John Linton's Personal Musings

I can't really swear to this - but my memory of a 40+ year working life to date is of maybe one or two days every 10 years or so when I've actually not done any work because I was "sick". I actually can't remember the last day/part day I didn't work but I'm sure there probably was one in the past five years.

I can't take any personal 'credit' for this achievement - it's obviously a combination of a genetic inheritance, a protestant ethic upbringing and schooling (in days when such things still existed) and significant intakes of alcohol ever since rendering my blood stream so toxic that germs and bugs can't exist in it.

However my personal 'good health' pales in to insignificance compared to my wife's, or for that matter any other mother of my acquaintance including my own and my grandmothers, both of them, who as far as I've observed have never been 'sick' for a single day of their lives. My paternal grandmother died at the age of 93 from a heart attack while scrubbing her kitchen floor; as she once told me when I was a boy - "I'm far too busy to get sick; that's for those that can afford it".

I sometimes despair at the low standards of hygiene in so many Australian eateries - how do these places manage to stay in business when they so regularly poison so many of their patrons? I make this point because so many people I've been associated with over the past 20 years seem to be unable to attend work on Fridays and Mondays due to food poisoning picked up at restaurants in every geographic location of the Sydney Metropolitan area.

(I imagine they still manage to survive because the particular food poisoning they inflict on their customers only lasts a day and leaves the victim in the peak of health when they return to their job after destroying their ability to work for a period of 24 hours).

Apparently motherhood confers instant immunity, to every physical and mental ailment known, on those females lucky enough to bear children - or perhaps, they are far too busy (and far too responsible). Something we males can never get the benefit of. Females before becoming mothers don't seem to be as fortunate and males seem to be particularly prone to being poisoned by Sydney food at what appears to be an alarming regularity.

Maybe there's another reason or perhaps more than one other reason? If there is, then the various State and Federal governments aren't aware of it and seem to be aware that the hygiene standards in Sydney restaurants continues to fall as the various NSW State agencies responsible seem to indicate that sickness increases in a direct proportion to the amount of time each person spends working for the same employer.

This lack of hygiene in Sydney eateries is a concern to small companies such as Exetel who are leanly 'staffed' and when some ptomaine loaded meal strikes down one of our employees it puts an unreasonable burden on the, now short staffed, part of the operation who have to do the work of their stricken colleague. Of course it doesn't impact larger organisations and especialy not government agencies who are able to calculate the likely daily incidences of personnel stuck down by sudden illness and actually over staff their operations to compensate for what is effectively a permanent absence of a percentage of their total employees.

Not having the luxury of over staffing nor having any form of legitimate medical knowledge I've found, what appears to be, equally effective ways of improving the general health of people relied on by others over the past 20 years or so. These ways are based on monetary reward for those people who manage to avoid ptomain risk laden restaurants and who regard over the counter phamaceutical items (Panadol, Codral, Fisherman's Friend etc) effective ways of supressing the more disagreeable symptoms of 'coughs and colds'.

According to State and Federal Government beliefs (and those of the remaining militant unions) it appears that any individual's general health deteriorates alarmingly in direct proportion to the time they stay with the same employer. Apparently working for any employer for a second year results in the employee's health being serious compromised by 60%. What other construction can be put on the fact that "sick leave entitlements" assume that every employee's perfect health when they join a new employer protects them from ptomain and flu as NO sick leave entitlement is present for the first 3 months but the deterioration in their health requires five sick days in the next 9 months which increases by 60% from 5 days in the first full year to 8 days in the second year?

Clearly the solution to maintaining perfect health is only to work for an employer for a maximum of three months.

I've actually found that the reverse applies. Employee health actually improves in direct proportion to the way they are rewarded for doing the work of people who are continually struck down with sickness that prevents them from working for periods of 24 hours. It seems that if a person who hasn't taken any unplanned time off for short term "sickness" is paid a bonus at the end of each year equivalent to 2 weeks of their average pay in that period their health improves markedly.

Similarly if their next remuneration increase carries a 'multiplier' based on the number, or rather the lack of the number, of sick days they've been forced to take in the previous year most people seem never to get 'sick' at all.

Pretty much people seem to become like me and every mother I've ever known - they never get sick and minor ailments are dealt with by non-prescription pharmaceuticals. (or maybe like me they increase their alcohol intake to the level requred to eliminate bugs from their blood stream)

I wonder whether I should write to the Australian Medical Journal or Lancet about this world shattering health breakthrough?

Firstly let me apologise to Nick Hornby for 'borrowing' and messing around with his protagonist's statement about Arsenal in his very funny and insightful book 'Fever Pitch'. Having watched the film of the book some years ago, my wife finally understands the terrible nature of being interested in a sporting team that never reaches its potential.

Any male who has ever truly been a 'follower' of the fortunes of a sporting team will recognise the meaning of that quote. The bad news is that it will never change even when you are as old, and therefore are meant to be rational and mature, as I am meant to be in my 60s.

How did an immigrant from the UK at the age of just less than 18 (and an avid Arsenal supporter courtesy of a fanatical uncle who took me to Highbury at the age of 7) who spent his first 5 years in Australia in Sydney become so wrapped up in a provincial Victorian club that played a game I had zero knowledge about?

By happenstance as with most strange passions that descend upon immature males - as well as older males who are meant to know much better.

