even larger profit reductions) selling Ethernet services would involve.
It occurred to me after we finished the conversation that his problem would be quite common across the providers who have a largish SHDSL customer base and that Telstra's newly announced pricing for the Hatteras based solution would have encouraged the majority of those suppliers to believe that they would be able to make a 'smooth' transition from their current SHDSL pricing to new Ethernet pricing while maintaining their customer base at their current rip off pricing levels. Undoubtedly that will be 'the plan' for a large number of these providers and doubtless many of those providers who don't bother to look at alternatives will be very happy to get more speed for the same price never realising that they are spending double, or more, what they should be paying.
I just hope we can find a thousand or so business users over the coming twelve months who will look around before re-signing with their current rip off provider.
Copyright © Exetel Pty Ltd 2010
Sunday, May 30. 2010
.....try, try , try again....and then keep repeating the process.
I did some more 'analysis' on wireless broadband yesterday - but it was 'saturday analysis' which means that I browsed various competitors and US carrier web sites while watching Geelong proceed to a routine win over Melbourne. Our efforts to date to find a (profitable) way of providing wireless broadband to residential and business users has, largely, been a failure - we simply cannot begin to match the 'give away' programs of Optus themselves and other Optus associated providers. We are making some encouraging progress in the business sectors and we would now expect to make more progress in those sectors as the facilities we offer to manage wireless broadband 'fleet' continue to develop and MoIP becomes better accepted. There is no doubt that together with finding ways to deal with the saturation (and the subsequent competitor actions caused by saturation) finding ways to more rapidly build a wireless broadband base is either the most important or second most important challenge of the new financial year.
Our simple problem is that our buy price for data is getting close to double the price that Telstra, among others, offer residential customers at retail. Now, while that actually isn't true when you REALLY look at what is being offered it's certainly apparently true to the majority of people who look for wireless broadband service.....so it's the same thing as far as developing a service goes. Interestingly neither Telstra nor Optus attempt to offer the same smoke and mirrors pricing to corporate customers - I wonder why that would be? That doesn't help us in residential sales but it is becoming noticeable in business sales where pricing being offered by Telstra and Optus is actually higher than Exetel's pricing and doesn't have the add ons we provide but, in most cases is tied in to a 'whole of business deal' on 3+ year contracts. Again that will change over time as we get more exposure in the larger corporate market sectors.
In residential offerings we have two issues that have been insurmountable so far: the fixed monthly service charge and the very high per mb cost of data that Optus charge us. Anything is 'overcomeable' if we were to resort to the smoke and mirrors hucksterism of the current major offerors of wireless broadband services - but I really dislike resorting to that sort of 'gut the mug he/she deserves it for being that stupid' type of operating. Then again, I may be entirely the wrong sort of person to be involved in these exercises and I may have to acknowledge that fact and withdraw from future planning processes for wireless broadband.....but for this one last time that will not be possible.
We have a few more days to come up with new ways of approaching the various market sectors we think we may have a chance of addressing but I have to say that I really don't currently have any ideas that could be considered even vaguely appealing. We don't get "free" wireless USB modems and we don't get "free" monthly access charges and we certainly don't get "free" data so it is not possible to match, or even get close to, the current offers from our competitors or the retail operation of our supplier for that matter. We need a bolt from the blue inspiration otherwise we will have to endure another year of mundanity in marketplaces that are rapidly growing. The problem is simple - how to offer something meaningfully attractive where our competitors are selling at half our buy price?
Why is that so hard?
Copyright © Exetel Pty Ltd 2010
Saturday, May 29. 2010
......in a year of interesting months.
despite the various and varied issues that continue to make life more difficult than I remember it being for quite a while the results reported at the weekly sales meeting we hold each Friday were all, and quite evenly across the 'product range' very positive. We split the responsibilities for obtaining our revenue targets across four 'groups':
1) Residential ADSL1 and ADSL2
2) Corporate services
3) Telephone services (including VoIP)
4) Wireless services and SMS
and each group has reached its, pretty tough, May revenue and new business targets. Of course, May is one of the 'best' months of the year for selling pretty much anything in Australia for reasons I have yet to fully understand. Anyway the May results were on or above the planned targets which is always heartening especially when you are finalising new targets for the coming financial year.
One of our key growth areas has been our corporate sales - we have doubled our revenue from corporate business over the past twelve months and are planning to double it again over the coming year. One of the reasons we have been able to do that has been via being the first (?) data provider to offer low cost Ethernet services that replace the aging SHDSL service used by most small and small/medium businesses. These new services are delivered by the carrier installing a 'box' in a local exchange (pretty similar to a non-Telstra provider installing an ADSL2 DSLAM in a Telstra exchange) and aggregating copper PSTN lines in 'groups' to provide Ethernet symmetrical services of up to 20 mbps (and in some circumstances up to 40 mbps) at prices that are, in Telstra and other suppliers cases) more than 50% lower cost than the 2x2 mnps services offered by those suppliers.
Exetel (courtesy of AAPT) have been providing these Ethernet services for the best part of a year now and other providers have also started to offer those services during that time - but they have all had a major problem - they have been ripping off their customers for so long charging prices that are a mark up of 600% to 800% on their costs that they have a problem offering something ten times as fast at 50% below wht their customer base is currently paying. This is clearly illustrated in Telstra's announced prices cited in this article:
The prices are horrendously high compared to pricing for the identical services offered by Exetel:
The bulk of Exetel's corporate new business sales each month is now Ethernet over PSTN services (with the remaining 25% coming from fibre services and the occasional SHDSL service where Ethernet is not available). In April we sold a record 60 new Ethernet services and will go close to that figure again by COB next Monday. One of my planning concerns for next year was what new pricing Telstra (and other providers) would offer for Ethernet services and Telstra's published pricing (which I understand they will discount heavily when faced with competitive offers) comes as a 'bonus' - it is so ridiculously high.
