Friday, May 16. 2008
There's Just No Pleasing Some People.... Posted by John Linton
at
08:32
Comments (18) Trackbacks (0) There's Just No Pleasing Some People....John Linton .....but then perhaps some people appear to need to live their lives in a state of disappointment and anger? (or is there something more sinister?) I've commented before on the sheer perversity of some people who, from my direct observation, seem to actually prefer to live at least a part of their lives in perpetual conflict. In Exetel's terms this manifests itself in a type of customer who continually complains, in the most vociferous ways and at great length, about the absolute un-usability of the service Exetel supplies and the total incompetence of every person who has been involved in dealing with his (occasionally her) issues and the criminal nature of the management and directors. This type of 'customer' often carries out his verbal and written abuse of each person within Exetel with whom he deals using the vilest of language and always at great length. Inevitably this sort of 'customer' couches his complaints in the most untruthful of terms to the TIO and occasionally to one or other of the minor court systems in the different States. His version of events is not only that the service he refuses to pay for is totally inadequate but it's lack of proper provision has ruined his life and he must be compensated for his inconvenience by the payment of thousands of dollars of damages. This has, often gone on, for 8 - 10 weeks before some modicum of 'satisfaction' is grudgingly admitted (usually when the TIO eventually tells him to take some tiny financial accommodation and accept a no-penalty cancellation of the service and move on to another provider). A huge waste of time for everyone involved and a great deal of stress and uncontrolled anger by the 'complainant'. So the account is terminated and everyone involved moves on........except for the complainant. What does he do? He does something truly amazing. Within a week or so, in several cases the next day (and in one case the actual same day as the account was cancelled) this person who has described Exetel as a company, several engineering and accounting employees and the directors and owners as incompetent, criminal scum whose service consists of two 10 year old computers connected by a piece of string (actual quotes and words used by one of these unhappy people) PUTS IN AN APPLICATION FOR THE SAME SERVICE HE HAS JUST SPENT TEN WEEKS 'LITIGATING' ABOUT. What has happened to turn the service he desperately wanted to be free of in to something that he must immediately start using it again?????? How is this actually possible without making the assumption that there is a higher lunacy rate in Australia than you might expect? It defies explanation in any rational terms that I can get my mind around. A person who has so vociferously decried a company and a service, who was both genuine in their complaint and sane, could not possibly re-sign for a service that has allegedly been so inadequate that it has affected his health and financial well being and he has had to seek the TIO's assistance, or the assistance of a court, to free himself from the requirement to pay for it on an ongoing basis. However there have been 15 instances of this conundrum over the past 6 months and there would have been more except, when we began to notice this strange scenario, we began putting in a 'black list' that wouldn't accept applications from specified telephone numbers/bank accounts/credit cards/addresses etc. I can accept that there are a few lunatics who are not institutionalised that could, possibly, account for one or maybe even two such ridiculous situations. I can't accept that there are 15 +. I can accept that in some, very few - no more than 1 or 2, cases all the slandering and complaining was done by someone other than the account holder (parent/partner/flat mate) who actually paid the bills and when the complainer got the account cancelled they had to cover up what they had been doing by trying to get it reinstated. Who are the others? I now have my suspicions having done some minor research on one of the most ridiculous instances and found that the person was actually an employee of another ISP but I can't believe that explanation would account for more than just one occurrence. So is Australia getting crazier as a society or are my suspicions that there are some grossly unethical and terminally silly companies in Australia correct? Neither scenario has any attractiveness.