In 1967 I went to Melbourne on a work transfer for what was meant to be 12 months. One of the first things that the kind workmates did for me was to take me to a VFL game - they were all avid St Kilda supporters and St Kilda were at their first (and only?) peak of their powers having won the premiership the year before. It was explained to me that now I was a "Victorian" I'd have to support a VFL team or I would never be able to survive a Melbourne winter. They then, as I quickly learned was the case at every VFL game I ever subsequently attended, joined in with the crowd around them in loudly, ferociously and (it seemed to me at the time before I "learned" better), viciously to barrack for St Kilda's every action and to ridicule the efforts of a grey headed ruckman, a small blonde rover and, for a sporting athlete, a portly full forward all of whom were wearing some unattractive horizontal blue striped jerseys.

St Kilda went on to win the game by ten goals and I learned the names of the objects of my work mates' ridicule were Polly Farmer, Billy Goggin and Doug Wade - I became an avid and long term Geelong follower from about 20 minutes into the first quarter that day and 'old grey haired' Graham Farmer had a freeway in Perth named after him (and was regarded as the best knock ruckman of his generation); the 'portly' full forward Doug Wade has a stand at Kardinia Park with his name on it (yes I know it's had two names since but to me it's always Kardinia) named after him and won the Coleman medal twice more despite competing with Hawthorn's Peter Hudson and some person from Collingwood called Peter McKenna in those years; and I don't remember what happened to Goggin.

Throughout my ten years in Melbourne I made my way for the two hours it then used to take (on a good day) to Kardinia almost every weekend that Geelong played and to those other grounds in Melbourne that used to exist then for the 'away' games. I was at the 1968 grand final loss to Richmond and suffered the drive to and from work from my unit in Hawthorn through the Richmond heart land past Richmond town hall each morning for the following horrible week.

They never did better than that Grand Final loss for the rest of my time in Melbourne.

When I returned to Sydney I made sure I obtained a powerful enough radio that could get 3GL and I listened to most of Geelong's games through the remainder of the 1970's and into the eigties as Geelong continued to lose on a regular basis sometimes after being 40 or 50 points up late in the third quarter. I managed to get to the odd game at Kardinia (mostly at least once a season) including the game that Gary Ablett kicked his 100th goal. I drove to Melbourne with my middle daughter to see the semis and I attended two grand finals that Geelong subsequently lost. I was there for the final against Hawthorn (down by 36 points at quarter time and getting back to 6 points at the end the day Gary kicked 9 goals 1 and won the Norm Smith medal. I left the Grand Final against Carlton at half time and walked back to Tullamarine because I couldn't bear to even talk to a cab driver.

I was so devastated by the Hawthorn loss that I din't attend the next two GF appearances by Geelong against West Coast - I even cruelly gave my tickets to my two older daughters (who had, like their father, become chronic Cats supporters after being dragged to various football grounds in mid winter from the age of 3).

My wife came to terms that it was pointless attempting to talk to me after Geelong had lost a game and my Victorian friends never lost an opportunity of making nasty comments about the latest Geelong failure on the field. My good 'football friend' (and hapless Essendon supporter) would constantly ring me during telecasts of Geelong games enquiring "how're they going mate?' and then laughing uproariously.

I watched, on TV, the demolition of North Melbourne three weeks ago with almost indifference.

I watched, feeling physically ill for over an hour, the game against Collingwood and shared with Mark Thomson his sentiment when asked how he was feeling about the narrow win when he said "I wish I felt happier".

And so....it's a little over three hours to the start of the only game of the year in Australia.

How do I feel - not a lot.

I didn't buy tickets to the game. I can't bring myself to watch it on TV - though I'll tape it and, if they win, I'll watch it some time.

I'm going to go to a movie that starts at 2.30 with my wife.

After 40 years of being intensely interested in Geelong's performances I really wish everything goes well for them and that they win today and treasure the win for the rest of their lives - they really deserve to cap off their great year and the 6 years preparation the majority of them have put in to achieving every player's goal/dream.

Go the Cats - I just can't bring myself to watch.

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.

I continue to slog through the slough of despond that seems to be the environment surrounding every aspect of finding a wireless broadband service that can be offered by a small company like Exetel. I've begun the lengthy and delicate communications with the global mobile minute brokers (the ones that I've been informed about) that appear to be the only long term possibility of providing a service that will meet the needs of a large percentage of Australian users - and when I say lengthy, it will be at least 6 - 9 months before any solution could be reached; if in fact that turns out to be possible at all.

Concurrently I've begun to look at all of the other options one more time and have initiated new contacts within the organisations that could possibly realistically wholesale a wireless service. Our problem is that we aren't big enough to make the sorts of volume promises that are likely to be required and I'm too old and "wise" to bluster and exaggerate to get the dialogue started on such a basis.

In the mean time we will see what's possible with the remaining local wireless companies and we will even listen to what Unwired have to say having not spoken with them for over 18 months after their last disastrous attempt to bully us into changing the contract we had with them in ways that would have been totally disadvantageous to us. I must be more desperate than I thought I was.

Because of the unfortunate attitude of some personnel at Unwired we've been unable to improve the wireless service we offer to customers and that's not a good situation. Perhaps the Channel 7 takeover of Unwired will change things but, at least in terms of wholesale, it doesn't seem likely to me as they will clearly have their own needs and dealing with wholesale customers is unlikely to figure in their thinking other than to stop doing it altogether as I think they have already done with the ISPs who tried to sell on a wholesale basis (PeopleTelecom, InterNode, AAPT and possibly one or two others).