I feel more comfortable planning to double our business revenues with Telstra 'out of the game' and hopefully that pricing will encourage the other 'umbrella pricists' to follow the same path (all of them have current revenue bases to protect). To achieve 100% growth at any time is never easy and it will depend on how we can develop our corporate sales and engineering force over the coming months and, of course, how we can structure our 'product offerings' to meet what competitors continue to do.
However these are issues I understand much better than most people we will be competing with.
Copyright © Exetel Pty Ltd 2010
Friday, May 28. 2010
Some Progress - But Progress Remains ... Posted by John Linton at 07:51
We continue to work on the Australian business plan for next financial year - frighteningly only barely a month away now. We are pursuing an even more conservative path than we did at this time twelve months ago with more uncertainty now than there was then. One major change to the planning is that for the first time since we began the Exetel business is that, overall, we are planning for less ADSL customers month by month going forward whereas in every month for the past six and a half years of Exetel's existence we have always planned, and succeeded in achieving, month on month growth for that service which has been by far the largest revenue contributor to our company.
The other major change is that we will cease/have already ceased to cater for the high end down loaders in the ADSL marketplaces and reduce our 'ambitions' from offering more for less to every ADSL user to offering more for less to the marketplaces that download less than 150 gb per month. When we look at our ADSL customer base we actually have less than 2,000 customers who download more than 150 gb per month with over 90% of our user base downloading less than 30 gb. It has become ever clearer that in attempting to satisfy that higher end user we have wasted a huge (for us) amount of money. If we can deal with that waste then we would be able to solve our current issues and have a much easier 'life'.
So we continue to refine the various assumptions and predictions and attempt to correct the more obvious of our mistakes. In simple terms our plan is to not provide services to end users who cost us money and use that money to provide better/lower cost services to our other ADSL customers without the need to make lower downloading users pay for the downloads of money losing users. The continuing, and escalating, growth of our corporate business (a sector where we can continue to offer services at the lowest pricing in Australia but make a solid 30% plus net margin) will more than replace the 'lost' revenue from a decrease in ADSL revenues and make a very big difference to monthly 'profit' results - at least according to the draft plan.
We are also closer to finalising our revised wireless offerings for FY2011. We will 'bundle' a wireless service withe the Optus ADSL2 naked and included wire line telephone services at no monthly cost except usage from either June or July 1st. This service will be aimed at people who want a 'mobile' data service that is not used every month or for very heavy downloading. No monthly use - no charge and at 2 cents per megabyte gives a user who averages 500 mb of casual mobile use a sound wireless service for $A10.00 a month in usage charges - and an immediate back up should their ADSL service ever become unavailable at an awkward time. It still needs some work but we don't expect to make any more changes to the structure.
We have made no provision for any fibre services in the next year plan. Although we have been surprised at the 'take up' of fibre services in the Point Cook trial there is no certainty that Telstra will provide a wholesale fibre service moving forward and the fibred areas provided by Opticomm are limited and with 'established' competition so we have no basis on which to make any sort of forecast at this time. There is even less certainty as to what the 'NBN2' fibred areas may provide and with the current difficulties of dealing with NBNCo on even the most mundane of issues it isn't possible to forecast any sort of contribution from that possible area of operation.You have to speculate on what would happen if fibre services were widely available in the capital cities. It would instantly 'wipe out' the outrageously over priced SHDSL services in use by over 50 - 100,000 small/medium businesses in those areas.
The main area of the plan that we are uncertain about is VoIP. We have a constantly increasing number of VoIP users both residential and small business and continue to receive a lot of interest from much bigger businesses. We are in the process of deciding whether to limit our business VoIP offerings to 'hosted VoIP' rather than installing hardware at customer premises and if we do go that way just what we will implement. It's a very big decision and one that needs more knowledge than I possess to be made correctly. We have to solve that dilemma 'real soon now'.
It's my youngest son's graduation ceremony this afternoon which will be a very happy occasion and, being the last of five, a more meaningful event in some ways than the four previous graduations. A sobering thought.
Copyright © Exetel Pty Ltd 2010
Thursday, May 27. 2010
.............though the products of today's awful parents and almost as awful schools will not care.
As can be seen from today's share prices Apple has overtaken Microsoft in terms of the value it delivers to shareholders from its activities while Microsoft, still an immensely valuable company whose products are used by an ever growing number of people and entities, has demonstrated what thieves can do to your corporate growth. It would seem highly unlikely that Microsoft would have been overtaken by Apple if the huge/gigantic number of people and entities that steal its software products had actually paid for them. I suppose the situation of embedded thievery in poorly parented individuals has become endemic to the point that it has reversed to the point where today's thieves actually believe the only restriction on whether you should steal something rather than pay for it has simply become always steal as long as you think you won't "get caught".
I wonder where this will lead in the future?
The other aspect of the article that struck a very positive note was the fact that Apple had 'rescued itself' from its seemingly inevitable downward spiral into irrelevance and since the 'birth' of the iPod had rediscovered its ability to innovate and, even more surprisingly, how to 'mass market'. I find that much more surprising but it's really good to see. I have never bought an iPod or an iPhone and my current use of an Apple computer at work was totally due to its physical design advantage of no ugly and awkward 'box' with its mess of cables cluttering up my work space - I use the version that has all of the 'electronics' built in to a beautifully designed screen - which in itself somehow seems to be better than the screens we used for the office PCs. I actually find using an Apple less simple than using a standard Windows PC - undoubtedly that's because I use it in 'Windows Mode'.