Thursday, May 15. 2008One Can't Believe Impossible Things.........John Linton ...... Why, sometimes I've believed as many as six impossible things before breakfast! (Lewis Carroll) Unfortunately, or fortunately depending on your point of view, I'm not the Red Queen and I have to stay with the, to me, sensible, point of view that no matter how any marketing 'guru' might try to persuade me otherwise (and this one didn't even have blonde hair yet alone a very short skirt and an impressive bust) - I have to be able to believe that a service is salable at a realistic price. ....and....of course......we are talking about HSPA services - yet again. There must have been, at some time in the far distant past "the good old days" before companies decided they must have 'marketing' people and 'product manager' people instead of sales people to persuade buyers (direct or wholesale) to either buy or resell their products and services. They must have been the days when manufacturers and service providers established a retail price (from which they might discount in appropriate circumstances) and also established a wholesale price that was based on the retail price less all the costs of selling, supplying and servicing the same product that was then undertaken by the wholesale buyer. In those days, I assume, the sale of the product or service to an end user returned the same profit to the manufacturer/service provider irrespective of whether it was sold via retail or wholesale processes. So, of course, the manufacturer/service provider had no interest, beyond certain practical 'territorial' issues, in whether end users bought the product or service from their retail processes or their wholesale processes - the bottom line result remained unchanged. Not today. Not in the Australian telecommunications marketplaces and definitely not in the HSPA 'marketplaces'. I really wouldn't mind failing to reach some sort of workable arrangement that would allow Exetel to provide an HSPA service to the million or so customers whom I believe would buy such a service if Exetel were able to provide it (no, I don't mean 1,000,000 people would buy HSPA from Exetel - I mean that would be the marketplace size that we would have a realistic chance of obtaining 2 - 3% of over 12 - 15 months; and maybe more). Each time I think we get close to understanding how that could be achieved some marketing 'genius' or 'product manager (or worse - some 'product specialist') from the supplier gets involved with his/her unbelievably convoluted 'marketing models' under which the service can be provided to Exetel. OK. Like Human Relations (does anyone actually now remember when a company's 'pay master/mistress became the Human Relations Director?), PR and General Management - "Marketing" and now "Product Champions" have become part of the absurd and horrifically expensive overheads of so many large companies. So discussing the possibility of actually buying HSPA services from a carrier is impossible without first discussing the wonderful merits of the fizzy mineral water provided in the massive 'presentation room' or whether I'd like my my coffee 'fine ground' or 'medium rough ground' which delivers the true taste of the Kenyan beans so much more 'explosively'. My mild request for Blue Mountain fell on bewildered and quickly huffy ears so in the interests of salvaging some time from this clearly about to be wasted afternoon I settled on the Greek mineral, still not fizzy, water (rather than the Italian, French or local) and a rough ground coffee. 60 minutes later, and by no means anywhere near the end of the 'slide show' and endless demographic analysis, I asked for a break and when I returned I asked two questions: 1) What was the contract commitment in terms of units per month, quarter, year 2) What was the pricing of the proposed 'bundles'. After a further 15 minutes of just 'completing the essentials' of the base information and then a further 20 minutes of going through the 'various options' that information was provided. 20,000 connections in the first year was tough but, if we are going to be half way serious about offering an HSPA service, not really a problem. What was a problem was just how we could offer a service, to which we could add very little clear cut value, at pricing that was,at the time of the presentation, 25% more expensive than the carrier was widely advertising the same service. Hence the Alice In Wonderland quote at the start of this post. When I raised this, I would have thought, quite simple issue I was amazed to be told that I was just plain stupid for attempting to look at it in that way and that as a wholesale customer I should understand that it was the added value and additional services that would provide the differentiation. Didn't I understand anything about the fundamentals of "positioning" strategy and "early to market sacrifice strategy" and .......... Umm....errr...."but aren't you only offering a discount off a fixed service bundle (that we can't modify) and that is actually more cost to us than you have just started widely advertising it to end users at less than that?" Well - how silly was I to raise such a spurious point? It was actually quite funny so I stayed for another 15 minutes listening to this (non-blonde, non-short skirted, non-amply upper body blessed) marketing 'expert' flounder around in 21st century marketing doublespeak that would have made Big Brother (Orwell's creation; not Channel X's) sound the epitome of clarity and concision - and then I 'fled'. So, no HSPA for Exetel today - at least from that carrier as I really am unable to believe the impossible, even after breakfast.
