John Linton
.......I'd Do It In Another Country.
I did some preliminary work on the likely HSPA service offering we hope to be able to offer later in the year (my idea of preliminary work is to take a very high target number of 'sales' in 24 months time and work backwards to see how that could be achieved - it's a lot more interesting than to take a number of 'sales' to be achieved in the first month and work forward 24months).
As with all 'planning', it's simply playing with numbers and making assumptions based on the 'facts' known at the time of indulging in this sort of exercise - anyone who claims otherwise is kidding themselves or is a kind/type of planner I've never encountered. After a fair amount of thinking about this service over the past,almost, two years the number I came up with was 500,000 HSPA users in the 36th month after first offering the HSPA service. which translates into a revenue of around $A120 million a year.
When it's your own money that is going to be needed to fund and sustain a new venture you do take it quite seriously and you do, at least I would think the majority of people do, rationally test your different assumptions against your previous experiences and the, relatively, few facts you have at your disposal. As, in my case, I'm never very ambitious I don't have the constraints of someone who is aiming to dominate a market/product sector so I can get away with less 'research' and have a much wider margin of error than someone who is aiming for a significant market share in a particular market/product sector.
Throughout the four plus years that we have operated Exetel (bearing in mind it was a zero base start up in a product set/market place that was already 'mature') we have, obviously, suffered from being the smallest company with the least buying power (and therefore the highest buy prices) of any of the companies we competed with. Ignoring Telstra and Optus we still paid more than twice as much for infrastructure and IP bandwidth than larger and well established companies and we also paid more for 'tail circuits' and, of course, much more for wire line and mobile minutes and infinitely more for VoIP minutes. We also paid more for routers and servers and virtually every other 'component' we needed to operate the business.
I don't say any of these things by way of complaint, I'm just pointing out the obvious - that a start up company has a lot of difficulty in buying 'components' at pricing that allows it to compete with companies that are established in any market place. ("Well spotted - he can grasp the bleeding obvious" you might feel inclined to think). OK - completely obvious and equally as obvious is that since the Phoenicians sold blue beads to the Egyptians every start up company has faced the same scenario and while over 95% of all start ups fail within the first four years of operation 5% overcome the difficulties and manage to survive.
How the 5% survive would vary infinitely but they would all have to have one thing in common I would have thought - they overcome their buy price disadvantages with running their businesses at a much lower cost than their established competitors which, over time, neutralises and thens turns the initial price disadvantage in to an overall price advantage. I think Exetel has eventually achieved this status - but it's taken almost five years.
Perhaps Exetel has become one of the 5% that has managed to survive. However we now face the difficulty of 'starting all over again' in trying to compete with the established mobile distribution organisations around Australia who have 'huge' buying volumes with the mobile carriers and who are far more important to the mobile carriers as customers and who will get to buy HSPA services, data and devices at much lower prices than Exetel will be able to do. So we will have to go through the same 4 years of difficulties and back breaking and mind sapping workloads all over again. A very unappealing prospect indeed and not one that I, personally, can contemplate.
In establishing a viable (buying power) HSPA operation we will have to do a large number of things differently to the way we have built the other aspects of the Exetel business and, no matter which way I look at it, the major difference is that we shouldn't do it in Australia but we should do it in some either much bigger marketplace (EU or USA) or some entirely different marketplace Russia or Japan and use the much larger numbers that could be achieved in those places to develop a level of buying power (number of connections and gbs of data) that will allow the Australian company to buy at the lowest rates available to any Australian HSPA service provider (other than the mobile carriers themselves).
I think that Exetel has got a little over 1.3% of the Australian ADSL marketplace after four and a half years of incredibly hard work. I doubt that it would have been any harder to have started up Exetel in the UK (for example) and have built a similar market share of a 100 million user market rather than Australia's 5 million current users and instead of having an annual revenue of $A35 million in Australia having a revenue of $A700 million in the UK. Well, perhaps not that much but something a whole lot more than what we have today in Australia. The effort would have been no more than we have put in to building the Australian business.
Sure you'd have to have put up with living for four years in a dreadful climate where it's continually cold and wet but then when you start up a company you don't see much of where you live except for a computer screen anyway.
So while we will proceed with HSPA in Australia (and deal with the issues of buying price penalties just as we have for the past 4+ years) I think it's going to be essential to, almost in parallel, do the same thing in the EU if for no other reason that to buy HSPA devices at increasingly lower prices, offer 'global roaming' (at least in the EU) to Australian customers and Australian roaming to EU customers and to eventually (in three years time) use the EU company's much larger buying power to get lower service and per gb prices in Australia.
I will have a first hand, and much more detailed look at the current status of HSPA services in the EU later next month but from what I've seen on the various different suppliers web sites their plans and pricing aren't very attractive and my initial enquiries regarding wholesale pricing is that it's a lot better than it is in Australia. However what's provided as a 'guide' may well turn out very differently in a contract.
It may prove to be impossible but it has a lot of appeal in concept and the concept has stood up to the initial obtaining of the 'facts'.