The Apple 'story' over the past ten years or so has been very encouraging demonstrating that a seemingly doomed company can re-invent itself so completely that it becomes even more successful than its early boom days. So a very 'American' commercial success story where the 'good guy' battles back from being down and out to kicking the bad guys out of town and restoring peace and tranquility to the citizenry. I can't think of any Australian examples of this sort of turnaround but there are bound to have been some. I wonder whether this scenario can apply at Telstra?
Apple was always 'adored' by its customers which is something that can probably not be said for Telstra. I also understand that Apple's customers chose to pay more for its hardware products than the equivalent PC products because of a string of perceived or actual added values where that can seldom, if ever, be said about Telstra's services. Then again there is the gigantic difference between a slothful government monopoly and a 'start up' technical innovator. A lot of differences. But one big similarity - both companies have had to face up to 'seismic shifts' in their operating environments and both have/are facing the prospect of corporate annihilation and need to find a way past their ingrained operational beliefs to a new future.
Much as I really dislike many aspects of dealing with Telstra I think I would dislike, even more, dealing with an even more bureaucratic federal government replacement - which I had stupidly supposed had been the reason for privatising Telecom Australia in the first place. It's clear that, except in mobile telephony, only a little progress has been made by privatising the Australian telephone/data communications monopoly in Australia - but it is equally true that some progress has been made over that twenty years - there is, in some areas, real choice for residential and business end users and there is little doubt that there will be greater choice as time elapses. A Telstra that has a greater need to compete will, over time, become much more efficient and that, alone, would be the very best thing that can happen for Australian communications users. Killing off Telstra by either 'absorbing' it or destroying it and replacing it with a gubmant owned new monopoly would be the very worst thing that can happen to Australians. (if you think Telstra prices are bad and the services out of date you clearly weren't around in the early 1990s to use and pay for a Telecom Australia service).
The communications, and more general, media are suggesting that a 'deal' with Telstra about the 'NBN2' is close. For everyone's sake let's hope that isn't the case.
Copyright © Exetel Pty Ltd 2010
Wednesday, May 26. 2010
I was interested to read Mr Quigley's comments on NBN pricing to the Senate as reported here:
It's a novel approach to pricing and, I suppose, it simplifies the problems for their billing system. The report doesn't say whether that price includes GST but that makes only a small difference. Assuming that the reporting is correct a monthly cost of $A27.50 (plus interest giving an ISP costs of approximately $27.50 per month excluding the back haul) for a 25 mbps service is not particularly exciting and doesn't compare particularly well with ADSL2 costings from reasonable carriers but is certainly a little less than Telstra charge for a 256/64 kbps (amortising Telstra's activation fee over twelve months) ADSL1 connection to Exetel though the back haul costs for an NBN service are significantly more expensive in Tasmania.
Comparing those announced costings with current ADSL1 costs to Exetel for Telstra 1500/256 kbps circuits in Tasmania the cost of an NBN fibre service connected to Exetel's Hobart PoP will be more expensive due to the horrendously expensive back haul costs in Tasmania. In a mainland State the NBN costs would be more than a Telstra 1500 service and more than double that of an ADSL2 service. But, as the early days of Telstra's Point Cook trial indicate, people are very enthusiastic about taking up a fibre service and the cost, at least for those early adopters, is not really a major consideration.
So, the first round of NBNCo pricing is good enough not to frighten the horses and will allow the service to be offered at around today's higher end ADSL2 pricing - which the majority of Australian users are obviously very happy to pay (assuming the reported pricing is correct).The next interesting step is to see what the three companies (iPrimus, Internode and iinet) now charge for the services with NBNCo having made the cost of the service (minus the IP content and 'administration costs) so very public. It may be even more interesting to see what, if anything, Telstra do both in terms of adjusting their future fibre pricing and whether or not they see such pricing as 'predatory' - something they have a great deal of experience in assessing in terms the ACCC's views.
Looking ahead, to what the "National NBNCo pricing will be in July 2011" in mainland capital cities is more interesting. Assuming Labor manages to win the imminent federal election then it would be likely that the "NBN2" will have continued to be built and deal/no deal would have been reached with Telstra which will have a material bearing on the competitive nature of fibre pricing to the end user. Assuming Telstra is still a 'player' then it could also be assumed that NBNCo will be forced to offer something along the current pricing - around $30.00 per month (however that is structured/re-structured) for a fibre service and the back haul costs to mainland capital cities at least will be something like a tenth of the Tasmanian costs. If the Point Cook experience is valid for other areas that will mean that Telstra's ADSL1 (and any Telstra Wholesale customer's ADSL1) customer base will disappear as soon as fibre becomes an option to those users. No question or doubt about that - though a great deal of doubt about that time frame....could be quite a while.
What will happen to ADSL2 users when fibre becomes an alternative - different scenario. Firstly fibre will be at least double the cost of a non-Telstra ADSL2 service (ignoring the need to have some sort of telephone line charge with ADSL2). Secondly the 'independent' ADSL2 DSLAM owners have a very commanding interest in competing with the fibre services for as long as they can and their pricing can allow them to do this. For all but the speed freaks an ADSL2 service could be more suitable for their immediate needs (as long as it was at a better price) so it will take much longer for fibre to over run ADSL2. Of course, the speed totally depends on fibre pricing and, perhaps to an even greater extent depends on ADSL2's need for a Telstra PSTN line which cripples the ability to move the price paid by the end user for an ADSL2 service.
So now the first pricing has been 'officially' announced the future of ADSL is put more sharply in perspective.
