Wednesday, March 3. 2010Operating In A Declining Marketplace.........John Linton ....presents a set of problems/challenges that requires a simple, but far reaching, question to be asked by any small company of itself....why do I need to be here? If you assume that the current government will be re-elected later this year then it seems inevitable, irrespective of what Telstra manages to do about separation and selling its PSTN to Krudd's pipe dream, the 'NBN2' will lumber on and less and less companies will invest in adding ADSL2 DSLAM capacities around the country and ADSL generally will go past the 'flat growth' stage and, because of faster and lower cost wireless broadband, will decline at some as yet unknown rate. While the 'NBN2' even under a continuing government may never actually continue to exist, even as a pipe dream, the effect it will have on the ADSL market will be severe and if, by some tax payer funding it actually delivers some sort of service it will kill ADSL completely over time but while it slowly does that the ADSL market will continue to shrink more rapidly. Under almost any scenario I can conceive (and I would be the first to agree that my ability to comprehend how this can be happening is far from comprehensive) there is no place for small communications companies like Exetel in such a set of marketplaces. Of course, if I hadn't lost my pair of rose coloured glasses some time ago I could imagine that the ongoing 'NBN2' would wholesale services to Exetel at a similar cost as Optus and AAPT do today and that Exetel would be able to use its very low operating costs to be able to continue to offer residential internet services with a seamless changeover from the ADSL2 services we offer today. Perhaps, despite all the obvious reservations that will be the case.....and it may very well turn out like that or even the alternative that the 'NBN2' comes to a halt under either the current or a future government......but in the meantime and that meantime is likely to last for at least 12 months the current ADSL uncertainty will continue to exist with all of the current and likely immediate future problems. While I'm really glad that we made the decision not to proceed with the very attractive DSLAM proposal we came so close to accepting some two years ago and don't have the additional financial and operational concerns of paying off a large debt against static/falling customer levels that would have entailed, it doesn't really help us much. Our key issue is to manage to 'improve' our current ADSL offerings and to retain the current current levels (or in my better dreams continue to grow them) while the current scenarios become clearer and to survive the changes that are an inevitability in a saturated or declining marketplace. This is not something I have, personally, nor Exetel more generally has had any experience in dealing with. Dealing with the reactions by the major companies to falling customer levels is going to be the most difficult because they will be continuous and continuously unpredictable. We also need to change our approach to the ADSL residential marketplace from the base tenets we have used for the past six years relatively successfully. We have already gone a long way towards doing that in terms of providing 16 hour a day support (365 days a year) that has the fastest answer times of any ISP in Australia and as each month goes by the experience levels and competence of that operation continue to increase. That's something we didn't have before very recently. We have also, in pure download for money terms, significantly increased the 'value proposition' of our new plans and have significantly changed our Australian network to deliver those increased volumes - a two year plan that has now been, largely, completed. So both our network and our support capabilities are very different to what they were two years ago. I am of the opinion that Exetel's residential support, sales and provisioning operations are now better than those of any other ISP in Australia and are widening the gap. We also, in these ever more difficult times need to change at least some of the market demographics we are most attractive to.....which is the hardest thing for us to move away from....because it will disrupt a part of our current user base. But, in these likely rapidly shrinking 'sun set' years of ADSL continuing to do what we have done for the past six years simply isn't going to work. One thing we have to do is to remove all of the discontinued plans that lose us money which, over time have built up as we made a decision some 3 years ago to not 'force' customers to change plans when we introduced new plans and we now have a situation where over 50% of our current customers don't even make us the $1.00 per month profit we have always aimed for....more than a few of those plans lose us more than $A5.00 a month and we must remedy that situation. Whatever happens with the 'NBN2' and whatever happens with the developments of wireless broadband and whatever Telstra and Optus do with their own fibre roll outs in the major capital cities (which appear to be continuing to happen) the 'picture' forming for ADSL2 over the next six months is one of significant change and the changes are likely to have a large impact on all sorts of current providers of residential ADSL services. Trackbacks
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"more than a few of those plans lose us more than $A5.00 a month and we must remedy that situation."
