John Linton
....not something it is sensible to do unless there are no alternatives.
On page 50 of the AFR today there is an article in which David Teoh states that TPG's purchase of Pipe may allow it to offer 24 hour a day unlimited usage plans as Pipe's network has enough capacity to make that a possibility. Of course, that was said in answer to question at a press conference so it might not happen but it is the clearest possible indication that helping TPG fund its ability to put you out of business is not something any competitor would not give some serious thought to.
Since the announcement by TPG that it was going to buy Pipe (if it could find the finance) we have had a brief look at how sensibly we could move the few links we have with Pipe to another provider - we only spend around $A40,000 a month so 'losing' our business is not going to make the slightest bit of difference to Pipe's overall revenues. We use Pipe for a few cross connects between different data centres in various capital cities and for two interstate cross connects that are not very big. In the 'old days' Pipe offered such services at significantly lower prices than most competitors and as they have been a reliable, and generally responsive, provider we have only made cursory attempts at obtaining better pricing for the services we buy. It has been a cost/effective and useful relationship for many years. We have never bought IP from them as they have only recently been able to offer a deliverable service and, it appeared to us, that when we talked to them over the past three years the actual ability to deliver date was constantly moving backwards - not unusual in any project of that size.
When we read about the proposed takeover of Pipe by TPG we made the assumption that it was probable that the financing would eventuate (we doubted that TPG would have gone this far if their banks hadn't indicated the financing would be OK - though it did seem a bit of a stretch) and that we should move our Pipe supplied links to a neutral supplier when the contract periods were up. Moving the interstate links was a 'no-brainer' because we had already used a different carrier for the four later PoPs (in ACT, SA, WA and TAS) that charged us lower rates than Pipe and which had proved equally reliable over the time those interstate links had been in place. We would almost have certainly moved those links on financial grounds in any case. What has surprised me, nothing in contract form just quotations, is that several other intra-capital fibre providers now appear to offer faster links than we currently have from Pipe (a couple of which have only recently been installed) at lower prices than we are currently paying to Pipe - which we had previously considered to be very cost/effective.
I suppose I shouldn't really be surprised as the problem with 2/3 year contracts is that you don't have any reason to look at the costs of the services provided under those contracts until close to the end of contract dates and you get used to thinking in terms of the prices you are paying as being 'reasonable'. One of the real down sides of long term contracts. So the net result so far, and subject to obtaining the actual circuit contracts, is that we will reduce the amounts we pay for the Pipe circuits by up to 30% over the coming months as the various contracts end. It will be a pain to have to make the infrastructure changes involved (which I suppose is why so many companies operate on a 'sign and forget' basis for smaller purchases) but they are a once off and hopefully painless.
I don't know if any other of Pipe's current customers will look at what they are paying to Pipe for similar services but I would think that Pipe's competitors would look at the possible TPG take over as an opportunity to pick over their old 'lost business' files and make new approaches to all of the obvious Pipe customers - however that is not necessarily going to happen when I consider the general lack of 'energy' most of such companies demonstrate at the 'new business development' levels when we approach them over the years - it seems we are doing such suppliers a favour by requesting them to quote for our business needs - probably because we have always been so small they can't be bothered to make the effort to provide a quotation within a reasonable time frame. Though, to be fair, it may simply be a phase the industry is going through as it was something I have noticed about Pipe themselves over the past 12 months or so - despite several requests I don't think we have ever received a quote for IP bandwidth which there has been so much talk about in the media - I took that to mean that Exetel are too small as a 'target' for Pipe although our IP purchases continue to increase month on month and at now over 5 gbps I would have thought they were worth at least providing a quote for - apparently not - perhaps, despite all the hype, they couldn't meet today's "market pricing" of sub $A90.00 per mbps.
So I think, at least for Exetel, the TPG proposed takeover of Pipe has been a good thing because it has forced us to re-look at our second tier network link pricing for the first time in far too long. It just goes to show you that even people like me who take it as read that they constantly do everything possible to ensure Exetel buys at the lowest possible prices has been over paying by around $120,000 a year for some time.