John Linton I had lunch with one of our nicer suppliers yesterday and we discussed the 2010 calendar year which they had found as difficult as we had - based on several of their comments perhaps more so. Inevitably we discussed the ongoing actions of Telstra Retail and how annoying it would be if the Senate didn't pass the Telstra Split legislation that would eliminate the current uncertainty that of itself in causing so many of the current problems. The other 'irritant' in the current residential ADSL marketplaces was also a topic of discussion and whether the reports of a network under severe strain as variously reported including here:
http://www.computerworld.com.au/article/368976/tpg_faces_customer_backlash_over_slowed_net_speeds/
http://www.sharecafe.com.au/fnarena_news.asp?a=AV&ai=18573
were the first signs that the pricing and inclusions forced upon themselves by themselves by TPG was beginning to become too heavy a burden to continue to carry. The first of the analysts that 'follow' TPG seems to confirm that view - from one of TPG's more enthusiastic 'supporters' they have become sufficiently disillusioned to downgrade their 'advice' from buy in April to hold in August to sell a few days ago. Neither online web sites peopled by who knows who nor stock price analysts provide any definitive views on how a company is performing but the 'signs' that are available are all negative.
The TPG plan pricing has continually fallen since Telstra Retail began its assaults on other ISP's customer bases. It also was the introducer of unlimited plans at very low prices and reached the current lowest point of of $60.00 per month ($30.00 for ADSL and $30.00 for 'a telephone line'). However, as I pointed out some time ago the issue with putting in place plans that are based on 100% of your users being ADSL2 unlimited customers at plan prices that are lower than your previous prices for 'limited' plans will result in your average usage per user continually increasing ever more sharply and your average revenue per customer constantly decreasing. However the real problem with this 'strategy' is the cost of backhauls which eventually require upgrading from relatively inexpensive 1 gbps to much more expensive (in terms of hardware cost) 10 gbps boxes.This transforms a network performing at an efficient 90% of capacity to the same number of users on a network performing at less than 10% of its capacity and, worse, with little prospect of ever growing much beyond that and, worse again, with a much shorter payback period if there ever is an 'NBN2'.
If the current complaints about TPG speeds are more than a slightly higher level of web site whiners exaggerating their experiences (and their own incompetence and lack of understanding) are the first signs of a network that is not being dimensioned to cope with a customer base of ever growing numbers of very high down loaders then the cause of that lack of capacity is almost certainly a lack of back haul upgrades which in turn is a sign of reluctance (inability?) to spend the money required to provision to the new levels required by a customer base of unlimited down loaders. Pure speculation but it is the logical explanation of a program of growing a customer base based on 100% heavy down loaders.
So we had a very pleasant meal and agreed that the sooner 2010 ended the better for everyone except possibly Telstra Retail who don't really count as pretty much anyone can buy an increased market share if you are prepared to pay $300 (or whatever it really is) for each 'new' customer. Hopefully both Exetel and our supplier achieved what they wanted from the meeting and learned more about the strange times we are living through.
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