Wednesday, June 25. 2008Is There A Future For ADSL1?John Linton As the new financial year is only a few days away I've been trying to tidy up the 'initiatives' that we will put in place in July and August to try and ensure we get the new year off to at least an 'on target' start and hopefully a bit better than that. One of the things that remains shrouded in doubt, at least from a planning perspective, is what is the best thing to do about providing ADSL1 services in the immediate and medium term future. A very significant percentage of Exetel's revenues still come from ADSL1 though that percentage falls each month from a high point of 99% in February 2004 to around 50% today and has dropped at an average of 2% of total revenue each month over the past 5 months. Over the past few weeks the percentage of ADSL2 applications to ADSL1 applications has gradually increased and over the past few days has exceeded 40% of daily applications for the first time. I have no 'marketing' explanation for this increase as Exetel hasn't made any changes to its service offerings and, as far as we know, there have been no significant changes by any other ISPs that might explain this, quite significant, shift in emphasis. ADSL2 customers are still only just over 20% of total Exetel ADSL customers so ADSL1 customers are still the single most important component of Exetel's monthly revenue and in discrete numbers continue to increase each month. The major problem in improving the attractiveness of our ADSL1 offerings (which as far as I can see are more attractive than any other ISP's ADSL1 offerings) is the 'brick wall' of the cost of providing the service. The monthly port rental of a 1500/256 ADSL1 port is more than twice as expensive (to Exetel) as the rental of an ADSL2 port. Ignoring the obvious huge speed advantage of the ADSL2 port over the ADSL1 port the double cost makes a nonsense out of trying to construct 'equitable' plans on a side by side comparison. (as a side note: it's interesting in all this kerfuffle about providing faster internet speeds via FTTN that Telstra et alia keep insisting how much more expensive it's going to be yet all experience in deploying ADSL2, including Telstra's "special" offers, shows that ADSL2 is much less cost to the end user than ADSL1). So the current challenge is to find an answer to what can be done about improving ADSL1 services to end users who have no access to ADSL2 now and in the short to medium term future? The only real answer is for Telstra Wholesale (and therefore Telstra Retail) to provide ADSL1 port rentals at a far lower cost than they are priced today and to make sense of the speed difference between ADSL1 and ADSL2 - it makes absolutely no sense that a faster service has a lower base price than a slower service except in the Telstra accounting sense that they don't want to reduce the revenue/excessive profit contributions they already have in place. So where ADSL2 is available from their ISPs there will be an accelerating loss of ADSL1 customers moving to ADSL2 (not just for the speed which most users won't ever notice) but because the cost per month is less. That's fine for the 70% of Australians who have access to ADSL2 and can benefit from lower internet costs (and also get higher speeds). It still leaves the other 30%, mostly those living outside the major cities, paying unjustifiably higher costs for a slower service. It's all very well for Exetel to simply say "Telstra Wholesale determines the price at which we can offer ADSL1 services" but all that means is that our customers look for other solutions from other ISPs (and on the 500 exchanges that Telstra cover that we can't provide ADSL2 at those Exetel customers get a "special" Telstra offer of ADSL2 at, lo and behold, less cost than Exetel are providing them ADSL1 for. So the current scenario is that we have to plan to keep losing ADSL1 customers at around 1,000 a month to Telstra ADSL2 services and there's absolutely nothing we can offer that will prevent that happening at this time. In the future we are hoping that a sensibly priced and 'scoped' HSDPA service will become available that will allow a significant percentage of our current ADSL1 users to move away from ADSL1 to a much higher speed HSDPA service at a much lower cost than their current ADSL1 service - for a user who downloads less than 1 gb per month (of which we have more than 20,000 customers) we will be able to offer a much higher speed service for less than half what they are paying today.....but that is some months away. We really need to come up with something 'out of the box' to bridge the gap between now and when we could put in place a sensible HSDPA service but my personal abilities to 'pull yet another rabbit out of the hat' doesn't seem to be working at the moment and no one else in Exetel has come up with anything either. My only glimmer of hope is to somehow make VoIP appeal to those current and future residential customers who still see it as somehow 'frightening' or 'unreliable'. Telstra still has some 'vulnerability on being reliant on wire line telephone calls at high call rates to cross subsidise their 'special' ADSL2 offers so if there was an easy to understand way of making the less knowledgeable customers understand how they could reduce their actual telephone line rental and use VoIP easily and reliably to reduce their call charges then maybe there's a way to address this 'impasse'. However after destroying half a tree sketching out different ways of making this 'proposal' I can't find the words or 'pictures' that make a compelling and simply worded case. The other route to go down is, of course, 'bundling' either mobile or wire line services with the ADSL1 service but Exetel is extremely limited in being able to put together really attractive offers on either mobile or land line telephone calls. However we will explore how we could expand our offerings in this area. None of these putative solutions is really the answer and none of the ones that I have considered offer any real 'blockbuster' breakthrough - the issue is just the high cost of ADSL1. Right now I cant see why anyone connected to an ADSL2 enabled exchange wouldn't switch to ADSL2 and as that appears to be 70% of Australians I don't think ADSL1 has much of a future unless something changes either in the cost of the ADSL1 service or the way most people regard VoIP. Basically ADSL1 will join Dial Up as a quaint memory for most people within 18 months.
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somehow make VoIP appeal to those current and future residential customers who still see it as somehow 'frightening' or 'unreliable'
What about offering free installation of a competitively priced VoIP device? Do you have enough agents to make such an offer? And would it make financial sense after accounting for a one off payment or commission to the agent? Personally, since I spent a small amount of time setting up my own VoIP device the service has worked flawlessly - requiring no maintenance of any kind. However, I am detered from encouraging friends and family to move to VoIP in cases where I know the initial setup would require my time (which would be the majority of my friends and family using Exetel). Another option might be to offer a referral scheme for VoIP, to encourage customers with links to other customers to spend the time on the initial setup for other users. Admittedly, I expect you will advise you do not have the appropriate margin for such a scheme. Comment (1)
It's a very good idea - if only we could find a device that's cheap enough to 'give away'.
We are always looking for ways for our agents to 'sell' VoIP and make money (both for them and us) but the margins are so thin that we haven't ever been able to come up with a suitable offer. Something along the lines you suggest may be possible though. Comments (4)
(*It's a very good idea - if only we could find a device that's cheap enough to 'give away'.*)
I have come across a couple of different ATAs that have been priced extremely cheaply (Netgear TA612V and similar). Depending on the wholesale cost of these devices you may be able to give them away free or match what the user pays for the ATA in credit so that the device appears free. Comment (1)
Thank you for that suggestion - I'll follow it up.
Comments (4)
Oooh good ideas. My brother is on Exetel 256/64 and I'd move him to VOIP if this was offered. (Plus Exetel would get a speed change application and more $$ per month because of this too.)
Comment (1)
While I consider equipment locked to a provider a personal affront and a challenge, I do think pre-configured equipment, any idiot can plug it in, as a good possible introduction to voip.
Maybe at cost+. Comment (1)
What about removing that huge ($300) bond necessary to secure a voip service with exetel for non existing exetel adsl users with something like a $20 connection fee that is then credited to their account (giving you the opportunity to check there bank details are correct and working)
Comments (2)
The trouble is that there are a whole lot of thieves who steal VoIP minutes and can run up huge bills (for Exetel) before the auto checkers switch of the services.
Comments (4)
What about a pre-paid option similar to the calling cards?
Comments (2)
That's possible - but the issue is always with the thieves.
Comments (4)
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