Copyright © Exetel Pty Ltd 2010
Tuesday, May 25. 2010
The CEBIT 'update' on the 'NBN2' didn't provide anything new but the 'slide show' has been updated:
and uses some new pictorials. It's hard to see what it's purpose was - in announcing the 'NBN2' (after de-announcing the 'NBN') the current gubmant was very rubbery about how much of Australia's population would get a "fast broadband service" and to have a pretty graphic telling the average Australian what they already know - that 10% of Australians will be unlikely to get it doesn't warrant the cost of producing a set of slides that show that......unless you have nothing else to say which appears to be the case for the 'NBN2' for some time. Most people who have been around the industry for more than five minutes understand Australia's topography and that it is easier to deliver network services in Sydney's CBD than it is in aboriginal settlements in the Northern Territory. Maybe satellite technology has now managed to defy the laws of physics but I can't imagine how anyone could get "fast broadband" from a satellite service. How NBNCo will deliver wireless broadband was also not explained - or perhaps I missed that bit.
Meanwhile the 'discussions' between Telstra and the NBNCo continue in the attempt to remove Telstra as a future fibre alternative provider and those discussions are 'scheduled' to reach a conclusion 'in the not too distant future'. That will be a pretty interesting event which, in my uninformed opinion, will decide the future of the 'NBN2' at this very early stage of its deployment. No deal with Telstra = no 'NBN2' - irrespective of whether the current gubmant gets to cling to power in the next election or not - there has never been 'room' in Australia for two national residential networks and if that's the way it plays out then both entities will get in to an inextricable financial mess. It will be good, for wholesale customers and therefore for residential end users, at least for a while, to have a real choice between competing networks but that will simply ensure that both networks will remain financially unviable.
One thing that has become clear to me after only two weeks of 'selling' fibre services as part of Telstra's Point Cook trial is the immense difficulty that NBNCo (and Telstra for that matter) are going to face in providing the 'feet on the ground' to do the physical end user connections. I understand that FoxTel in their early days eventually managed to cope with having to actually terminate the service within the customer's premises but our early experiences with Telstra fibre installs that require the customer to be present and the logistics involve show this is not going to be an efficient process that can be accurately estimated in terms of the time any individual installation will take. Of course it is very, very early days - but it certainly isn't as simple as activating an ADSL service on an already installed telephone line. Irrespective of anything else if two fibre network deployers are going to compete on hiring fibre installers it seems to me an already expensive activation process will become even more expensive.
I have to admit that I'm very surprised at the number of fibre applications we are continuing to get from the very small number of potential end users in Point Cook. Before the end of the week (14 working days of 'selling') we will have received more applications than we have ADSL users in Point Cook which has taken us several years to acquire. Of course the rejection rate we are experiencing is also surprisingly large and obviously our application intake is boosted significantly by the other wholesale providers who have apparently signed on for this 'test period' have yet to begin accepting applications for reasons best known to themselves. I will be fascinated to see how these situations develop over the coming weeks. I would think that Telstra's wholesale prices will continue to be much more expensive for fibre services as they are for ADSL services but where there is no competition from another fibre provider that is not apparently going to be an issue.
We are making progress towards offering fibre services from another fibre network deployer (Opticomm) and, all being well, will makes those services available from the second week of June. This, to us, will be a more interesting scenario as at least two other providers have been offering Opticomm based services for some time now so we will be able to see whether our PFWYU plans are able to attract sensible users in markets where the early adopter enthusiasm has waned. Looking at the pricing offered by those companies who are offering fibre services they have made no attempt to 'innovate' referring to regard fibre as the same service as copper - maybe that is the case.
So, very interesting times - I am assuming that's a good thing.
Copyright © Exetel Pty Ltd 2010
Monday, May 24. 2010
........and give up because you simply can't come up with any solution at all,
The start of another week bringing the second last month of this financial year to an end. It has certainly been a very difficult last five months and shows no sign of becoming any easier over the coming months in terms of ADSL and wireless broadband. So, rather than maunder on about how difficult those markets are to provide products to and how very difficult it is to find pricing and inclusions that are appealing to today's customers I have, at least temporarily, abandoned spending any more time looking at what is appearing to be a set of insoluble problems and do something more productive......and something that may be capable of sensible analysis resulting in sensible executable ideas.
I wish I knew what that was.....but was glad enough of the 'distraction' of going out to a simple Sunday lunch with my wife, my father in law and my brother in law.
I had one of those 'bolt from the blue' thoughts while having that small family lunch yesterday. I have picked up some sort of bug which made the food, and especially the wine, taste almost unpleasant and as the food was simple and the wine from makers and vintages I like I realised that the problems were with me as the other three family members expressed no such negative views. So, although the conversation was as pleasant and diverse as always I tended to 'drift away' first thinking how much less attractive the harbour looks on rainy days then how much I miss sailing regularly and then moving on to how much easier, financially more lucrative and infinitely less time demanding it would be to become a 'salesman' again selling mega ticket technology to the largest corporate and government buyers it would be as I had done three times in the distant past....earning million dollar commissions and spending large amounts of time 'messing about in boats' and doing other personally pleasurable things.
Like all 'day dreams' it was merely idle thoughts - probably caused by a mixture of alcohol, medication for the bug I was suffering with and sleepiness from the effects of all three. But then it struck me. The best/most enjoyable/easiest/most lucrative years of my life were spent selling Fujitsu mainframe computers when they had struggled and failed to establish a presence in Australia for 7 years (in that seven year period they had sold one computer by 'giving it away). In the four years following my taking on (literally single handed to start with - then building a highly effective sales team) selling their M Series large scale computers they went from zero percent of the market to selling more large computers in a year than IBM (the then dominant provider who when I started had 80%+ of the large end market). After three years Allan Moyes, the then MD of IBM Australia went to the then Prime Minister and threatened to close down IMB's Canberra branch unless the PM did something about giving all government business to Fujitsu. I worked very 'short hours' to accomplish that and obtained a great deal of money doing a tenth of the work I do today.
