Thursday, November 25. 2010What Is The Sound Of Desperation?........John Linton ......in the event there is such a thing? It's pretty obvious, at least to me, that in the communications industry it's the harshness of current conditions in the residential communications market continuing to increase and the 'sound' of desperation is the ever more bizarre and amazingly changing offers being made at both the retail and wholesale levels.Major suppliers who say "absolutely out of the question" one day are coming back a few days later saying "let's do that". What changed? I was told that TPG approached us yesterday to try and establish a price at which we would buy residential ADSL2 services from them (having approached us a couple of weeks ago with the same pitch on business services). Perhaps this is simply a new marketing ploy to fill up their unused ADSL ports caused by falling direct sales and Telstra's depredations which could be a logical extension of any network owner's ongoing marketing opportunities but it seems a very unlikely 'strategy'. TPG's approach to the retail markets appears to be based on taking as much market share as it can get based on a more for less approach to end user pricing which, by definition, can only be successful if it gains customers at the expense of its competitors. Why would it expect its competitors to help TPG put them out of business? (that's ignoring the reputation TPG has for a congested network that generates so many end user complaints). It sounds more like a company that is not meeting its publicly promised growth targets and is looking for a 'quick fix'. The thought of on-selling the TPG network is simply quite bizarre to someone like me....but perhaps its a sign of a truly changed future? On the same day we had a re-approach from a long term supplier who we had 'taken some business away from' who had then threatened us in a most unseemly manner. Apparently forgetting their immediately previous belligerence they wrote to me asking Exetel to tell them at what price it would take to continue doing business with them. On balance this was even stranger than the TPG approach. We have been dealing with this particular supplier for well over 5 years and we have always kept them advised of the future pricing we expected as the market changed. It was no different in the recent contract end discussions but they chose not to meet the market prices now existing so we advised them we would have to change providers. Their reaction was unprecedented in my experience and resulted in a very 'bad taste in our corporate mouth'. To then come back and say, effectively, "OK the blackmail didn't work so how about you tell us at what price you'll keep the business with us" was......I'm not sure I can find the words to adequately describe our reactions. Again, on the same day, we had yet another potential provider this time, whose previous offer we had considered but then decided against proceeding with come back to us with such a vastly improved offer that it made nonsense of the original proposal and seemed to contradict everything that had been previously said. We know, equally as well as most I would have thought, how difficult 2010 has been and although Ms Faustus backed down enough yesterday to get the Senate to pass the Telstra Separation bill (a small mercy in these confused times that is only a small step along the way towards a more sane set of marketplaces): the first six months of 2011 are still going to be far from enjoyable....and that's probably the most optimistic view that can be taken. These three incidents (in one day) together with the general feelings generated from so many casual conversations, media reports and email exchanges each day keep emphasising that however difficult things were 'yesterday' nobody seems to be expecting them to be anything but more difficult 'tomorrow'. Sometimes it makes you wonder why you get out of bed each morning. So, nil desperandum, tough times allow the talented to shine and the less talented to move on to something easier they can cope with. The problem is trying to work out which category you fit into before circumstances make it abundantly clear to you. Meanwhile it is somewhat comforting to know that other people are as, or more, perplexed by current conditions than you are. Copyright © Exetel Pty Ltd 2010 Trackbacks
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I wouldn't expect to see Exetel reselling TPG services so no surprises there, no doubt TPG will be making offers to others out there as well so I guess we'll see their results with that soon enough when the offers from other ISP's start to surface, I would imagine only the smaller ISP's if any would be tempted
Comment (1)
Hard/impossible to know who they are approaching but I would have thought Exetel would be at the bottom of a list of possible customers.
Comments (4)
Why not resell TPG ports? Optus, AAPT or Telstra are not your "friends" either.
Isn't the game now to maximise retail customers then migrate them to the NBN? Comment (1)
What is common in these three examples is a mindset that fails to recognise that at least for some people, how a seller behaved previously or how they behave elsewhere, might actually be significant in any future proposition. Price isn't always the final arbiter.
Also for the last two, their original offers show a complete lack of understanding of the current market or an assumption of a naive client. Comment (1)
1) I'm not sure that TPG's network is remotely in the class of the three other carriers we buy from. If the current apparent under provisioning of backhaull by TPG is a reality why on Earth would you use it?
2) Your assumptions on what the 'game' is now may be correct - I don't have the ability, or luxury, of looking that far in to the future. Comments (4)
I disagree with Exetel being potentially at the "bottom" of TPG's approach list.
In reality, you'd probably be nearer the top - can you name a bigger residential ISP in terms of customer numbers who hasn't committed to putting DSLAMs in all the profitable exchanges? Of course I'm not attempting to question your business decision making process, but as a casual observation perhaps this is an example of TPG trying to make good on their public allegation of being "just like Optus" with regard to their wholesale and retail operation ownership. The idea that they have congested backhaul anywhere is quite quizzical though, given their ownership of Pipe's metro assets and the relatively low costs one can get 10Gb/s boxes from companies like Huawei, which TPG obviously have a very strong business relationship with. Comments (2)
Chris,
You may well be correct but: Pipe doesn't have all of the footprint covered by TPG's exchanges. 10 gbps routers/switches are not inexpensive 'even from Huawei'.....and TPG needs a lot of them The current rising complaint levels (ignoring the dummies) are an indication of building congestion and a reluctance to address the issue if it is in fact the case. The move from 1 gbps to 10 gbps is very expensive for any network deployer. The 'return' TPG would get on such an investment is problematical - it seems the TPG steam roller is running out of steam in terms of new net adds and is suffering increasingly from the Telstra Retail behemoth in saturation marketing terms and expenditure ability. The cost of a TPG net add today is likely to be much higher than it was 6 months ago and is unlikely to fall. The average ARPU for a new TPG customer is also likely to be lower and the actual gb usage is likely to be growing higher each month. A dangerous conjunction of circumstances that have no ready remedy given the tack that TPG has appeared to have taken over the past two years. Comments (4)
John,
I doubt very much I've any hope of being correct, being an observer outside of the industry! One of the reasons I read your blog is the insight it gives into an industry I find fascinating (both in terms of technology and business process). Another reason is the frank and direct replies you give when someone asks a question. With regard to TPG's practices, I have an number of friends who have TPG-provided ADSL2+ connections, and they all report the following problems: At times, data flow simply stops. There are no line sync or PPP errors, things just stop. Accessing one's workplace is often problematic, given TPG's insistence on tromboning their residential users to Sydney and back for non-IX reachable destinations within Australia. International speeds are very hit-and-miss, given the very strange approach TPG has taken to using their SXC and PPC-1 wavelengths. Changing service type (for instance, from Naked to ADSL2+ with TPG line rental) is simply impossible,even though both use the same hardware and are ULL services. * Products are promised in forum posts and ASX presentations that either materialise months after their initially stated availability date if at all. This doesn't say anything about the business / corporate offerings, but it seems to me TPG should be fixing some more basic problems with their residential operation prior to throwing bigger download limits at the business problems they have. Comments (2)
Chris,
Interesting feedback on your friend's connections. If that is a general experience then there appear to be some very real provisioning problems apart from the BGP issues that are implied in the comments on international routes. Comments (4)
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