Sunday, August 21. 2011One Of The Tougher Decisions.....John Linton ....that companies like Exetel are now faced with is - is there any future in continuing to buy residential services from Telstra Wholesale? It's a strange scenario as the only reason the Exetel became involved in providing end user services was because Telstra created a wholesale operation that allowed start up companies (as Exetel was then) to enter the business. Nevertheless, seven or so years later the concept of buying wholesale services from an organisation that sells those service to retail end users at lower prices is not a tenable scenario. Unlike some others in this industry I am not 'whinging' about this situation but Exetel does have to make decisions based on current and likely future circumstances. 'Things' have changed a great deal since Exetel entered the market in January 2004. In those 'old days' Telstra was selling residential ADSL services at sky high prices and was providing almost non-existent end user services to an almost totally 'uneducated' end user market with no experience in using the internet. There was a clearly defined, and profitable, opportunity for start up ISPs (providing they had some sensible engineering and marketing skills) to become a Telstra Wholesale customer and provide an ADSL service at something like 50% of the prices that Telstra Retail was then charging and still make a reasonable profit. For Exetel, that lasted for around two years before Telstra started to react to their increasing loss of future customers by playing a less virulent version of their current "win back games". Fair enough - no-one can seriously complain that Telstra Retail was always making far too much money out of providing a simple service and end user across Australia were better off paying Telstra less for a simple service rather than the ridiculously high prices they were previously paying - in fact, a simple reminder that competition is good for end users. And so, this has been the case for some years now and shows no sign of changing in the immediate future. Is it good for Australian residential users? I would have thought it would be impossible to argue that it isn't. Is it good for companies like Exetel to try and offer well priced services in the face of a wholesale provider who sells those services to retail end users at lower costs than they sell to Exetel? Clearly not. So what does an Exetel type company do in such circumstances? Well.....toughie....but as Exetel only entered the residential ADSL market on the basis that it would provide services at the lowest cost but at a quality and reliability equivalent or better than any other provider in Australia - the answer is pretty obvious. If we can't provide a lower cost service than Telstra to residential end users then we have lost the only reason for being in that market and need to face reality and concede that there is no purpose in offering Telstra based residential ADSL services any longer. Telstra charges more for ADSL ports and back haul, by a huge margin, than Optus or AAPT does and is far more difficult to deal with - in every aspect of business. The business dealing difference could well be totally Exetel's fault but that doesn't seem to be the case in our dealings with ALL of our other suppliers so I am not certain that is the case. I am unequivocally certain that Telstra's wholesale prices are approaching double those of our other ADSL providers. When we started Exetel 100% of our revenue came from Telstra dependent services. Over the years that percentage has steadily fallen.....a significant reason being Telstra's 'win back' campaigns targeting our residential ADSL users.Today, Telstra supplied residential services account for around 30% of our revenue and contribute almost no profit. I doubt that our situation is any different to similar sized companies, if in fact there are any left of our size, and the decision to 'get out' of the Telstra supplied residential market is pretty cut and dried on a financial basis and we have been "umming and erring" about taking that decision for several months now. Probably the only reason that has prevented that decision being taken is, quite probably, a misplaced concern for our longer term customers who would be affected (I am assuming they have stayed with Exetel because they see some value in resisting Telstra's constantly repetitive 'win back' attempts). It's a very difficult decision but one that Telstra makes easier to approach every time I read the daily ADSL win/loss report. News like this also reminds everyone that a recession is never pleasant for businesses under assault: http://www.smh.com.au/business/jobs-under-pressure-20110820-1j3ls.html Copyright © Exetel Pty Ltd 2011 Trackbacks
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I hope you don't stop selling Telstra ADSL services - they're all that's available in my area.
When I compare the current ADSL plans from Telstra and Extel, the Exetel (Telstra based) plans are MUCH better value than what Telstra offers. To me they seem to be highly successful at providing services "...at the lowest cost but at a quality and reliability equivalent or better than any other provider in Australia". If they contribute "almost no profit", are they priced too low? Maybe I'm missing something. Comments (3)
The Telstra plans are priced to compete with Telstra - if they can't do that then they are not in the race.
