John Linton
It's now been a little over 12 months since Exetel connected the first customers to its ADSL2 services using infrastructure/backhauls provided by Optus and Powertel instead of Telstra whose only part in the ADSL2 services is to supply the 'last mile' copper between the end user's location and the end user's local telephone exchange. Over the succeeding 12 months Exetel has connected a little over 10,000 residential and business users to an ADSL2 service using the infrastructures provided by Optus or by Powertel.
When we were initially assessing the various factors involved in ADSL2 services to be able to set pricing for end user plans we had only our experience with provisioning ADSL1 services to provide some sort of view of likely usage and likely times of usage. That experience seemed valid and reasonable as our experience in planning, provisioning and delivering ADSL1 services (and dial up services prior to the availability of ADSL1) as well as SHDSL and wireless broadband services extended over almost 15 years.
There was a great deal of attraction in providing ADSL2 as it enabled a greater degree of independence from Telstra Wholesale and the pricing of the actual 'ports' was much lower than TW was then offering for a much faster end user service. Also with the Optus offering we were able to 'bundle' in the revenue/profit from the telephone voice calls made over the ADSL2 ULL based service (something not available from the Powertel SSS based service).
We also looked at what the then independent ISPs who had made investments in their own ADSL2 dslams and infrastructures were pricing their various ADSL2 plans as a 'sanity check' for the pricing we were contemplating and saw nothing concerning in what those ISPs were doing.
It all looked very good as we made the final decisions on pricing and provisioning.
It didn't turn out that way.
We had always been aware that the 'early adopters' of an Exetel ADSL2 service would be the heavier users in terms of downloads and had taken that in to consideration. Pretty obvious really for even people much less experienced than us. We had also taken into consideration that both Optus and Powertel were also completely inexperienced in provisioning ADSL2 networks but , like us, had a lot of experience in data network and ADSL1 network provisioning on much bigger scales than we did.
What we weren't aware of, or were too insouciant about, was the actuality that a much higher proportion of really heavy users would be attracted to our particular ADSL2 offerings than our most pessimistic (if that's the appropriate word to use) forecasts had allowed for.
Fair enough - by no means the first time our planning assumptions proved to be very wrong - time and a sensibly sized user base will redress that imbalance.
Well time has passed - over 12 months of it - and most people, certainly me, would consider 10,000 users a realistic sized user base to begin to deliver economies of scale in terms of a balanced customer mix.
Not the case at all - if anything our ADSL2 experiences are showing that even low download users who transferred from Exetel ADSL1 plans seem to find the functionality of much higher speeds irresistible and now download three times more on ADSL2 than they did on their previous ADSL1 Exetel plans. If that's the case with Exetel ADSL1 users then there is no reason to assume it isn't the case with users who come to Exetel from other ISPs.
So, after a little over a year we find that the AVERAGE download amount per month of an ADSL2 user is three times greater than we thought it would be with the resulting necessity to add ingress/egress and IP bandwidth much faster and in greater quantities than we had planned for. Not such a major problem in an ADSL1 scenario but much more difficult in an ADSL2 scenario, particularly with Optus, because the ingress/egress (as opposed to the IP bandwidth which is the same per mbps for all services) is more than double the cost of ADSL1 ingress/egress.
So, "suddenly" the nice profitability projections we had based the service on are reduced to senseless optimism and to even get a breakeven from the ADSL2 services at the current customer mix appears to be highly unlikely.
I've been turning the current figures over and over and discarding scenario after scenario that will allow Exetel to deliver a competitively priced service that will at least break even but, so far, I have failed to get even close to doing that.
I'm not sure there is a real solution based on the current supplier pricing but it is now my major priority to make the decisions that any sensible business has to make when faced with such problems; get lower supplier pricing or raise end user pricing - pretty simple really.
....if only I'd never heard of ADSL2..........