Wednesday, May 14. 2008Times Are Very Tough For Almost EveryoneJohn Linton After flipping through the usual dozens of pages of post budget night 'analysis' and 'what this means for you' (even in allegedly fiscally intelligent papers such as the AFR) I think these two small articles sum up where 'the average Australian and the average Australian business' stands at the moment: http://business.smh.com.au/buy-now-pay-even-later-harvey-norman/20080513-2dvp.html which has some details on why Harvey Norman's share price has dropped 50% over the past year and why they are now offering 44 months interest free terms and this one: http://business.smh.com.au/borrowing-down-across-the-board-as-rates-sting/20080513-2dvl.html which provides some data on how residential and business borrowing has dropped across the whole range of lending services over the past quarter - and particularly over the past month. If you combine the information in those two small articles you could reach the conclusions that: 1) People are paying off their credit cards rather than using their credit cards to buy things
3) Retailers, like HN, are having to discount very, very heavily to maintain sales at last year's levels and shareholders have lost faith in them being able to sustain that model 4) HN is a 'bell wether' for retail generally and the interest rate hikes by the RBA are about to collapse spending confidence and all that leads to will now become a reality 5) Unless the proposed tax cuts put a brake on these general views the second half of 2008 is going to see significant job losses and all that brings with it. We notice that our level of failed monthly payments and the time it then takes for those customers to be able to then pay for their services has again increased in May, not cripplingly, or even at a worrying level as yet, but the trend is obvious and has been slightly increasing in terms of the time between default and eventual payment each month since January 2008. In ADSL terms we have noticed a fairly sharp increase in 'churns' to Exetel (almost twice the rate of the last quarter of 2007) and a slight reduction in churns away from us compared to the last quarter of 2007. As we offer the lowest cost ADSL service in Australia that's also probably an indication of people looking for economies in their monthly expenditures - or just some short term anomaly - I don't have any real ability to detect which. Having said that, the relatively low number of churns away from Exetel still go almost 50% each, every day, to Telstra and TPG whose ADSL2 offers are still impossible to match in two segments of the market: TPG - Large ADSL2 downloads for very low price appealing to the heavy/inexperienced downloader There are no churns away from Exetel to any other provider that aren't matched or significantly 'over matched' by churns from those ISPs (churns to Exetel still exceed churns away from Exetel by over 5:1). The major sources of churns to Exetel are almost 50% from 'no name' ISPs (which includes Dodo), 25% from Bigpond and the rest from the remaining 'top 10' ISPs. The increase in churns from Westnet would be easily explainable as a 'knee jerk' reaction to the takeover by iinet. The 'jump' in churns from small companies has steepened but we don't keep separate statistics - it seems that more of those very small companies are shutting up shop over the past few months, or showing signs of shutting up shop, than the last quarter of 2007. So the impression I get is that ADSL customers are beginning to look for monthly savings more than they did in 2007 as a consequence of having less 'disposable income' in 2008. There are some other signs that there are difficulties in the ADSL marketplaces if you look at the various pricing and 'promotional' activities from various ISPs which are often puzzling (at least to me) and sometimes quite bizarre. I will have to look at a 'year end' promotion to get with the trend. Tuesday, May 13. 2008Is Tasmania Really A Part Of Australia?John Linton I have been following the various discussions and news articles on the vicissitudes of providing cable access to and from Tasmania with increasing interest over the past few months as the time gets closer for Exetel to make a decision on how to provide ADSL and other services to Tasmanian users more directly than we are currently able to do. I read this, latest, set of 'nothing' statements: http://www.itwire.com/content/view/18169/127/ yesterday which didn't enlighten me in any way. Currently Exetel provides ADSL1 services to Tasmanian customers via an arrangement with Optus that no-one finds particularly suitable and, as with our customers in VIC, QLD, WA, SA and the NT, the only sensible way forward has been to establish PoPs in each State and run our own (leased) back hauls from those States and Territories to the main international junction points in Sydney (Southern Cross, AJC etc). This has proven to be expensive (at our low volumes) but affordable in the wider context of delivering services and essential in getting rid of some of the contention issues involved in using back hauls that we could not control. Later this month, all being well, we will activate the new WA, SA and NT PoPs which will then leave the ACT and Tasmania still being serviced out of the Sydney Data Centres and connected by Optus inter-State bandwidth. We will be able to establish an ACT PoP at the same/similar costs as the other PoPs but we are struggling to find a cost/effective back haul solution for Tasmania. Currently there is no fibre connectivity except via Telstra which, on current indications, is not going to allow a suitable pricing scenario for Exetel to deliver sensibly priced services to Tasmanian users - at least not sensibly priced in the terms we understand 'sensibly priced' to mean. If we ever got an HSDPA service offering then that might solve the problem but that isn't imminent - earliest date would be October 2008. I find it a curious disparity that Darwin, and other population centres in the NT can be connected to Adelaide at far less cost than Tasmania can be connected to Melbourne. An obviously 'politically incorrect' Tasmanian postulated that it was because there were very few aboriginal people in Tasmania and therefore the Federal Government's bottomless bucket of funding wasn't available to Tasmanians. We have been talking to two organisations in Tasmania (other than Telstra) about back haul from Hobart and Launceston but are not making much progress. I would feel very badly about not being able to provide Exetel's services in Tasmania in the same way we provide them everywhere else in Australia but, at least at the moment, finding a way or ways to do it is proving almost as difficult as finding a suitable HSPA service - and is beginning to look as though the time to find a solution is going to take as long. So far we have been discussing these issues with Tasmanian companies via email and telephone which, for every other supply contract we have with all of our suppliers, has always been suitable. I'm now of the opinion that we will have to get some sort of understanding of just what the Tasmanian State government is prepared to do to make the BassLink project actually deliverable in terms of access to companies such as Exetel and that seems to require some ongoing 'face to face' discussion. Perhaps its possible to provide some 'innovative thinking' to the Tasmanian government that goes beyond, and is truly creative, compared to what they may have been provided with to date? A long, long time ago I remember playing a not insignificant part in helping the Tasmanian government reduce their costs of obtaining computer and printer equipment to a level that they never dreamed was possible (at that time) which played a major part in providing Tasmanian school children and Tasmanian government offices with facilities that had never been previously affordable. Maybe that will be possible to do again? What is becoming almost certainly clear is that there has to be something done to unblock whatever is holding up the delivery of affordable connectivity between 'Australia' and Tasmania and therefore everything else that is being held up. Monday, May 12. 2008Telco Capacity Is Built To Meet Mothers Day Demand........John Linton ....is an old theory Steve reminded me about when Exetel's VoIP line capacity was reached around 1.00 pm yesterday. Up to yesterday our VoIP switches had never exceeded 66% of the line capacity connecting our VoIP services to the PSTN carrier networks in Australia. The closest we had gone in the past was prior to the last big line capacity upgrade during Chinese New Year. Since the beginning of 2008 we have more than trebled the number of VoIP minutes transiting our VoIP switches and that trend is 'steepening' as Exetel ADSL users accelerate their take up of Exetel VoIP services. This has been partly due to the introduction of the free VoIP services included with the 'naked' ADSL plans, partly because of the increasing penetration of the Exetel calling cards but it's mainly due to the take up by 'non-Naked' ADSL customers. This article in today's IT News: http://www.itwire.com/content/view/18157/127/ presents some analysis on the trends of Australian users to 'dump' their use of fixed wire line services in favour of mobile and VoIP alternatives - particularly in the rental market - but it really doesn't say much more than has already been evident for some time to anyone in the telco industry space. It's a clear trend that ADSL users are moving much of their wire line telephone spending to VoIP (over and above the people who select 'Naked' ADSL) and it underscores the rapid, and increasing, take up of HSPA services from all four carriers who offer them. I'm constantly told by the carriers we have contact with that they are in no hurry to provide HSPA via wholesale as they can't keep up with the retail demand since they first made the services available. I can fully understand that view - up to a point (its a 'new' service and they need to get their major distribution channel fully functioning before expanding the methods of distribution) - but still find it a little bizarre that today's carriers seem to have lost sight of the reasons why all major service and equipment 'manufacturers' in every country in the world since 1780 have understood the unbeatable benefits of multiple distribution models - for any business. Having digressed, the issues that now needs to be more directly addressed by Exetel is determining how best to expand the functions and capacities of our current VoIP services which we have grown relatively slowly over the past 2+ years and how we can integrate an HSPA and mobile service in to our main product/service offerings. All this is made very difficult without having an HSPA service defined. It seems clear enough that we should add another VOIP switch both for additional capacity but more importantly for redundancy in terms of both the switchs and the circuits to and from the switches. Easy enough, if expensive to do - but the expense can be more easily justified now as the VoIP business has grown so rapidly and shows every indication of continuing to grow even more rapidly. However, what isn't clear, at least to me, is whether we should add additional switching capacity in Sydney or begin to 'distribute' it to the other PoPs. What also isn't at all clear is when/if we begin to offer an HSPA