In this 'day dream' all I have done for the past 6 plus years is work immensely long hours trying to sell services for other people (Telstra Wholesale, Optus Wholesale, AAPT Wholesale etc) into marketplaces that are over-supplied and commercially got nowhere in terms of competitive advantage for Exetel and personally have earned very little. All we need to do to solve Exetel's endless battles is to find a very large Japanese company that has failed to gain a presence in Australia and become its 'sole agent' rather than continuing to pursue the current courses and relationships we have pursued since we started the Exetel business. By using two of Exetel's unique advantages and by protecting the new businesses from the me-tooism of a saturated market by having an exclusive contract we can 'cross subsidise' the services provided to our current customers with the profits that can be obtained from the new services to a different marketplace.
It's amazing how you find the solution to a problem you have despaired over as soon as you decide to stop thinking about it. All I have to do now is to find 2010's version of Fujitsu in 1977. Simple.
Copyright © Exetel Pty Ltd 2010
Sunday, May 23. 2010
.....because by paying more you always get the best........a statement only usually made by someone spending someone else's money.
As part of our planning for the almost upon us new financial year we are looking at selling IP services to the 'TOP 1,000' Australian companies. Doubtless this will prove to be a difficult thing to do but, at the end of the day, it's no more difficult than selling simple services to the medium/medium large companies we already do. In fact we already have a few 'TOP 1,000' companies as customers who found us rather than us finding them. So, perhaps, it sounds, certainly on 'first hearing' that such buyers would not consider a company of Exetel's size as being a 'suitable' provider for large corporate entities I have personally been involved in making such a strategy very successful on two previous occasions for companies that were far smaller at the time than Exetel is now.
IP, irrespective of what contrary views may be held, is a very simple product and takes less 'skills' to provide than, say, a regular office cleaning service and is far easier than an office cleaning service to provide at the highest level of performance and at the highest level of 'up time'. So, if you continue that analogy for a moment, do you think that BHP or CBA has a policy of only buying office cleaning services from 'Tier One' office cleaners' (should there be such a grouping?). Or 'Tier One' window cleaners? Or 'Tier One' couriers? Almost certainly not.
How much more complex a 'service' is IP than those three services I referenced above? My view is that it is a far, far simpler 'service' to provide cleaning windows, cleaning floors or delivering 'parcels'. It depends on none of those services major problems (human beings with the correct level of training and daily diligence and performance or even the requirement to turn up for work. It only depends on inert fibre from 'point A' to point B'. As a company like Exetel delivers the service to the 'TOP 1,000' company using the same fibre the 'Tier One' providers and then uses the fibre to connect to the 'world' also used by the 'Tier One' providers the only difference in 'quality of service' is.......well there isn't one......all such services are EXACTLY the same....they have to be....they all run on the same fibre from end to end.
So why buy IP from Telstra, Optus, AAPT or XXXX if you are a large IT Department provider of services to your company's 1,000 to 50,000 or 100,000 employees? Because you always have? Because it takes a company of a certain size to be able to deliver it? Because only a 'Tier One' provider has the purchasing power to provide you with a suitable price? Any other reason? I don't know of any other than the truly pathetic "we buy all services from the one provider because of the whole of business discounts" which any adult should be ashamed of uttering they are so demonstrably stupidly untrue.......but of course they are uttered more often than I can believe possible.
I only know the buyer responsible within two large organisations that use 1 gbps or more IP who are not ISPs. Both those organisations (after multiple years of multiple negotiations) have managed to buy IP on 3 and 5 year contracts at prices more than 5 times that Exetel currently buys at - and are locked in to those contracts for 2 or more years from now. How stupid are such decisions? Pretty stupid by any measure of commercial knowledge or competence. If I ever do another job it would be to work as an agent for one of the overseas cable owners and make myself very wealthy by selling IP services "for a tier one carrier" to the top 1,000 commercial and government buyers of IT services in Australia. It is a target rich environment as Mav once said to Goose.
As I am not about to get another job I wont be able to do that but I can participate in it. Exetel would only need 100 of such organisations, around 10% to buy IP services from us for us to double the size of today's Exetel - that's a very motivating opportunity. I haven't tried yet but I think I could develop the words, proofs and methodologies of making such a target achievable with not much time or effort. Almost better than working directly for a 'tier one carrier' I have a lot more freedom (and now the resources), and a lot more experience in the Australian marketplace to have a better chance of success than any company I currently know.
It will be interesting to see just what price 'premium' large Australian companies are prepared to pay for the identical service.
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Saturday, May 22. 2010
Annette made the hackneyed/mundane comment earlier this morning - "where did the week go?....it had a Monday and a Friday....but the rest"....I agreed but didn't say that's often the way it is for me. I'm sure its the same for most people who have more to do in any given day than they have time for. Or perhaps it's the aging process?
Our fibre applications from the Point Cook area continue at an average of 4 - 5 per day which, to me, is amazing from such a small number of potential customers (I don't know the precise number but it is variously quoted at numbers between 1,500 and 2,500 residences). There is a surprisingly high rejection rate - far higher than with ADSL - and we are still trying to understand that with the help of Telstra. I hope we don't find anything we wouldn't like to when the 'facts' become apparent. We are in the final stages of getting the cross connects activated for linking to the Opticomm fibred estates and would expect to begin offering services to those residences/small businesses in early June. Similarly we have made some progress, much slower than we expected, in providing fibre services in Tasmania but will select a fibre provider by the end of next week. So, all in the very early stages, but an interesting set of challenges nevertheless.....particularly how to market to the potential customers in such diverse and limited areas.
Most of my week was spent on developing the FY2011 business plan and how we could better integrate the services we offer to provide more true value to customers who buy more than one service from us. As we don't start with any thing but wafer thin margins the 'standard bundling' processes available to large carriers aren't available to us. If you are an Exetel user you would know that we have spent a lot of time developing MoIP mini apps for both Nokia and Apple iPhones. We have now had both apps running effectively for some time and the iPhone version is available from the Apple App Store and is selling very well. Some 2,500 Exetel customers now use the MoIP app (which provides 10 cent national calls to any land line number in Australia and 5 cent SMS to any mobile phone in Australia. I think that these are the best ways of adding value to Exetel customers as I really don't think there is any lower cost SMS or CTM service available from any carrier or provider and none of them are likely to offer such a service - for all the obvious reasons.