We have re-looked at the iBurst network which when we looked previously was not a suitable service for Exetel but it's changed substantially since we last seriously considered what we could offer if we became a wholesale buyer of access to it. It's grown a lot in coverage since we last looked but the wholesale costs are still very high and very difficult to "package" so that an end user sevice is attractive. It certainly wouldn't be suitable for anyone who wants to download more than a gigabyte but it may prove to be something that business 'travellers' could find attractive - though with all of the unsecured wireless networks that are available in virtually every part of Sydney, Melbourne and Brisbane that have any sort of office buildings "travelling internet" is something that is free in most places.

Providing we can reach sensible commercial terms, and assuming that there are no positive developments with Unwired, we will trial an iBurst based solution aiming at some specific 'market segments' starting in November

I'm still of the opinion that only a major mobile network is the long term answer for a wireless data service but we definitely need to replace our Unwired service in the not too distant future and that means we need to find a series of solutions that can be implemented over the next 18 - 24 months as, from what I've been able to find to date, there is no single solution anywhere in sight.

The one thing that is certain in setting up and operating a small company is that you never have quite enough money to do all the things you want (need?) to do but you comfort yourself with the thought that one day in the not so distant future you'll have grown the company to a point where "economy of scale" will produce that extra amount of monthly profit that will allow you to buy those extra bits and pieces and cut back your working week to less than 80 or 90 hours.

I was reminded of the fallacy of this thinking when some kind person posted a comment on one of my entries in this diary pointing out to me that InterNode had in fact been listed in the recent BRW To 500 Private companies listing (at 446) whereas I had said I could only find one company (Go Talk Communications). The only reason I had commented on the article was:

a) The lack of private communications companies of any size
b) The only company listed seemed to be very inefficient based on revenue per employee

Go Talk was reported as having 320 employees with a revenue of $A136.5 million giving an average revenue per employee of around $426,000 which appeared to be very low to me given the nature of the services advertised on the GoTalk web site which seemed to be cut throat priced telephone calls and calling card minutes. However, I have obviously got no knowledge of their actual margins so I can't comment further.

Obviously large, public, telecommunications companies publish their annual results which obviously include revenue and profit and also include, mostly, other data such as number of employees. If you were to check the latest annual reports of these companies you would see that Telstra (obviously by far the largest and with by far the largest margins) reports not only a handsome nett profit but their revenue per employee is a little over $A403,000 - almost the same as GoTalk's.

The kind person who corrected my error by pointing out InterNodes entry in the article I referenced (and I'm always grateful for being able to correct any wrong statements I make) also made me consider what the meagre data provided in the listing actually meant. The only data available was that Internode had a revenue in its latest reporting year of $A88 million (which was an increase of 54% on the previous year) and had 304 employees (which was a 51% increase on the previous year).

It seemed very odd to me that a medium sized communications company would have so many personnel and that their revenue to employee ratio would be so much worse ($A290,000) than Telstra's which, even after Mr Trujilo's 'slashing and burning' seems to continue to be grossly over staffed and very inefficient (except for the profits which are very, very good - but then Telstra does enjoy monopoly pricing).

There's no reason to doubt the figures provided by BRW.

However......

Exetel's revenue in the past financial year (presumably the same period as reported on by BRW) of around $A30 million compared to Internode's revenue of around $A90 million - meaning InterNode is three times larger than Exetel in revenue terms.

Exetel had 30 employees at the end of the FY2007 reporting period and, presumably at the end of the same reporting period, InterNode had 304 - meaning Intenode has ten times more employees than Exetel but only three times the revenue.

The figures for GoTalk are slightly better (4.5 times the revenue with 10.7 times the number of employees).

Clearly both GoTalk and InterNode make huge margins on the services they sell (alternatively they get an awful lot of Federal and State Government subsidy money) otherwise they couldn't stay in business - the monthly salary bill would bury them.

As I doubt that GoTalk gets any type of government subsidy the reality must be in the profit margins which means that both of those companies must buy at significantly better rates than Exetel is able to do.

I very much doubt that Exetel is ever going to be more efficient than it is today (around $A1 million in annual revenue per employee with an all inclusive remuneration cost of around 6% of revenue).

How I can reduce the current supplier costs to match what other communications companies must be paying is not something I have the remotest idea of how to do.

Maybe it's past time to find a replacement who can do that.

I've been working on the best ways of reducing Exetel's IP bandwidth costs moving forward and have accumulated a fair amount of current information to consider. Over the weekend I read the recent CommsDay articles and the subsequent US media comments about the possibility of Google participating in a new trans-Pacific cable:

http://www.commsday.com/node/188

A few months ago PIPE was reported as being involved in providing another trans-Pacific cable but the details of that announcement are too vague for me to be able to understand what may become available and when it may become available to small companies like Exetal.

We will have 'firmed up' the costs of buying direct from Southern Cross within the next few weeks which, at least currently, is by far the most economical way to go but has very stringent contract conditions.

Currently Exetel spend around $400,000 a month on IP bandwidth and it's the largest single expenditure we have after the $1,000,000 or so dollars we spend with Telstra Wholesale each month for ADSL1 'tail' circuits. It's therefore a very high priority in terms of the cost reductions we need to put in place over the coming two years and we have to at least make a start on reducing those costs in the immediate future.

And it's becoming clearer that that might be something to be even more wary about than has been the case in the past.

Despite the reports in the press earlier in the year that seemed to state that some ISPs were claiming that IP costs are rising that has never seemed to be the case based on the information that I've been privy to. Today the 'offer cost' of IP at around the 1 gbps level is less than $A200.00 per mbps which is around 20% lower than Exetel currently pays on contracts that have a few months to run. Generally Exetel has always had to sign 24 month contracts for IP to get a reasonable price and we've been happy enough to do that - partly because we thought the price was good and partly because we were too small to have much choice.