service and when/if we implement a direct mobile access to a mobile carrier network how we need to do that in terms of both topology and cost-effectiveness. What is clear is that VoIP is becoming a bigger part of our business and taking more resources (both financial and personnel) more rapidly that we had previously planned for. I probably should be embarrassed by having to say that because the signs and trends have been so obvious for so long but, like some trends, they happen over such a long period of time ("VoIP is going to really happen 'next year' since 1995") that when this really is the year people like me tend to still get surprised. I have alreaady forgotten that both my calls from the handset on my office desk and all my calls from my home are via VoIP - I just don't think about it and it now surprises me when people I meet talk about the complexities of setting up VoIP or the lower call quality of VoIP - in 2008 neither of those views is true. Chinese New Year and now Mother's Day have underlined just how much VoIP has become the telephone communication method of choice in Australia in 2008. Sunday, May 11. 2008Responding To Customer's Calls For SupportJohn Linton I guess I can't get the reported Westnet personnel figures out of my head. I keep doing the arithmetic while I'm driving or even when I'm reading. I compare the personnel/calls per hour per person with the figures I see daily on calls to Exetel which for April were: Date /Average waiting time/ Handled calls /ABN calls /Average ABN time /Talk Time 1/04/2008 2:40 146 17 1:38 5:36 2/04/2008 2:44 144 26 1:47 5:35 3/04/2008 2:27 146 10 2:56 5:55 4/04/2008 2:25 148 12 1:01 5:06 8/04/2008 1:64 153 13 1:22 5:18 9/04/2008 1:23 128 14 0:26 4:51 10/04/2008 1:43 124 9 0:37 4:58 11/04/2008 4:04 99 16 1:42 5:11 14/04/2008 2:30 158 16 3:12 5:21 15/04/2008 2:13 132 8 2:13 5:34 16/04/2008 1:01 104 6 1:16 5:28 17/04/2008 1:02 135 8 0:44 5:20 18/04/2008 1:25 123 1 0:56 4:48 21/04/2008 1:52 152 16 2:10 6:26 22/04/2008 1:06 192 9 0:35 4:40 23/04/2008 0:56 161 6 0:29 5:45 24/04/2008 0:27 129 16 0:37 4:56 25/04/2008 0:25 11 2 0:42 4:17 28/04/2008 0:46 191 2 2:39 5:13 29/04/2008 0:58 176 3 1:58 5:29 30/04/2008 0:18 154 5 1:39 5:39 AVG 1:37 138.38 11 1:27 5:18 April was an 'average' month in terms of support calls received and The average wait time was slightly better than in March and the average number of inbound telephone calls taken for combined support and provisioning issues was a little higher. These statistics don't include customers who used the telephone to automatically log a 'service down' situation which would increase the total by approximately 50% on weekdays and by 150% on weekends/public holidays when Exetel offers limited telephone support. Exetel has 12 customer support engineers (4 in Sri Lanka, 6 in the North Sydney office and one each working from their homes in the ACT and the NSW Central Coast respectively) and two managers/supervisors. These personnel deal with approximately 6,000 support calls each month (including those logged automatically) which equates to approximately 30 support calls per person per hour day. These same people also deal with approximately the same number of sales calls each working day. Given an average of 5 minutes of initial talk time per 'live' call and the requirement to spend a further 7 - 8 minutes for each call in either call back or other actions this is a fairly reasonable work load per person that allows enough time to respond to emails and forum posts without anyone being 'over worked'. Basically this means that an Exetel service customer will, on average, call or automatically seek assistance less than once each year. I doubt that Exetel offers any more reliable services than any other supplier so I think that in terms of true customer need for support every other provider of similar services to Exetel would have similar figures. So allowing for Westnet having three times the number of services than what accounts for the 8 times more personnel per service difference? Surely there's only so many times a customer forgets their password or needs help to set up an email account or whatever else Westnet has decided is their problem to fix? Exetel's 1:6,000 customer support ratio (which allows telephone support calls to be answered in less than an average of 2 minutes and email support to be answered within less than an average of one working hour) is, by any standards, very efficient. But, for the life of me, I can't understand why Westnet apparently needs a support staff ratio of 1:700. Hopefully a family Mother's Day lunch at Eleanora will drive these whirling figures out of my mind (it must be the very best smorgasbord lunch in Australia). Saturday, May 10. 2008Wesnet: Service And Brand LoyaltyJohn Linton A colleague sent me this last night: http://www.thewest.com.au/default.aspx?MenuID=30&ContentID=71966 which added some interesting background detail to the formal announcement to the ASX. I was struck by two things in this brief article. Firstly the statement that at the time of sale Westnet had 550 employees and 215,000 services (I'm not sure whether 'services' are distinct from 'customers' but that makes little difference) and a revenue of $A134 million. It doesn't (as you would see) split the employees by category (and neither from what I recall did the ASX announcement which, again as I recall, didn't make any reference to employee numbers). Neither document references annual salary numbers so that makes it more difficult to come to grips with the analysis but using an average would get fairly close to the actual detail. What struck me was the number of employees per customer that Westnet deploys - it seems to me to be 