Sunday, October 30. 2011The ADSL2 Pricing Problem........John Linton .....perhaps the only solution is to do a "Qantas". I have mentioned, more than once, recently that we continue to struggle to find ways of providing low cost ADSL2 plans that achieve at least a break even financial situation. This is still possible to do with Optus and, to some extent, with AAPT but unless we sell our soul (commit to things that just make no commercial sense) we can't find a way to offer Telstra based ADSL services that make any sort of 'profit' at all. Our problem is that we don't sell enough Telstra based services to qualify for the discounts they offer to larger ISPs and we won't sell out our other long term carriers to qualify for the huge 'special' discounts that are offered for mass migrating other carrier business to Telstra. Effectively continuing to deal with Telstra on the current terms is ruining our residential business (even ignoring that Telstra Retail has targeted our customers (and of course those of other ISPS for over three years with offers lower than they sell to us). It is a crazy situation for any company to find itself in - to have a major supplier do everything possible to destroy its business and even crazier for the company to continue to do business with such a predatory supplier without doing something about it. The problem is, of course, that we have tens of thousands of customers on the Telstra wholesale service who have no other option as only Telstra provides services in the overwhelming number of regional areas of Australia. However we simply can't continue under the current Telstra pricing and business practices as provided by Telstra Wholesale today which, within a few months, will result in us making a loss on all Telstra based services. So when confronted with the inevitable for long enough, even the thickest of CEOs (which I am almost certainly one) eventually reach 'breaking point'. There is simply no point in continuing to sign up new customers that will simply join our current customers in a Telstra Retail data base of prospective customers to be offered incentives (including cash to cover the customers early termination fees) to cancel their Exetel contracts and re-sign with Telstra Retail. So on Friday we began the process of working out the financial cost of offering all of our Zone One Telstra based ADSL customers the opportunity of moving to either Optus or AAPT. The immediate cost is that Telstra will increase all our Zone Three and Zone Two service costs as well as the Zone One customers that decide they want to stay on the Telstra infrastructure. The immediate benefit is that we can reduce the ludicrously expensive Telstra Wholesale back hauls (more than double the cost of AAPT's for instance) and reduce the port cost by around $10.00 for those customers that move to either an AAPT or Optus infrastructure service. The financial exercise is to determine whether the cost savings are enough to counteract the immediate cost increases. It is only a simple exercise to do that with the only unknown being the actual number of customers who choose to move from Telstra to either Optus or AAPT. This is a complete reversal of anything we have ever contemplated in the past but is something like what has to be done rather than allow Telstra Retail to kill us via the death of a thousand cuts. If the separation of Telstra does in fact go through then Telstra will be forced/agree to change its current contractual arrangements, when they expire, t some sort of generic arrangement based on some like the terms outlined in this document: Of course, as you will see if you bother to read it, there is plenty of scope for TW to do whatever it likes and it carefully prepares the ground for that by on the one hand appearing to comply with the ACCC's requirement for a retail discounted to wholesale price structure but then injected the weasel worded statement that there can never be a 'standard' retail price....nothing will ever change with Telstra - once a monopolist - always a monopolist. It will be an interesting exercise over the next few days. Copyright © Exetel Pty Ltd 2011 Trackbacks
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Might I suggest that Exetel send an email to all customers on a Telstra system to explain the problems?
This will allow customers some time to considering options and will reduce the surprise resulting from any offer you may make them. Many people struggle with unwelcome surprises. You may find a fair proportion are prepared to pay a little more to stay with a trustworthy ISP. Perhaps even an survey of the customers most likely to be affected to discover their preferences between feasible options. Comment (1)
We value our long term ADSL customers very highly and would never do anything that disadvantages them.
We have done that for almost 8 years. What we really need to do is to 'convince' as many current Telstra ADSL infrastructure customers as possible (where there is a choice of service) to move from an Exetel/Telstra service to a Exetel/Optus or Exetel/AAPT service. The immediate financial penalty we will incur by dropping the Telstra Zone One customers below the 'threshold' (which triggers port price increases for all Telstra Zones will hopefully be dropped to 'break even' if enough customers transfer. How all this is done, if in fact that's the way it goes, remains to be seen. Comments (5)
Perhaps harnessing the collective brain power of your current Telstra based ADSL customers might provide a method, or at least some ammunition, to counteract Telstra Retail's poaching activities.
There must be a number of customers refusing the Telstra offers. The reasons why they refused could provide valuable marketing clues. At the moment, you possibly only get the reasons why people accept Telstra's offers. This may be artificially limiting the apparent options for fighting back. For example, AJL's post yesterday makes some good points why he/she chooses Exetel. If you were able to gather data and ideas from a larger sample of Tesltra based customers, this might provide a number of things. A few possibilities... - perhaps simply educating your customers how to use some of Exetel's add-on features might enhance their opinion of the Exetel service and make them more resistant to poaching. - perhaps there are minor issues customers have with their current Telstra based plans which could be addressed with a few tweaks of the existing plans and turn potential negatives into positives. - perhaps there are low cost additions, or package combinations that would have good appeal and strengthen loyalty. - perhaps making available a summary of the reasons people give for accepting Telstra offers might stimulate some useful comments from other Telstra customers on their own reaction to such offers. The Exetel Forum seems ideal to conduct this information gathering and brainstorming exercise. The forums for these discussions could be either public or private, open to all, or by invitation only. Separating the input by Telstra zone might also be helpful. You probably have quite a few loyal Telstra based customers who would like to contribute in this war against Telstra simply out of self interest. They are very happy with their service, admire Exetel's business style and want to continue being supplied by Exetel for a long time. But at the moment they are largely silent (because they are happy) and are an untapped resource. Some of these loyal customers may be able to contribute to the war effort in other ways too. But to find out how, you might need to get them talking to each other. Comments (2)
You have some good ideas.