A combination of a fibre service with mobile calls at ten cents and SMS at 5 cents obviating the need for a 'wire line' telephone service could be quite appealing as a FY2011 offer. The continuing increase in the ratio of 'naked' ADSL applications versus wire line included (either from Exetel or supplier of choice) clearly shows there is a preference by an increasing number of users to get rid of PSTN services and VoiP is one sensible way to do that. Once a user is happy with VoIP why wouldn't they use MoIP? I know, I know...."because capped plans are so inexpensive".....except every one I have ever seen checked just isn't. Irrespective of that flim flam there are sensible people in the market place who are numerate and who can work out simple multiplications who would see that 10 cent calls and 5 cent SMS and no minimum spend would be a good offer. Perhaps I am wrong.
The other major aspect of the FY2011 business plan, in terms of residential services, is how to provide wireless broadband to 50% of Exetel's customers who have a laptop/notebook and who use it outside their residence. People like students (or more precisely parents of students) who may need wireless broadband away from the home on occasions and people who travel or just have a need for internet away from wifi hot spots. Of course we could attempt to meet the needs of people with the obsession for 'free' who seem capable of believing that services cost the provider nothing to supply. But I would have thought that there were a sensible number (bearing in mind it's unlikely that
So, an interesting enough week in the mundane world of providing communications services in Australia even though the fact that it passed in a blur indicates nothing remarkable or memorable occurred.
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Friday, May 21. 2010
.......for the latest Labor government to run Australia into massive debt.
I doubt whether there have been so many fatuously wrong statements by an Australian government regarding the state of Australia's financial situation than have been made by the current one. Starting from their financially disastrous pronouncement that the 'GFC' would be disastrous for "Australian working families" (which hadn't affected Australia in any way at the time nor up until now) and how they would "prevent the worst effects" of it on Australia by a ludicrous set of spending and give away programs that not only turned an inherited surplus in to a deficit but did absolutely nothing except boost the economies of several Asian countries that make useless consumer goods. As all of the more conservative financial writers said at that time and ever since that time - the 'GFC' was a "wave" that had not yet reached Australia.
Well....the wave is almost on the horizon now:
and it seems highly likely that Australia will now become affected by the "GFC" (or should that be 'GFC2' like the 'NBN2'?). And what do those dim bulbs in government do in response? They insist their 'responsible fiscal management (i.e. throwing away 48 billion dollars) fixed the problem so they will now 'super' tax the generator of Australia's "protection" and slow it down just as the real impact of the "GFC" is about to slow Australia down for real. Oh well, perhaps every new voter that has never heard of Whitlam needs a lesson in basic economics. Enjoy the lesson - it comes at a massive price.
I was wondering at how people who have never experienced a regular event are so insouciant about the warnings from people who have? Is this some particularly human trait? Do you ever wonder about people who build houses on flood plains or in "idyllic" heavily wooded areas surrounding major capital cities or vote for Labor governments and then complain vociferously when the inevitable events like floods, bush fires and economic vandalism destroy their lives or in the very severe cases actually take their lives or those of people close to them? Should that old adage really be "There's no fool like a young fool".
What do the words "flood plain" mean to such people?
What do the words "severe bush fire danger" and remains of burned out houses mean?
Why have there been so few Labor governments in the history of Federation?
I suppose history is no longer taught in Australian schools and common sense has always been far from common.We also live in era where the word 'politician' is synonymous in credibility with the word 'criminal' or 'copy writer' in terms of personal ethics and public probity.
These thoughts came to me as I mulled over what the CEO was really trying to say in this piece of reporting:
Now, firstly I never believe a word that is reported in the Australian media as, in my view, Australian media is so dumbed down for the sound bite generations it aims at and the roles of sub editor and editor seem to have disappeared, what is now printed in the broadsheets is little more than imaginative fiction. It's obvious that the current government wants to split up Telstra (20 years after the last time passed that could be done) but its equally clear that a "Telstra Retail" without a monopoly is a dead duck with no possible chance of survival - and it really doesn't matter how you wish to argue against that statement - Telstra's management and employees without the protection of sky high pricing and monopolistic shackled competition simply wouldn't know what to do.
So, after all the talk and the threatening and the bluster what will result? Telstra can't sell its assets without destroying itself. The current government can't build an 'NBN2' without ensuring Telstra can't compete with it. A federal election is very close. Hmmmm..... I guess the 'governed' will pay a very high price for this nonsensical situation.....but then the 'governed' always do....that's why they build houses where they do and elect governments they do....what else do they deserve?
Why is this so? I wouldn't have any real idea. I would venture a guess that 70 years of living in a world where "information" is actually propaganda has so completely removed truth from the public domain that 'governments' have been able to lead the 'governed' so far down the 'yellow brick road' that it's only when its much too late to avoid disaster that any of the 'governed' begin to get an inkling that some thing is wrong.
What other explanation can there be?
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Thursday, May 20. 2010
....and likely to get cooler still if not outright cold.
I was sent this late last night:
and wondered what it referred to in terms of the company/part of a company being 'sold off' and what in turn that meant, if anything, for Exetel. Earler in the day I had seen that the shares in Eftel had dropped to a new low of $0.008 valuing the company at less than $A2 million before it ''recovered" to $0.012. For those of you unfamiliar with M2 - it is a 'bottom feeder' that borrows money or issues shares to acquire already bankrupt or failing businesses to build revenue volume - pretty much along the same lines as iinet. It's half yearly reports to the ASX are interesting to read if you enjoy skillful writing.