If PIPE and/or Google do manage to get a new trans-Pacific cable in operation by mid 2009 I can see why Southern Cross itself (and those companies that re-sell Southern Cross capacity) are apparently being so easy to negotiate with recently and how surprisingly 'low' the price of SX cable capacity has become - fear of what new cable capacity will be sold at - especially if it's Google who would not only negatively affect the growth of SX's current customers but may well reduce the amounts those current customers buy from the SX consortium and its resellers.

Exetel will start to re-sign its IP contracts in March 2008 and, not unreasonably - as in the past, significant discounts are being offered for 24 and 36 month contracts with really big discounts being offered for 48 and even 84 month contracts. However if Google DOES lay a new cable and DOES get it operational in mid 2009 then signing even a 24 month contract in March 2008 becomes a much bigger 'gamble' than it appeared to be until I read the CommsDay article.

Some time in the next two months we will begin to trial the P2P caching products we contracted for earlier this month and will begin to understand the quantum of how much trans-Pacific network capacity will be 'saved' by this concept. If it lives up to the lower estimates of its developer's claims then it will reduce Exetel's IP costs by around 25% without impacting the customers in any way. If it lives up to the more optimistic claims it could reduce trans-Pacific bandwidth by 50% - but I really doubt that scenario.

Depending on how much information becomes available about Google (or even PIPE's) intentions over the next three months and depending on how much efficiency P2P caching actually delivers the permutations of what needs to be considered in making the rapidly approaching decisions on who Exetel should buy IP from is becoming increasingly more complicated.

Depending on which business 'bible' or State or Federal government statistics you subscribe to the failure rate of small start up companies is something along the lines of:

40% fail in the first twelve months
A further 30% fail within 24 months
A further 20% fail within the first 36 months

After 36 months very few fail but over 50% are absorbed/taken over with less than 1% completing a tenth year in business.

The reasons for the 90% failure rate in the first 36 months are variously given as:

40% have too little capital - or access to capital
30% have inadequate management skills and planning abilities
25% are unable to cope with a sudden/unexpected change in the marketplace in which they operate

The fourth year is generally described as the transition year in which the founders of the business have grown it to a point that is beyond their ability to continue to directly control everything and they must pass over a significant amount of day to day decision making and personnel management to people they've hired.

The fifth year is generally described as only being possible for the owners to 're-generate' the business by having the time made available by having put in place competent people to handle the operations they used to be totally involved in.

Exetel commenced offering communications services to end users in January 2004 and 2007 is our 'fourth year'; and 2007 is rapidly drawing to an end. This year I've done my best to hand over a great deal of the day to day operational responsibilities to the very able and capable personnel whom Exetel has been fortunate enough to recruit over the time its been in busness - I've clearly done an abysmal job of this key requirement and there is now very little of the year left.

I was forcibly reminded of this inability by a number of incidents over the weekend which disturbed me greatly. The problems were all of my own causing (which provided absolutely no comfort) and caused me to review what I actually had to do in the immediate future. It seemed to me there was an awful lot to do and I'd left precious little time to do it.

In some, before the stone age, psychobabble analysis done by McKinsey's for IBM back in the 1970s my test results exactly fitted their sales profile of "hunter/killer" and I apparently had none of the characteristics of the "nurturer". Not unexpectedly (psychobabble or not) I spent the whole of my IBM career as a rep or manager in new business and never had responsibility of maintaining established accounts. It was, in many ways a self fulfilling 'prophecy' and, irrespective of the accuracy of the initial assessment, 10 years of 'conditioning' made it observably 'true'.

This was undoubtedly the reason I have been prepared to act as a consultant to other companies over most of the past 20 years. It was that I got a great deal of pleasure and professional satisfaction from growing new businesses from 'ground zero' to effective operation and that I had never got any real satisfaction from beyond that point so I was happy to move on to the next start up opportunity. At the end of the growth phase in each of the assigmnets I took I moved on to something new for some other company - I don't have that option any more.

So I find myself having to do some really key things that I've never had to do in the past and, even allowing for the hyperbole of the psychobabble, am inherently unsuited to carry out and even more inherently incapable of maintaining.

I guess some old dogs do have to learn new tricks when there is no other option.

As we have some really interesting plans for Exetel's fifth year it's going to be a really important process to complete and, as with everyone who procrastinates, I've only got 3 of the 12 months left to do what's required.

I spent some time this weekend looking over the 'prospectuses' (prospecti?) of three companies that have been offered for sale recently. These are not companies like aaNet, Koala, Veridas,WildIT that were either about to be wound up by their creditors for non-payment of bills or actually in the hands of receivers/liquidators, but companies that are trading profitably whose owners, for diverse reasons, want to move on to other things.

I've never, to date, considered that there was any point in paying money for another,smaller, company's "customer base" as, usually, the price per customer could never generate a profit and the numbers of customers are unlikely to raise the combined customer base to a level that could deliver either economies of scale or better buying leverage.

My interest in the three companies that are currentlyfor sale is only based on the fact that their customer bases are principally business/corporate users and that they all, at least based on the information provided, seem to make a much healthier net profit than Exetel currently does from its business SHDSL and Ethernet customers. Of course these figures are based on internally generated documentation rather than the actual tax returns the companies would have lodged but, nevertheless, as they are going to be scrutinised in that detail by a prospective buyer I'm, perhaps naively, assuming they are pretty close to reality.