Once we have worked out the 'financials' we will use the forum to discuss the issues. Comments (5)
If you do start some discussion in the Forum, could you let us know here please?
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Sorry if this makes you spit in your soup.
I've read many times in this blog, your opinions about and opposition to the NBN, however I do find it interesting that the problems which are currently affecting Exetel in a very significant way, are due to the predatory tactics of an incumbent monopoly provider, and the fact that private enterprise in Australia has not worked to provide alternative wholesale ADSL providers in the zone 2 and 3 areas which are the main areas or concern here. My understanding (and I accept that I could very well be wrong), is that the reason for proposing a "National Broadband Network" in the first place, was to break the power of the incumbent and restore an even playing field, particularly in those areas of Australia where there is currently a lack of competition. (I know you will say that the original reason was to get elected) Despite the varying opinions on the cost or method of building it, it seems now that the NBN may be the last hope for smaller companies like Exetel to remain in business as competitive going concerns. It should be remembered that easy universal access to the Internet as we know it today, only came into being in late 1995 with the introduction of Windows 95, and for the significant majority of the time since then (particularly the formative years), it was the Howard Liberal government (1996~2007) who made the decisions about what and how Australia took (or didn't take) advantage of it. (yes, I know the 'net started back in the 60s, but I'm talking easy and universal) The facts are (no matter what your political pursuasion) that the Howard Government (courtesy of Richard Alston's lack of vision), totally screwed the way the Internet would be deployed in this country, through a lack of understanding, poor deployment of infrastructure, and a lack of duty of care, culminating with the worst decision in Australian government communications history... the selling-off of Telstra to private enterprise, without first dividing the retail and wholesale arms into separate companies. I'm one of those people who feels that in a country of Australia's large size, with such a relatively small but widespread population, essential infrastructure and services need to be in the ownership and under the control of the federal government. This includes Roads, Public transport, Electricity supply, Water supply, Health care & Hospitals, Education, Policing, and of course, Communications. I see no reason why private enterprise cannot provide services off the backbone of government infrastructure in competition with the government if they wish, and that provides competition and is a good thing, and for the most part already happens in Australia. But the basic infrastructure IMO needs to be owned by the people, and made available to everyone with fair and equal access and cost. If some people want to call this socialism, then fair enough, guilty as charged. But the evidence is there for everyone to see, particularly with communications in Australia... leaving things to chance and private enterprise has not worked, and has only produced an incumbent monopoly, and a situation where zone 1 exchanges are generally served by 5~6 wholesalers, while zones 2 and 3 have no competition at all, and are left as a gift for the incumbent provider. If the NBN can fix and improve on this situation, then perhaps we really "do" need it. Comment (1)
I don't want to be rude but Telstra was the creation of various Australian governments over the past 100 years, as a government monopoly.
Privatising it and a few years later going back to recreating a government monopoly is hardly rational. But that isn't the point. I am NOT complaining that this early version of the privatised government monopoly is causing our very, very small company problems (because of Telstra's own need to compete with the proposed new government monopoly. I am simply commenting that the NBN2 and Telstra have made it very difficult for us to continue to do some of the things we set out to do eight years ago. No big deal - we will have to find something else to do - that's commercial life for you. It's unlikely that a new government monopoly (particularly one that is premised on being quickly on sold to private enterprise as a base tenet of its creation) will do anything very well, very quickly or very economically. However I will almost certainly be dead by the time that can be sensibly judged so, I really don't care. I have a current responsibility to Exetel's customers, its employees, its suppliers and the Linton family investments in Exetel all of which are threatened by current situations - and it's not relevant how those situations have been brought about - only that they must be addressed. I was brought up by my parents and educators to live my life by those old, and largely now discredited base values, of standing on your own feet and working hard, and honestly, to make your contribution to the society in which you live. Socialist, or Conservative 'politics' were judged to be the refuge of scoundrels and the pursuit of third rate people with neither ethics nor morals....only self interest. For the last eight years I have worked as hard as I am able to do to deliver services that are better and at lower costs than those provided by every other supplier - it's a worthwhile objective even if we have not always been able to meet it in the eyes of some of our customers - it hasn't been for the lack of effort on our apart....maybe we simply lacked the skills and knowledge. Whether socialist or conservative - I am very sure that neither type of government should interfere in the delivery of technology services - they make such a total hash of delivering far simpler services it should be enough example to steer well clear of such an over arching ambition that is so obviously so far beyond their abilities. Comments (5)
.....perhaps the only solution is to do a "Qantas".
Or an Ellis Wyatt. Comment (1)
....Ellis Wyattt....now there's a name I haven't heard for a very long time.
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