John Linton A few weeks back I had a conversation with a similar sized ISP to Exetel who lamented that he had arranged to sell their ADSL1 customer base for $200.00 per customer but the owners wanted $250.00 per customer so the deal had fallen through. At the time it made me think that there must be some truly foolish people in ISPLand as, for the life of me, I can't see how you would ever get your money back, let alone make any profit out of paying that sort of money for customers who, at the wildest extremes of over priced plans, would be lucky to make $10.00 a month in any real profit and probably much closer to $5.00.
Of course, I understand the concept that at some level of business, particularly if you aggregate your ADSL, mobile and land line spends, you will get some accommodations from either Telstra or Optus but I would think such discounts would be unlikely to exceed 15% - if that - however I don't know.
Similarly once you get your IP needs up towards 2.4 gbps you can certainly get some major savings from buying in to either SX or another cable supplier and achieve some very significant bandwidth cost savings; but those savings are beginning to rapidly dwindle with the new 'round' of IP price cuts from the major cable providers and their 'partners'
I remember smiling when I read the price paid by EFTel when they bought the customer base of the bankrupt aaNet - which looked to be around $100.00 per customer with the total customer base actualy not only NOT making any money but losing a great deal of money each month - as it turned out I probably underestimated just how money losing that base was when you look at EFTel's subsequent 'profit' results.
Of course nothing is going to even vaguely get close to the stratopheric price per customer that was originaly paid to MalcomTurnbull et al for Ozemail - something like $A850 a customer - Malcolm Turnbull certainly found his 'Alan Bond' and even the price subsequently paid by iiNet to buy a much more realisticaly 'sized' "Ozemail" some years later was over $A300.00 per customer and more like $A400.00 whenthe 'dust had settled'.
Where is the common sense in these sorts of transactions?
Economy of scale? That has to be the answer somewhere but I can't begin to see where it would be delivered.
Why am I wasting my time on thinking about such things on a not unpleasant Easter long weekend?
The main reason is that I'm trying to work out what Exetel might have to "pay" to build the 5 locations in which we don't have PoPs to a level where it can be financially justified on an ongoing basis.
One 'approach' woud be advertising which is something I haven't seen any sense in for over ten years and still don't see the sense in today.I looked at the various ads by Telstra, Optus and TPG in yesterday's and today's papers and still can't work out how anything that Exetel could afford would be able to make any impact on the giveaways being offered by Telstra and Optus.
Ignoring the cost of preparing the ad and then the insertion costs the 'give aways':
Free activation
Free modem
Four months free over the life of the contract
you begin to see how some people think that an ADSL customer is worth $250.00 to buy - because these freebies plus the advertising cost would add up to more than that (at least at the prices that Exetel has to pay).
So my mind was diverted down this path - how much could Exetel afford to pay/sacrifice to double the current ADSL1 user base overall in Queensland, NSW and Victoria and quadruple it in the other States and the two Territories?
For the past two years we have been pursuing a quite different operational plan that was aimed at building other parts of the Exetel business while maintaining a very slow growth in the ADSL1 business -something that has been accomplished with some pain but accomplished none the less.
I think it would be very, very dificult, to grow the ADSL1 business in one year to double the size it has taken to grow it to over the past 4+ years but then I also see no reason why any particular number can't be aimed at if there is a realistic rationale. Constructing the rationale and then building the components that would allow the rationale to become real and then executing the various aspects of the overall plan would be tricky but then so is everything else in business - scale is seldom the issue - only the validity of the concept.
So the negatives can easily and clearly be identified as:
1) Telstra's targetting of ADSL1 users in the 900 most 'popular' Australian exchanges.
2) Optus give away advertising frenzy.
3) ADSL2 generally being flogged to all and sundry by those ISPs/wholesale customers of those ISPs who have ADSL2 capabilities in some subset of the Telstra 900 exchanges.
4) The push by the mobile carriers to take the bottom end of the ADSL market
5) Declining discretionary incomes across much of Australia
Pretty formidable negatives when you write them down like that.
So - positives...anyone....anyone......
.....it will need a lot more thought.