With asking prices of over a million dollars, closer to two million dollars for one of them, it's not likely that Exetel will proceed with a serious discussion that would only waste the owners and their agent's time in these three instances. However it is one more 'straw in the wind' that things are very difficult in ISP land and in the view of these owners of profitable businesss that have been around for over five years (and from the initial information provided) continue to grow in a very acceptable pattern over the past three years it's time for them to take a profit on their investment and move on to other things.

My cursory look at the information provided indicated that each of the companies would be able to greatly reduce their total expenses if they were able to buy from their main carrier/providers at lower prices than it appears they are currently paying and that may well interest other potential purchasers of these companies (assuming that those purchasers buy at the rates I would have thought would be avaialable to an ISP with a reasonable spend with the main carriers). So I would think that each of these companies will find a buyer in the not too distant future.

My view is that if I offered Exetel's agents a sign up commission of $2,500 per customer for each new SHDSL or Ehternet customer they signed up for two years then Exetel would get more new customers, revenue and profit for it's $1,000,000 than we would get by spending $1,000,000 on buying one of the three businesses I examined over the weekend.

It makes me wonder why anyone would buy another ISP/comms company at any realistic price.

I seldom get involved, or even appraised, of the dealings that Exetel has with some of the amazingly hard to please people that become Exetel customers. It isn't that I'm not concerned when customers reach the conclusion that Exetel has failed them in some way - just that I have neither the inclination or temperament to deal with unreasonable people - and I certainly don't have the required abilities.

I sometimes have to become involved when some incredibly unreasonable person somehow comes to my attention which is what happened a day or so ago.

I've seen some trivial complaints in my time in business but I don't think I've ever either seen personally, or been made aware of, a person going to such extreme lengths to claim that Exetel had unfairly and unreasonably overcharged them by 5 CENTS (this is not a typing error - the amount was 5 CENTS) and they were going to go to the TIO, ASIC, Channel 9 and all the other 'usual suspects' as well as spreading the word about how dishonest Exetel is "to every corner of the world".

Breathtaking in its sheer idiocy if this had been one telephone call (which presumably cost more than 5 cents) and a follow up email. But it wasn't - it went on for days and involved the TIO and "other undisclosed government departments".

If this had been some retiree who was looking for some idle amusement on a cold or rainy day I think I could just have understood how someone could be so bored they would find the waste of time and money better than going to a movie or renting a video. It subsequently proved not to be the case.

This complainant (and let me say there was absolutely no "fraud" or any other form of "illegality - just his own inability to understand that an SMS is 160 characters around the world and has been since SMS was introduced as far as I remember) was not a bored retiree but an Exetel Agent who had signed up over 60 ADSL customers over the 2+ years he'd been an agent and who earns more than $200.00 each month in commissions from those sign ups.

This agent spoke with Exetel personnel on several occasions using completely unacceptable words and wrote similarly abusive emails. He then took his 5 cent complaint to the TIO who, quite rightly, took very little notice of what he had to say.

Despite agreeing to refund him his 5 cents of over charge he persisted in abusing the two people with whom he spoke and continued the same abusive attitude in emails. I became involved when I overheard one of the conversations and asked for the ticket number. I couldn't believe what I read there and formally responded to his email by telling him that there was clearly no basis for a professional/commercial relationship going forward and, based on his incredibly negative views and statements about Exetel, he clearly could no longer represent Exetel to his customers.

Apart from the pointlessly trivial nature of his complaint, and the fact that it would be impossible to see how even he could believe he was "purposely mislead" he has wasted a great deal of his own time and cost Exetel a lot of our own time (and therefore money) over an issue which he was completely in the wrong about!

And of course - he'll have to find another ISP to represent and then tell his 60+ current Exetel customers some story as to why he wants them to incur themselves in the cost of changing their ADSL service - if in fact they are prepared to do that.

Isn't business fun?

I've commented several times over the past few weeks on the ups and downs (almost all downs) of trying to find a 3G delivery infrastucture for data at an affordable price - all current investigations have proved negative and a waste of time to date. I, therefore, didn't know what to make of the report in yesterdays SMH (Business Section - page 29) of the likely takeover of Unwired by Channel 7 via its controlling ownership of the voip provider - Engin.

Channel 7 bought in to Unwired (via Engin) and acquired a 10.4% stake buying at 20% over the previous trading price to acquire that amount of shares in an illiquid stock 2 - 3 weeks ago and has now increased that stake to almost 20% by, again, paying a premium to acquire the shares.

It's pretty easy to understand why a voip provider would see both synergy and commercial sense in acquiring a non-wire line service over which to offer its services; though buying major network infrastructure for voip did seem to be taking a very long view and a big investment for a tiny revenue base that Engin represents. So it appeared highly likely that was always something else that Channel 7 had in mind.

But.........

This was the statement, ascribed to a Mark McDonnell a media analyst at BBY, in the article that I had a great deal of trouble understanding:

"Seven has committed to multi-channelling. Internet-based (sic) video distribution is clearly a further means for (sic) developing a multi-channel alternative to pay-TV and Unwired has significant (sic) amount of spectrum that would be suitable for that."

Is that comment meant to mean that Channel 7 thinks WiMAx is suitable for delivering DVD or better quality streaming TV at a realistic cost?

