John Linton
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 â there were not very many âindependentâ ISPs in Tasmania and there were fewer listings in 2007 than there were in 2006; by almost 50%.
The only really âhardâ 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 Iâm not sure when their 2007 report is due. Their last report, at least the last report that Iâve seen, stated the following âthere were 467 Internet service providers operating in Australia at the end of September 2006, 32% fewer than in March 2005â.
I donât 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 ISPs that cease reporting are either tiny or very tiny â 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 âhypedâ 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 âwarâ 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) arenât already giving away for free or havenât 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 âgive awaysâ by those two companies continues to escalate. This seems more than a possibility according to a recent article in BRW (September 12th 2007 â pages 34 â 36).
If Telstra and Optus do escalate their âwarâ to any great extent over the next twelve months then it is hard to see just how independent communications companies can make any money. Iâve been very happy about Exetelâs financial results each month of 2007 and was looking forward to a progressively easier time on the financial front this financial year. However, now, Iâm not so sure.
Of course, a major factor will be how both Optus and Telstra see the value of their wholesale customers in their âwarâ with each other. Itâs pretty clear that Telstra see wholesale customers as competitors, which in the case of Optus, AAPT, iPrimus etc, they clearly are. Optus wouldnât have the same view (at least I donât think they do) but their wholly owned subsidiary ventures seem to be preferred to âindependentâ wholesale âalliesâ.
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.