Telstra's telemarketing offer 'come home' discounts of over $200.00 so 'list prices' are only for the mugs. Comments (6)
They've never asked me to "come home" - even though I was a BigPond customer for several years in the '90's and have always had my landline with them. So they've got my number.
And even if they did offer a discount of $200, that would be amortized over a 24 month contract - say $8/mth in round numbers. That's still not as good as Exetel price-wise and there's none of the handy add-ons. If Exetel does stop supplying Telstra based services, aren't you just dumping a big chunk of customers who will probably become NBN customers (or whatever comes after Telstra ADSL)? Comments (3)
Quite a few of my relatives are with Exetel on "Telstra only" exchanges. (eg. 2446 post code). Please don't force them to go back to Helstra! Noooooo!!!!
T. Comment (1)
In hindsight, I really, really wish that Exetel did go down the DSLAM route. That seems much more reliably profitable than other options.
If you drop TW, then you lose so many customers and potential customers, it surely isn't worth dropping TW. As has been said time and time again, Exetel offers some nice extras and better features that are not available to ordinary Big Pond customers. Sure, they do have better business products today, but most people don't use them, they use a plain old residential service. My current view is that both Optus and Telstra are trying to get as many customers as possible in order to best benefit from the NBN changeover -- by the look of it, they stand to win handsomely with an NBN changeover and the more customers they have at the cut-over point, the better the deal for them. Exetel may be able to win in a similar way, but I've no idea if that is possible. In any case, it would be more natural for existing customers to move over and keep their current provider with the NBN down the track. Comments (3)
Andrew,
You are quite right as far as current things go. However it is getting more and more difficult dealing with Telstra and, unless things change significantly, there is no future for a company like Exetel continuing to be abused by such a company - it really sticks in your throat on so many occasions. We have limited options but we really do have to do the best for our customers and shareholders rather than paying through the nose to benefit Telstra shareholders and over pay Telstra employees. Comments (6)
Is it possible to cherry pick exchanges now and install an Exetel DSLAM in them; are you able to get a good deal on DSLAM equipment these days?
I know at one stage you talked about DSLAM sales people almost falling over backwards to try and get you equipment to use. Considering the current situation, I would think that you might get DSLAMs at even better pricing than you've ever been offered before. If you could DSLAM a few exchanges, find success moving customers from TW to your DSLAM, then other exchanges could follow. You have customer numbers to do this on at least a few exchanges don't you? Comments (3)
While there is no problem in buying DSLAM equipment at prices far lower than a year or so ago its not a good 'strategic' thing t do.
Comments (6)
Maybe not today, but if NBN lags out longer, it might make it more worthwhile in the meantime. Unless it interferes too much with other agreements in place. Internode and TPG seem to manage to have a range of other DSLAM options unless that has changed, whilst still being able to run their own DSLAMs. If I remember correctly, I think Internode used to (and maybe still do) build up TW customers at exchanges and then transfer customers over when the numbers make sense and they are able to get around to installing their own DSLAM.
Comments (3)
There is little doubt that ADSL will continue to be profitable for a while.
However the concept of building out new DSLAM coverage in late 2011 is not a sensible one....in our opinion. Today, and for the immediate future, it is economically more viable to buy DSLAM ports at reduced prices from those companies who have already got 'spare capacity'. Comments (6)
I for one hope you don't drop these services. My exchange only has Telstra Dslams and is not likely to have any other carriers, maybe ever. If i thought Telstra was good value i would move. I have been with Exetel since 2005, and many of my friends are in the same situation. How many Teltra only Dslam services has Exetel?
Comment (1)
It is something that has to be considered but a decision is not imminent.
Exetel has approximately 30,000 customers on exchanges where no alternative is available. Comments (6)
If we pay a little more, will that help?
I really don't want to be "divorced" after a happy seven year "marriage". Everything is just perfect at the moment. Comments (3)
We are happy with what everyone currently pays.
If we do decide, at some future time, to make any changes we would exempt our long term customers from those changes. Comments (6)
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