'dizzyingly' high and very difficult to comprehend in what they all do each day - and I realise that Westnet's management would be of the opinion that they all do something valuable and necessary. But some simple arithmetic on these numbers makes it hard to work out just how Westnet is operated. Just take the financial numbers first. Revenue = $A136 million - divided by 550 = $247,000 per employee per year. I dont know what the average salary is but, including superannuation and 'accommodation costs' and shift loadings it's difficult to see that it would be much less than $A40,000 a year (Exetel's average is more like $65,000 a year but it doesn't have the same huge low end employee percentage). This means that Westnet spends a little over 16% of its gross revenue on personnel - roughly twice what Exetel pays and 60% higher than the 'rule of thumb' figure common to most service industries business models. It's easy to see how the losses in FY2006 and FY2007 were incurred and why the dramatic end user price rises were necessary in February/March 2007. Of course the upside was clearly that the "best in Australia service" was generated by this staffing level which also ensured enough ongoing loyalty to prevent any significant loss of customers thus allowing the price increases to actually turn around the loss situation. Customer Service and Brand Loyalty are thus demonstrated as being very valuable. Now look at personnel productivity and retention What on Earth do 550 people do in a business with 215,000 'services' and a revenue of $A136,000? I think I can remember, and I may well be wrong, that Westnet once stated in a WA newspaper that they had over 300 personnel in their call centre. What do they do all day? If you assume an 8 hour working day with 20 working days per month per call centre employee and an average of 4 inbound calls per hour (a pretty average assumption) that would mean that their were 640 inbound calls per employee per month. Assume that half of these were sales calls (unlikely given the net increase of services per month quoted in the ASX report) and that means that there are 96,000 support inbound calls a month - or one call for 40% of your total number of 'services' per month? Bear in mind that this means that you are allowing for 15 minutes per call (allowing for each inbound call to require two additional outbound call backs per situation resolution and that your 'services' experience problems requiring supplier attention 4.8 times a year). There are either huge problems with the services being supplied or my math is totally off the planet. However if these numbers are somewhere in the ball park it would also mean that any support or sales call should be answered instantly (which is what you'd expect based on the 'best service in Australia' reputation. However if you ring a Westnet sales or support number during the working week you will find this isn't the case - in my experience so t.here is something really wrong with the assumptions I've laid out above. I can't begin to get my head around what the other 250 people do to fill in their day. However the net result is that Westnet survived and prospered and delivered, over an extended period of time, a set of services that their customers found to be the best on the market and, in the end, delivered a handsome financial return to the company's owners. Something to continue to consider. Friday, May 9. 2008More Money In Selling ISPs Than Running Them.....John Linton ....with the major exception of TPG of course. The recent 'audited' numbers contained in the TPG/SPT merger document (I commented on some weeks ago) and now some 'unaudited' numbers provided by iiNet/Westnet here: http://www.asx.com.au/asxpdf/20080508/pdf/3190vk9f41823r.pdf present some interesting insights into two hitherto private, and therefore undisclosed, information about the larger end of the ISP operations in Australia. I won't comment again on the TPG numbers other to again express my admiration for a private company that makes a better NP percentage than Telstra in the Australian communications business and then sells it's business for a quarter of a billion Australian dollars. What I found interesting about the figures disclosed in the Westnet/iinet report was that it showed that my assessment of 15 months ago that Westnet had to be losing money up to the time of its large, across the board, ADSL price rises last year was correct. as shown on page 3: Loss in FY06 of $A4.9 million on revenue of $A69.5 million Loss in FY07 of $A800,000 on revenue of $A100.7 million According to iinet's 2007 annual report they had accumulated losses in ongoing operations of around $A45 million. It is also very interesting when you look at the audited balance sheet of a company like iinet and notice that on revenues of over $A200 million there is the slimmest of margins between current assets and current liabilities ($A2 million and that includes "prepayments" of over $A8 million) and only $A15 million in cash with relatively high amounts of accounts receivable for a company where the majority of revenue, I assume, is cash in advance. I seem to recall that PeopleTelecom reported a million dollar loss on a revenue of $A100 million in FY07. It's a bit depressing to read these reports and realise that, effectively, for a significant number of ISPs there is no 'economy of scale' in terms of reaching some size produces enough purchase power savings to 'guarantee' profitability on an ongoing basis - though by significantly hiking their prices in Feb/Mar 2007 Westnet seems to have fixed their disclosable profit issues - big time - and achieved an exit strategy of handsome proportions. ($A20 exit bonus million each for 14 years