The Eftel situation (a smaller version of M2 buying up tiny failed companies and trying to make something out of them) remains a triumph of something or other - trading shares at less than a cent in a company with negative net asset backing to those shares is an odd scenario. Though the number of the shares traded over the last 2 weeks represents around 40% of the shares traded since January 1st 2010 and the price has 'plunged' over that trading period which, usually, indicates that someone knows something they don't like. I guess it will all become clear soon.
I have no idea what the $A4 million referred to in M2's Schedule A buys you in today's communications marketplace and the reference to small/medium business contracts is not very clear - I assume it means that the acquisition of business customers but what the services are could be anything. I have commented before that the changing technology in the 20 bps and below data link technologies has left many previous solid 'data service providers' to medium sized businesses very vulnerable with new data technologies exposing their over priced legacy services to technologies that deliver superior services at less than half the prices they have based their existences on for the better part of the last ten years. Perhaps that is the business type of M2's target company?
In themselves, those two scraps of 'information' don't mean anything very much except that they are yet more 'straws in a wind' that continues to blow slightly more strongly inferring that business is tougher than the "the economy is well on the way to recovery" would have it. Perhaps the economy such people talk about is based on averaging the mining industries strength and the federal governments multi billion dollar give aways with the rest of business sectors? The few people I talk to and the main writers in the Australian financial media all seem to be saying that times are getting tougher and there is nothing that is likely to be done about it as the government spent all available money jumping at shadows 18 months ago.
It makes me feel even more uneasy that I already do trying to plan for the issues that are specific to the communications industry and seem to take up all the available time in any given day. I don't have a clue how to read what implications there may be in an even wider 'down turn' in residential and business financial situations. What is becoming more apparent is that companies of quite significant sizes are now talking in terms of 'we must reduce expenses' as part of their financial planning for next year. We have also noticed at least two of the companies we compete with for medium sized business data links have radically reduced their end user prices over the past few weeks which is probably the most obvious sign yet that things are getting a lot tougher than they have been in even the most recent past.
One day soon perhaps the morning will start with good news?
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Wednesday, May 19. 2010
.........and the raging fire behind you is almost within touching distance..........if you are a wire line based communications infrastructure owner in Australia
We made some progress yesterday in getting some of the basic 'understandings' on how the FY2011 plan would be based and the rough time frames for making the various 'adjustments' to the way we define the sources of the revenue streams from the different services. There is a very long way to go and only 6 weeks to compete this work which is taking, and will take, far more time and effort than in any previous years - at least that I can remember. The additional work is mainly caused by the changing nature of the ADSL marketplaces and trying to work out how to adapt to those changes. But the changing nature of the ADSL situations is by no means the only issue that needs to be considered for a company of Exetel's size.
There is no, well none that I can see, doubt that Rudd will 'turn on' the Tasmanian Phase 1 part of the 'NBN2' network come July 1st 2010 - if he doesn't then the current Labor government will almost certainly see itself become that rarity in Australian politics - a one term government - and that means some resolution of the current 'negotiations' with Telstra will have to happen well before the next Federal election. Early indications are that fibre, even at Telstra's pricing will find a market in any area that it is offered. If Telstra decides it will 'go its own way' then it has the ability to offer fibre to well over a million residences in Sydney and Melbourne and could, for a relatively low investment (well within its financial means) expand that fibre offering to double or treble that number of 'big city' users.
I constantly comment that wireless broadband continues to become faster and with more download capability at lower costs per gb and the ABS reports seem to show that wireless broadband will overtake ADSL in terms of number of users before the end of 2011. The combination of new fibre offerings in an increasing number of areas, the inexorable growth in wireless replacement of ADSL and an already saturated ADSL marketplace is the sort of "triple whammy" beloved of editorial speak. There is NO doubt (irrespective of what uninformed people try to say) that ADSL is already 'yesterday's technology' and the challenges that the three current developing situations poses to ADSL service providers is growing each passing week.
So, as I see it, the providers are already offering, what for all but a minute percentage of users, is more speed and downloads than they actually need, can use or even want to use for something like $A50.00 per month. Where next? For the first time in any market that I am even vaguely aware of Australian ADSL providers have reached a stage where they have nowhere to go. Few, if any, current customers can use the amount of data they are being offered for $A50.00 per month. Yet the churn rate of users between providers is increasing and the total number of Australian ADSL users probably continues to decline. What is your next move?
It's certainly true that all but a minute number of residential users of ADSL services have more speed/more downloads/acceptable price than they have ever had in the past or will ever need for years to come and they are now enjoying a service that entirely meets their needs at prices that are as good as anything that has ever been seen in this country for ANY product or service. If there was no competition then both buyer and seller would be perfectly happy. But that isn't the case. Too many providers have given their shareholders an expectation of continual growth and, as far as can be seen from the public record, have given the investor community future forecasts based on continued growth. But where is that growth going to come from?
Only one place - growth can only come from their competitors and that means more 'marketing dollars' and lower prices to 'lure' customers from one provider to another - not a pretty prospect for companies that have also set expectations on profits. That may, just, be possible except for the continued growth of wireless broadband and imminent availability of fibre services will continue to shrink the size of the total market available to ADSL providers. This in turn means that the only way to meet some of the ADSL providers 'growth' forecasts (which incidentally drive the internal costings on which current pricing is based) is for there to be less 'competitors' - it has never been any different in commerce.
So, at least for us, we need to find a way of increasing our wireless broadband and fibre broadband customers as there appears to be no sensible basis for assuming we can find a way of increasing our ADSL market share.
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Tuesday, May 18. 2010
......the 'recession' has actually been gradually getting worse for over two years outside the mining and mobile telephony industries....one view I heard articulately expressed yesterday.