If it does (and I struggle to really believe that's what it meant) then what is it I don't understand about:

a) The amount of bandwidth actually available in any location to deliver some sort of spread spectrum (or whatever the correct term is) signal.

b) The cost of enough bandwidth to deliver multi-channel TV signal over that bandwidth at an affordable cost to the end user.

c) If there's a whole new concept of how WiMax can be used in some sort of multicast way (like satellite) that allows such an end solution over WiMax why hasn't Unwired and Austar already started to put it in place/yell it from the rooftops in their coverage areas?.

I suppose it'll all become clear in the future if Channel 7 do take over Unwired and announce, in some measure, what their plans are for using the spectrum.

Certainly Channel 7 would make an interesting new network provider and, with their TV content plus a viable residential voip service and an affordable data service could actually deliver the much loved new concept of 'triple play'.

Makes you think that the Packer and Murdoch investments in the One.Tel 3G network some years back wasn't really such a silly mistake - just a few years too soon (and a few hundred million dollars too expensive for the spectrum)?

I suppose it was inevitable that after receiving a string of enquiries from companies that were, allegedly, expressing interest in buying Exetel, or parts of Exetel, we have received three enquiries about whether Exetel would be interested in buying other, very small, ISPs. I've never considered either selling Exetel (it's far too early in Exetel's "life" for that to be feasible or remotely attractive to me personally) and I've certainly never considered paying for some other ISP's customer base or company.

However, it seems to be yet another indication that all isn't well in ISP land and it has prompted me to think about whether there are any ways of 'collaborating' with one or more other companies to leverage some greater buying power to reduce some of the costs of operating a communications company.

I guess the reason for considering such a collaboration was sparked by the analysis of the Southern Cross pricing of an STM16 connection to the USA. I mentioned this in an earlier rambling - that the cost of a 2.4 gbps link between Exetel and, say PAIX, in the US had reached a point where it was becoming 'do-able'. It has immense attractions in terms of reducing the ingress/egress IP bandwidth cost (subject to final quotes it could cut current bcosts by 50%). However it's also contractually demanding and it occurred to me it might be better to 'go halves' with another ISP - preferably one co-located in or close to our current major PoP.

Given the personality characteristics of the few owners of their own largish ISP (not mention my own!) that I have at least some knowledge of such a short list would be very short indeed. The list of sizable/reputable ISPs that could, possibly be considered can be counted on the fingers of one hand (without needing to use the thumb) and of those the likelihood of being able to reach a mutually satifactory agreement would be, at best, (and I struggle for the right word) .....problematic.

Anyway, Steve has contacted one company and I contacted another (we actually only needed half the fingers and no thumb of one hand in the end) and we will see what, if any, real interest there may be in some form of collaboration.

I don't have any real hopes of a positive result with that sort of collaboration but, also sparked by the enquiries we've received concerning buying small ISPs, I'm mulling over the concept of selling IP bandwidth to some smaller ISPs who, I would think, are paying far too much for ingress/egress IP bandwidth than is realistic for them. I would think that Exetel could, if the SX possibility does firm up in to a reality (contractuallyand economically) sell IP bandwidth to small ISPs at 30 - 50% below theiir current cost on a no-term contract basis that would be very appealing to them - and would allow Exetel to use the whole of the 2.4 gbps much earlier than our own dedicated needs would take up.

If I'm totally honest with myself I'd have to admit that the concept of having the cost savings of a direct link to the USA are so alluring I'm trying to find every way possible to justify the risk of a long term contract. I'm also intrigued by the P2P solutions we could come up with if we did have an SX link - offering either direct dedicated bandwidth at one price and P2P cached bandwidth at a much reduced price to smaller ISPs - that would reduce their major costs dramatically if it proved to be seamless.

Then again - maybe this is all megalomania and self delusion.

I'd better get back to the nuts and bolts of running Exetel the way it is today.

It's been a while since I bothered to read a Telstra annual report but, from my rapidly failing memory, I seem to remember that Telstra still derives a great deal of revenue and profit from providing wire line calls. Ever since the Federal Government began to introduce 'de-regulation' of the telephone, and associated services, market back in early 1990s Telstra has managed to maintain, and increase, both the revenue and profit it derives from telephone calls by simply raising the price of telephone line rental as other companies forced it to reduce its telephone charges.

I doubt that many people remember what a PSTN telephone line could be rented for in the early 1990s (certainly not me) but I have a vague memory that it was slightly less than ten dollars a month. I do remember what Telstra charged for a call to the USA which was over $2.00 per minute. So today a call to the USA costs the user of a sensible call provider around 5 cents a minute (and even less over VoIP) while the telephone line required to make that call has risen by over 300% in most cases. Even with that draconian increase Telstra is beginning to see the decline in the combined line rental and call income which is predicted to steepen quarter by quarter from now on.

I'm becoming more knowledgable about telephone service income streams which has been necessitated by Exetel's moves to become a supplier of mobile, VoIP and over ride call services and, since July 2006, line rental - as part of the Optus based ADSL2 services. Exetel started selling over ride services over three years ago, mobile services two and half years ago and VoIP services around 2 years ago. Since we started the revenue we earn from telephone services has increased month on month at a slow, but steady, rate and has always delivered much better profits than the ADSL businesses with which it's associated.

The 'killer' service today is, of course, VoIP which can be provided at a call quality indistinguishable from a toll line but at a fraction of the cost of even the most heavily discounted over ride or pre-selected telephone call service. Of course, VoIP still needs a telephone line to deliver the DSL service that is needed to provide VoIP but the ACCC has forced Telstra to provide those lines at a fraction of the cost of the 'standard' PSTN telephone line.