work is almost merchant banker like in annual income). So is the moral of these stories to operate your ISP business on the basis that you get a suitable 'wage' but make no profit and rely on a golden handshake if you manage to sell your ISP to someone when you're able to derive the most benefit from such a transaction? It seems to be as if iiNet racks up $A45 million in 'book' losses over its trading history (and countless millions of losses for the people who owned shares over that time) while becoming the "third largest ISP in Australia" - what's the point of it all? TPG disproved the rule by making money for the whole of its existence and hitting the jackpot as an exit strategy. Incidentally, you have to wonder why David Teoh got a quarter of a billion dollars for TPG while the owners of Westnet (roughly comparable size) 'only' got $A80 million? My guess would be David Teoh's superior negotiating ability coupled with SPT's ability to pay compared to iinet's ability to pay. Amost every other/every other ISP (except presumably Internode and, as I know for a fact - Exetel) seems to lose money before going out of business or being swallowed up by another more optimistic provider who belongs to the 'triumph of hope over experience' school of management. Scary scenario. I think, on balance, I'm going to decide to be pleased that a tiny company like Exetel made more money than Westnet and iinet (and PeopleTelecom, AAPT, etc, etc) put together over the past four years and that we still get the opportunity of making decisions on our own future - assuming there is one in this very obviously difficult industry/set of marketplaces. Thursday, May 8. 2008$A4.7 Billion Would Provide Fast Broadband To Every Australian 'Tomorrow'.....John Linton ....and would eliminate the Telstra monopoly for ever. I mentioned that while I was in Sri Lanka last week I was impressed by the fact that there were three mobile networks offering HSPA services at speeds of up to 7.2 mbps x 1.1 mbps at lower costs than were currently available in Australia - I was particularly impressed by the 1 cent per megabyte excess charges that compared to Australian mobile carrier's offerings of around 15 cents per megabyte. Since returning to Australia we have decided to trial one of these services (there are three to choose from including the one from Sri Lanka Telecom - the 'local' equivalent of Telstra). If this test is successful we will replace the current ADSL services we use for the four 'work from home' support engineers in Colombo and use the faster, and cheaper, HSPA services. We will also order the same services for the new central office in Colombo as a back up to the main Ethernet links. Telstra already offers HSPA to a large part of Australia and I see from this article: http://www.itwire.com/content/view/18089/127/ that Optus is going to extend its HSPA network to 98% of Australia and will increase speeds to 7.2 mbps and then to whatever the technology can sensibly deliver (certainly much faster than the 12 mbps stipulated in the current national broadband tender fiasco). I realise I have made this point before (that HSPA is a far more sensible approach to true competition in the country wide Australian broadband marketplaces) but I continue to fail to understand why the current 'government' is so Hell bent on restoring Telstra's monopoly by giving it $A4.7 billion to take five years to build a slower network than already exists from three major carriers. Once built it will almost certainly never be kept upgraded by Telstra and will become obsolete before it's completed. There are approximately 4.7 million ADSL users in Australia at the moment and assuming that the true end need is to provide a fast broadband connection to every Australian household there would be around 9.4 million households (probably about right and it keeps the math easy). A usable 5 gb of traffic now costs around $A50 per month with a zero activation fee and the purchase of an HSPA device (in bulk the carriers would be happy to sell it for $A80.00 rather than 'giving it away' on a two year contract). So my proposal to Crazy Kevin and Stupid Stephen is this: 1) Withdraw the current 'tender' immediately 2) Offer 9.4 million households in Australia (via the carriers that meet the criteria): a) A one off payment of $A100 to pay for an HSPA 'modem' b) A subsidy of $15.00 a month to pay for an HSPA service c) Make the accounting and actual payment direct to the mobile carriers d) Have the mobile carriers display the credits on the end user's monthly bill There you go - every Australian has 7.2 mbps broadband - quickly moving to 20 mbps+ 'immediately' without any tender and three major carriers in Australia get their share of the government's $A4.7 billion to ensure they extend their networks and upgrade the speed to above 12 mbps as a condition of participating. It also costs the 'government the same $A4.7 billion to subsidise each Australian household for two years after which the massive take up in HSPA will have driven the monthly price down so that further subsidy would be unnecessary. Plus it gives three mobile carriers an extra 3,000,000 users to make deployment of additional capacities a piece of cake. AND THE END USERS GET IT FAR CHEAPER THAN TELSTRA HAS SAID IT WILL HAVE TO BE PRICED AT - $A35.00 per month with no activation charge. Someone should elect me prime minister - I'd clearly do a much better job because I have a sensible knowledge of reality and technology and no vested interest. Who loses from such a scheme? No-one of any importance. Who gains from such a scheme? Every Australian and the three (perhaps four) mobile carriers who have invested over $A40 billion into building true Australia wide voice and data networks in Australia. Better than that - there would be no need for the ACCC to be constantly involved controlling a rapacious privately owned monopoly that would make everything in Australia much more expensive and would never have any reason to introduce new and better technology. Will it happen? No. Why? Make your own mind up. (you could try starting with - "because the Labor 'government'.....") Wednesday, May 7. 