I don't seem to be able to get anything right over the past six months so I am beginning to wonder whether I should be involved in making any more decisions....it would be nice to think that was going to be possible in the immediate future. So I resorted to calling up a long term acquaintance who also happens to run a communications company a little larger, and much longer established, than Exetel to get his opinions and advice. I don't ever recall doing such a thing since I arrived in Australia as an almost 18 year old some years before the first fleet struggled in to Sydney Cove. We have exchanged views two or three times a year on average over the past 10 plus years since we ran into each other at a particularly uninteresting seminar and discovered a mutual interest in wildlife protection.
His views on the current state of the wire line based communications services in Australia is that residential users have less money generally than at any time in the past ten years and a large percentage of businesses, at least those that actually pay attention, are under quite considerable pressure in several areas including receivables and order book current status and outlook. His company is not retrenching staff but has done no hiring since early in 2009 and has not been replacing people who have left over the past 15 months - though he said that their staff losses over that period are less than half of the usual level because there are very few jobs available in our industry at the moment and that has been the case for some time.
His views were that costs in the communications business in Australia had increased more than most people had expected during the period that interest rates were so low and that margins had tightened producing unexpected profit squeezes for his business and for other businesses he had some knowledge of. So we exchanged views for the better part of an hour over a couple of very pleasant glasses (supplied from his office bar) and I left to wend my way home. I'm not sure I got that much from the pleasant and, on his part, insightful, conversation other than other companies are facing their own different sets of difficulties which he believed are based on the two year weakness in the overall economy outside mining and mobile telephone services.
It isn't much comfort to me (not being involved in mining or mobile telephone services) but perhaps fortunate not to be involved in a plethora of other services that don't seem to be doing so well at the moment. He did make a peripheral point - that in our case the Telstra/Federal Government 'negotiations' would not have improved residential business for companies like Exetel - he said he, as a long term Exetel ADSL user, had had four different direct approaches to 'come home' to Telstra over the last three months - each 'offer' improving on the previous one. As he joked on the way to the lift; "pretty soon Telstra will pay me to use their service if I stop using Exetel".....
....and I think that sums up the current issues. Telstra, and more than a few other companies, have become so concerned about their eroding or stagnating customer base that their combined actions are beginning to create a completely different supply/buy demographic that I can't seem to understand at all. I have thought through this situation so much over the past six months I even dream about it some nights. It's long past time to find a 'solution' and move on to more interesting things - or perhaps the reality is that my aging brain just cant comprehend and compute the data relating to residential internet any more?
Maybe we should now concentrate on how to sell fibre services - We received our 40th application for a Point Cook service earlier this morning after five days of offering the services. A very small number you may well think - and quite rightly so. However in the time ADSL services have been available in Point Cook we only have 72 customers and, at the current rate, we will exceed that number in less than a month. I will be interested to see what happens when we offer services over the Opticomm fibred housing estates where, as far as I know, other providers have been offering fibre plans for some time.
Perhaps there's a message being partially obscured by so many difficult to understand incidents? - maybe I'm too tired to see it?
PS: Some confirmation that it isn't only me and my friend who think the economy isn't the best at the moment:
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Monday, May 17. 2010
Some Weeks Begin Better Than Others..... Posted by John Linton at 07:20
....this doesn't look like starting out very positively.
Despite everything we have looked at over the past few weeks (and pretty much every day for the preceding six plus years) there seems to be no way that we can find a way to provide competitive ADSL1 or ADSL2 services that will do better than break even in the current residential marketplaces in which we operate by continuing to offer the services based on any of the parameters we have used since we began operations. It seems that 'things' have just got too tough for almost all, if not all, providers of ADSL services and the results have been successive changes to offerings that 'burn up' whatever remained of the 'fat' they previously booked as profit at the end of each year.
This has been evidenced in the succession of 'sell downs' by the smaller companies supplying ADSL over the past two years, the ABS half yearly reports showing saturation in the ADSL marketplace, market share decline by Telstra and Optus and an ever increasing 'more for less' in general service offerings (actually that is really more for the same I suppose). It's true that IP costs have fallen significantly over the past 12 - 18 months but as so many people from the larger suppliers are being reported in the Australian communications media are beginning to point out the fall in IP costs is barely, if at all, matching the increase in average IP usage.
So we will now have to make some very tough decisions if we are to continue to develop our overall business at anything like the growth rates we have achieved up to today. One thing that we will need to do is to cease supplying services that lose us money. In looking at the April usage reports one thing has become very, very clear. Apart from the standout example of one single ADSL2 customer costing us over $A600.00 more than his/her monthly plan charge we 'lost' over $A400,000 on supplying ADSL services to 20,000 ADSL customers. We need those customers to leave us and transfer to providers that are able to provide them with services that they 'need' and, via their superior buying power/lower operating costs be able to 'survive' doing that.
If we proceed to do that it will reduce our revenue by around $A1 million per month (around 20%) which will be a very hard to deal with in the short term but will make every other aspect of operating the company infinitely easier. Finding the 'courage' to do something of this magnitude is not going to be easy but there appears little alternative and I, personally, find the prospect of continuing to subsidise so many people's use of the internet to be beyond my abilities to be able to do - both financially and 'socially'. It's entirely our own/my own bad planning that we have to contemplate such drastic actions but there seem to be no real alternatives. Carelessness in any aspect of business tends to get punished very severely.
Not a pleasant thing to have to contemplate doing and something I, personally, have no experience in doing. I'm not sure how to go about it. I suppose the only sensible way is to point out there are better providers than Exetel for people who need to use the internet in the ways these Exetel customers use it and we are doing them a favour for pointing this out to them? I doubt that such a view, how ever well expressed, (and, based on experience over the years, I seem unable to express any view very well) would be well received.
Not a very positive thought to begin the 'working' week with but, subject to a 'brain wave', I don't see any alternative.
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