Every small ISP and Telco, except Telstra, is pushing VoIP as a key service. Of course, if Telstra wished to do so it could do the same (and Telstra almost certainly uses VoIP within its own network and to the far edges of its 'hand-offs' to other carriers) but it can't offer a true user pays VoIP service because, for once, incumbency/monopoly acts against Telstra as they would have to give up their juicy wire line rental and excessive call charge income to do what every other carrier, telco and ISP is doing. Poor Telstra.

As Exetel's telephone revenues have steadily increased we have put a little more effort in to expanding and developing our telephone services. When we delivered the first call via over-ride some three years ago we used a third party company to do our telephone billing (which cost, proportionately, a lot of money) but we have used our own, inhouse developed, call billing systems for almost two years now - firstly for wire line then mobile and now also VoIP calls. It was with some trepidation that I made the decision to install our own VoIP switch almost twelve months ago but, after some minor teething problems in the test phase, both the switch and the billing from the switch have been problem free.

Exetel uses its own VoIP services in its North Sydney offices and for its remote employees/directors in Perth, Mosman and Sri Lanka without noticing any difference between the VoIP service and the Telstra PSTN service they replaced (the Sri Lankan VoIP service may well be even better than the Sri Lanka Telecom toll service).

I was reminded yesterday via an email from a business associate that the calling card market in Australia is still very much alive and still very profitable. We will begin to discuss with him how Exetel can provide the technology and management of VoIP call delivery for calling cards that his company will market. When we discussed this initiative with the Exetel personnel who would be involved in putting this service in place the VoIP engineer responsible for our VoIP switch told us that he had already put in place a 'calling card' voip service (using his home Exetel ADSL2 service) which is used by him and his friiends to make no call charge calls to Hong Kong (where he and his friends had family). Nice to have such enterprising people working for you but even more interesting to me (with my very limited knowledge) was the fact that VoIP calls incurred no charge to Hong Kong because the HK (and Macau) telephone system doesn't charge for local calls (only line rental).

Looking at the Optus/Virgin 'all the calls you wish to make at no additional cost' offer and the similar offers that are now appearing plus the continuing trend to using mobile rather than wire line to make calls it must be pretty frightening for Telstra whose planners will be constantly revising downwards the income and profit from their monopoly services - especially as they are also strangling ADSL development in favour of some new fibre/cable delivery platform - which by the time it's in place will not be very useful for carrying much telephone call traffic at anything like Telstra's current charges.

The intense competition in every part of the communications market is driving the need for additional and lower cost services at an ever quickening rate. Exetel, a very small company, has 11 major new product/service/development projects in process at the moment compared to 3 such projects a year ago.

Small companies have an advantage of speed to market and adaptability which large companies don't have. Perhaps, like risk taking, our only advantage in dodging around beneath the feet of the elephants.

When I worked for large multinationals (back before the dawn of time) I formed the view that the two most pointless and expensive areas of those businesses were Marketing and Human Resources. My views were based on many factors but the principal one was (and obviously I was biased as I was alwys in sales and always successful) was that the two departments were constantly being staffed by people who failed in sales positions.

I have never changed my view of "Marketing" - I regard marketing departments as the most completely useless wastes of money that any commercial organisation can countenance. I grudgingly changed my view on "Human Resources" departments based on the greater complexities of industrial employment laws and concommitant activities they necessitated. However I could never understand why anyone with half a brain thought that "Human Resources" should be used as part of the hiring process.

These entrenched prejudices have been re-kindled over the past month by the number of contacts I've had from, so called, "Personnel Consultants" who, somehow, have got hold of my contact telephone numbers and email address and even more incredibly believe that they can call me up and immediately commence some snake oil sales spiel on how I'm fortunate to have finally been located by them before Exetel ends up out of business for lack of the people needed to operate every aspect of it.

I've been exercising more restraint than I've bothered with at any time of my life over the past 12 months in my communications with people in business, yet another indication of aging, but at least three of these callers have managed to be so obnoxious so quickly that I've just hung up on them with a very common two word epithet (first word a vulgarism for human sexual intercourse; second word one of the two states of a light switch). Amazingly two of those people then emailed me with a condescending "apology" for "catching me at a bad time" and then continuing to tell me how much I needed their services and how many great people they had who would improve all aspects of Exetel's future.

I recently read an article, I forget in which publication, that quoted a series of results from, apparently, sound research showing that the cost of effective personnel acquisition was rising steeply with "Personnel Consultants/Agencies" now charging double or treble what they used to less than a year ago with the apparent justification that Australia's full employment had created a shortage of skilled people in every aspect of commercial employment. The article went on to say that with sharply rising remuneration (coupled with high demand and short supply) it was becoming impossible for any commercial company to staff its operations without employing one, and preferably two or three, external recruitment agencies.

Now, I can understand why major organisations need personnel search companies of the like of Egon Zender et alia to recruit a CEO for an AMP, Westpac or Telstra (because the person they need will almost certainly not be in Australia or Australian) but I completely fail to understand why a small company like Exetel needs a snake oil salesman to recruit a help desk support person, network engineer or an accountant (who by definition must be currently located in Sydney).

In reading the emails (which I always do no matter how pointless they seem to be) it was suggested that it would be impossible to find effective people without the writer's assistance and then it would be impossible to retain them without his assistance again in changing all aspectsof Exetel's remuneration schemes, training policies and all other aspects of work practices and, of course, designing a suitable working environment. Clearly the writers considered me to be completely bereft of any knowledge or ability in the field of finding, training and retaining personnel.

