John Linton
You start with $1,000,000 and leave $100,000 in a security guarded locker at the airport.
Possibly Rupert Murdoch, and noted huge money gambler Kerry Packer, should have heeded that old joke before turning over hundreds of millions of dollars to the One.Tel management to buy 'spectrum' in the hysterical auction the Australian Federal government ran that sold 'air' (sorry 'spectrum') to the gullible "visionaries" at the turn of the century.
I think the only snake oil con that has surpassed the sale of bottled "spring" water in the history of commerce has to be the sale of 'spectrum' by governments in the late 1990s and early 2000s.
Of course the $A600 million (or whatever the final figure was) invested by News Limited and Kerry Packer in One.Tel disappeared completely within two years of it being invested and the One.Tel company disappeared with all of the investor's and shareholder's funds along with it. Same story with the investments made in PBA which returned (was it $A19.00?) when Commander bought the iBurst spectrum - probably that few dollar figure represents something like the true cost of 'spectrum'. Same story now that Kerry Stokes has ponied up some $A120 million to buy the Unwired spectrum which originally cost, depending on which set of figures you read, over $A500 million including the base stations; at least the original shareholders will get some money for their shares.
Unlike the Las Vegas gambler in the old joke - spending money on empty air only gets you the ability to then spend even more money on wireless base stations and backhauls to use it. Of course if you're Telstra, Optus or Vodafone you get your money back after ten years or so and develop a very valuable mobile telephone business that has, at least today, some very real value - you did have to take a very long view of your investment and you did need billions of dollars not hundreds of millions to reach that situation of course.
It appears the lessons to be learned (unless you have a lot of patience and billions of dollars and a 30 year strategic plan) are:
1) Pay nothing for the empty air
2) Develop a strategy that isn't premised on wide coverage
3) Don't use a technology that's proprietary in any way
4) Have your own customer base that can use the service from day one
5) Identify a target market at least ten times the size of your own customer base that has a compelling reason to buy the service
6) Be prepared to lose everything you invest
As I talk more with the people who are able to sell wireless data access at rates that begin to approach levels at which it would be possible to provide a wireless service to end customers it seems that the cost of entry keeps rising. Not really surprising. If I had to make a decision today the cost would be well over $A1 million and almost certainly closer to $A2 million. If you say those numbers often enough they don't seem so big - a view that will probably last until it gets close to the time you have to sign over that amount of money.
So last night I, for the first time and being fully aware of 1) to 6) above, began to consider how Exetel could use the money that will be required to gain access to a 3G network in other ways and I am becoming intrigued by the possibilities - at least as a back up to getting access to an established 3G network.