John Linton ….possibly the best indicator of what’s going to happen for the balance of 2008.
The Michigan Consumer Confidence Index:
http://www.investopedia.com/university/releases/consumerconfidence.asp
Is at its lowest point (63.2) since March 1982 – at the time that the USA was in the middle of a recession and confirms what most US economists already believe – that the USA is already in recession.
Business is very tough for all of my business friends and acquaintances and, from what I read in the press and what I pick up from conversations with Exetel’s suppliers and ISP ‘acquaintances’, it seems the communications/ISP business is also starting to be negatively affected.
Doubtless some sections of industry and parts of Australia remain unaffected by the problems in many parts of the rest of the world (will the now fabled “mining boom” ever end?) but I see too many signs of tough financial times to think that there won’t be problems either right now or very shortly.
I live in one of Sydney’s more pleasant suburbs (Balmoral) which ‘accumulates’ householders who can afford more than the average price paid for a house in Sydney. Balmoral, and the slightly wider area of Mosman, has benefited, along with most suburbs around Australia from the rapid increase in house prices over the length of the stock market bull run which ended a few months ago after six years of big increases.
In the weekend papers there were various articles on slumping real estate prices and the ‘pain’ that higher mortgage rates were causing so many Australians. One of those articles almost took my breath away (and I assume its data was factual) which reported that there were 332 residential properties for sale in Mosman (which is a very small suburb) compared to an average of 85 properties over the past two years.
Perhaps more worrying was the erection of the first ‘mortgagee sale’ sign within 100 meters of where we live and I noticed another one as I drove home yesterday almost as close. I have never seen a mortgagee sale sign in Balmoral in the approaching 17 years we have lived there.
Perhaps the most obvious sign of tougher times is the almost trebling of approaches that Exetel receives from people with whom we don’t do business at the moment – particularly modem providers. Exetel has only ever sold Netcomm modems since we first connected an ADSL customer a little over four years ago and over that period we have been approached by virtually every other modem supplier once or twice a year.
However, over the past 4 – 6 weeks we have had approaches from 7 modem providers and, although we have indicated no interest in making a supplier change, all but 2 of those seven have made multiple approaches with ‘deals’ that are stunningly financially attractive. With very little ‘cross questioning’ each of those suppliers has said that they have an ‘over stock’ situation due to their usual customers not taking up their ‘usual forecasts’. I can only assume that a lot of ISPs, including some quite big ISPs, aren’t making as many new sales as they forecast they would.
I think at least one not so big ISP has some quite real financial difficulties as an early sign of such issues is increasingly late payment of operational supplier bills usually starting with those suppliers least able to exert collection pressure. ISP agents are one category of a ‘supplier’ who can’t really exert any financial pressure so when you receive an email like this:
”I’d like to become a residential Agent for Exetel, I have been an Agent for several ISPs during the last 6 years, starting with Ozzienet, Planet Netcom and currently XXX. Some have been purchased by other companies, and XXX for which I have been an Agent up till now, it looks like they are going "broke" as they have not been paying me my commission for over 6 months, now worth over $500. Therefore I'm not willing to setup any more customers with XXX.”
it makes you wonder – especially when you see a significant increase in churns from that particular ISP and you hear from a supplier that some of their ‘public statements’ are far from the truth.
Maybe the often talked about “ISP consolidation” will claim one more victim in the near future?