Was this always the case with those plans, or did your cost of providing those plans change upwards over time? Cheers, Mike. Comments (2)
They never made much money (less than $1.00 per month) and as the average download per month increased over time faster than the price of IP/Customer connect fell they began to lose money.
Comments (6)
Thanks That makes sense. Now I know how to explain it if customers ask me why their plans went up.
Comments (2)
Well, all good things come to an end sometime.
Hey, I was even moved from my payu plans to new plans this year. .... and lost the inclusions in the process. But I am happy.... I might be paying a little more, but I am comfortable with the theory that Exetel must make money on all their plan offers - even the old ones. I'd rather have Exetel make money on each and every plan.... we each pay our way.... and Exetel is still around to offer them! Regards, Harry. Comment (1)
"...and we must remedy that situation."
Can I suggest making the transition slowly with lots of emails warming up those affected for the change. Also plenty of lead time for them to make a decision. Although I've had six years of great service from Exetel and am not on a discontinued plan, I seem to have accumulated this feeling "what is the next sudden change going to be?" Fast decisions can be good (especially when the news is positive), but too fast action may leave customers rattled. And if 50% of the customer base is upset, that sounds like a big headache. Comment (1)
You are quite right and we don't want to upset any customer - let alone 50,000.
Comments (6)
I was a little disturbed to read in Monday's blog about your aim to release plans with even thinner margins than the current ones - I want Exetel to stay viable! In today's blog I was even more disturbed to read about plans to remove discontinued plans that make little or no profit.
As someone who loves his 8Mb/s TELO plan and has almost zero chance of getting ADSL2 at the his exchange, can I respectfully suggest that you consider raising the price until it is profitable. If you can't legally raise the actual plan price, how about doing it in a round about way by raising the administration fee? Comment (1)
We are looking at a range of possibilities.
Business life, as it relates to ADSL, is very difficult at the moment. Comments (6)
Amusing.... I just got the email telling me that my plan cost would increase by $5 next month as the current plan was losing exetel money and I could change plans if I liked. So I went to check out the options and discovered that if I switch from my current "INCPHONE B" to "NF/22INCTEL", then I spend $5 less (rather than $5 more) and get much cheaper excess.
So NF/22INCTEL also loses money for exetel? Confused and amused. Comment (1)
I've also found a similar situation.
My 8mb TELN plan has been costing me $75+$3 each month which I gladly paid, even though I don't even use half the provided data allowance. After checking my usage for the past year, I've now changed to NF/8192. I'll now be paying somewhere between $10 and $20 per month LESS than I previously paid. I'm overjoyed with that, but I'm not sure how this helps Exetel's profitability. Comment (1)
John,
I am both one of those customers and one of those agents who has to explain. All I can ask is keep the plans viable so they stay, dropping off the 8mbit bandwagon is not a happy thought. Comments (2)
For over six years we have always tried very hard.
Right now there is a lot of turmoil in the costs of ADSL which are difficult to deal with. Comments (6)
John,
success for me now I must share, thank you. My grandfathered plan has now been replaced with a plan that's now cheaper for the same quota. cheers Comments (2)
I believe that a problem shared is a problem halved. I would consider notifying customers and web visitors which plans are the money losing plans with an asterisk or your rates plan (if still advertised), and encourage number of users to discuss the situation.
The situation is complex because different customers will be affected differently eg can't switch to ADSL2+ because not active at their exchange. Many hands make light work. And many minds applied to a problem lighten the load. For customers with good service and a good opinion of Exetel, small increases may not be a problem. But constant change may be painful for some if the process is ongoing. I would even consider running a small number of customers at a loss where they have been long term customers of Exetel ie consider lifetime earnings. Listening and remaining flexible will win big dividends in the longer term, I believe. Transparency, ongoing dialogue and joint problem solving I believe is the way forward. Comment (1)
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