For my own amusement I wrote back to the two people who had emailed me apologising for my rudeness and saying that before I could consider using their services I would need to see their personal resumes. One I didn't hear back from the other sent me a resume that (and undoubtedly it was presented in the very best way possible) showed absolutely no work history of any sort of achievement at all.

I think Exetel will just have to continue using the knowledge, skills and contacts of its current employees to find the additional personnel we need from time to time. So far that seems to have worked out just fine.

I took last Friday off to spend some personal time in Tasmania (a very beautiful place). I spent no time on Exetel issues other than to think about a few things every now and again but I did take a look at the hotel room telephone directory to see what the status of ISPs in Hobart and Launceston was. As the hotel room had a 2006 and 2007 directory two things became clear on my cursory examination – there were not very many “independent” ISPs in Tasmania and there were fewer listings in 2007 than there were in 2006; by almost 50%.

The only really ‘hard’ statistics on this sort of thing are provided by the Australian Bureau of Statistics and they appear to have changed their reporting structure this year so I’m not sure when their 2007 report is due. Their last report, at least the last report that I’ve seen, stated the following “there were 467 Internet service providers operating in Australia at the end of September 2006, 32% fewer than in March 2005”.

I don’t save these reports and can seldom bother to delve in to the ABS site to find previous reports but I think the decline to 467 followed a similar percentage decline in the previous year. Of course most of the €œISPs that cease reporting are either tiny or very tiny – often only having a few hundred customers. Even the ones that go broke and get some sort of press coverage are seldom very big in any terms other than the amount they previously “hyped” themselves (examples over the past year have already mostly faded from my aging mind but names such as aaNet, WildIT, Veridas, Koala come to mind).

I have commented before on the results of the ‘war’ between Telstra and Optus in seeing who can provide every communications service at the lowest price and which of them can give away the most hardware, activation charges and free months of usage. The ability for a new company to enter the ISP (or general communications market) is practically zero as there is absolutely nothing they can offer that either Telstra or Optus (or both) aren’t already giving away for free or haven’t already locked the service into other services on long contracts.

As that has been escalating for over 18 months now, it seems likely that the next ABS report will report a further reduction in ISP numbers and quite possibly a steeper decline than in the previous report. Not really a problem in itself but definitely a concern if the current levels of ‘give aways’ by those two companies continues to escalate. This seems more than a possibility according to a recent article in BRW (September 12th 2007 – pages 34 – 36).

If Telstra and Optus do escalate their ‘war’ to any great extent over the next twelve months then it is hard to see just how independent communications companies can make any money. I’ve been very happy about Exetel’s financial results each month of 2007 and was looking forward to a progressively easier time on the financial front this financial year. However, now, I’m not so sure.

Of course, a major factor will be how both Optus and Telstra see the value of their wholesale customers in their ‘war’ with each other. It’s pretty clear that Telstra see wholesale customers as competitors, which in the case of Optus, AAPT, iPrimus etc, they clearly are. Optus wouldn’t have the same view (at least I don’t think they do) but their wholly owned subsidiary ventures seem to be preferred to ‘independent’ wholesale “allies”.

It seems to me that Exetel will need to reduce its operating costs by over 10% to stay where we are today and by considerably more than that to actually progress and make a realistic profit. Such a reduction is a big ask but it can be done, with some difficulty and pain, by Exetel, but I very much doubt that too many other small companies can do what appears to be required in the timeframe available.

It looks like being another very busy week.

When I returned from holidays at the end of July 2007 I commented on the various statements being made about the cost of IP bandwidth "no longer falling" as justifications for some ISPs increasing the costs of plan prices. At the time I made the observation that the only aspect of IP bandwidth costing that I had seen was a continuation of the progressive decline which, as far as I could see at the time I made the comments, was likely to continue.

As it's the time of year that Exetel start to plan what we'll do with our 2 year and 1 year contracts for IP we have begun to get the responses from those companies with whom we currently deal and other companies that we consider as possible future suppliers. I see nothing in the responses we have received to date to indicate anything other than the likelihood that IP bandwidth prices will be much lower in 2008 than they were in 2006 when we entered in to our current contracts or what we pay today - the likely 20% + per year decline seems to be as expected.

As Exetel is still basically in the 'start up' phases of its operations we have never seriously considered buying directly from the cable owners though we do get pricing each year. Currently we use a little more than 1.5 gbps of IP connectivity which is beginning to reach the volume where we could consider using a direct access to one of the major Australia-USA cable owners so we have been a little more interested in examining those options than we have in the past three annual reviews. I was therefore surprised to see the initial responses from the cable owners this time which, at first glance, don't seem to be out of the question.

It seems, if our revised plans indicate that we would need around 2.4 mbps in mid 2008 (compared to 1.6 mbps today) then we could buy at around a 50% discount to today's prices from the re-sellers - which will of course fall over the coming 6 - 9 months. What this means though is that providing we can negotiate a contract with the cable providers we could reduce our current IP costs by around 45% from what we pay today - or we could buy almost double the bandwidth that we pay for today at the same price.

I feel very comfortable in now advising our current IP providers that we will not require their services beyond the current contact end date unless they are prepared to reduce their prices substantially - I've little doubt that any one of the four providers we are considering will offer IP at a price of 25 - 30% less than we are currently paying and, depending on many currently unknown factors, we may simply buy direct at a 45% discount to our current prices.

In any event it's clear that IP prices are NOT "static" or "increasing" - they continue to fall and fall slightly faster than they have done over the past two years.

It seems the statements about the price of IP bandwidth made by those ISPs two months ago were, not unexpectedly, completely untrue.