2008"Consolidation" In The ISP 'Industry'John Linton The last ABS report on the ISP industry (which I have misplaced so I'm relying on my memory) indicated that the number of ISPs in Australia had fallen from a high of slightly over 900 in 2004 to around 450 in the year ending 2007. 450 still seems like a huge number for a country with a population of 21,000,000 but the ABS gives no indication of the size (in terms of number of connected customers) they deem to be an ISP so it seems possible that they count a significant number of companies that have less than 1,000 active customers in that number - I really don't know. Since that report was compiled TPG/SPT have 'merged' and I notice that iiNet advised the ASX to suspend its shares from trading pending the announcement of an acquisition. It didn't qualify the type of acquisition but there would be a good chance that it's an Australian rather than overseas company and its more likely than not to be an ISP of some size to require, as the announcement stated, a 'capital raising'. Looking at iiNet's last balance sheet there was no free cash available to buy anything so a capital raising would be required for even a small purchase. However, at roughly the same time iiNet requested a trading halt so did iiNet's largest shareholder - Amcom - though the Amcom announcement specified it was because of a projected capital raising and made no mention of an acquisition. Amcom, together with the then Powertel (now AAPT) bailed iiNet out a year or so ago by buying in to the company and has continued to increase its shareholding since then by buying more shares each quarter as it is permitted to do but keeping under the limit where it would have to make a formal offer to buy all the issued shares. I'm not sure how many customers SPT had so I don't know where they 'ranked' in terms of relative size to the largest ISP service providers in Australia but I assume they were in the top 10 - 15. Based on their revenues that would certainly be true though I don't remember whether I ever saw a split up of their revenues between wire line telephone, mobile telephone and internet services. I obviously don't know if the projected iiNet acquisition will be of some 'Top 15' ISP but you would have to assume they wouldn't suspend their share trading if it was just another penny ante acquisition. I suppose that the takeover of Powertel by AAPT also ranks as a "consolidation" though Powertel was a pure wholesaler so I'm not sure that's valid. So what does this mean? On the available facts 450 tiny to very small (and a few medium and fewer large) ISPs have disappeared over the four years ending 31/12/07; largely by their customer bases being 'taken over' by other ISPs. That's the only 'hard' data. This calendar year's SPT/TPG merger and the yet to be announced iiNet acquisition are the largest examples of take overs/consolidations since the iiNet/Ozemail merger/take over. iiNet's likeliest 'acquisition' would be either Westnet or, though it wouldn't require a capital raising, the ADSL base of PeopleTelecom (I would think $A10 million would buy that customer base). Buying Westnet would make more sense as Westnet's operational costs would be the highest of any Australian ISP's and a 'ruthless' purchaser would slash over 300 call centre staff without having to add very much, if any, additional personnel to its own, already bloated, call centre operations. I doubt whether such easy immediate cost reductions would apply to any other company - though, of course, I don't know. There is little doubt that PeopleTelecom will get out of the ADSL business, one way or another, before the end of this calendar year - with a market capitalisation of less than $A10 million it must be only a matter of time before the PT telephone business is rolled into Crazy Johns and the ADSL business sold off to anyone who pony's up a reasonable buy price. I don't know what Netspace plans to do but it seems to have no real direction (from a distant outsider's viewpoint) and that would suggest it is not going to continue in the independent ISP space in the long term. Chariot (already effectively owned by TPG) will have the remainder of its shares bought out by the merged SPT/TPG entity before the end of this financial year. EfTel's shares continue to decline in the penny dreadful part of the listed companies marketplace and have no reason to exist and will almost certainly disappear within 12 months. So, assuming those things happen, there isn't much left of the 'independent ADSL provider' sector with the exception of InterNode and DODO (assuming anyone can take the notion of DODO seriously). It seems that four years ago 900 separate 'managements' considered that investing their own and their shareholder's money in developing an ISP business was the best investment they could think of. Today it seems that only a very few people hold that view with the likelihood that 90% of the ADSL marketplace will be delivered by six companies before the end of 2008: Telstra Optus TPG/SPT iPrimus iiNet InterNode A very changed scene from 2004. Tuesday, May 6. 2008Democracy is simply another version of mob rule....John Linton I don't know why that particular piece of insightfulness leapt in to my mind earlier this morning as it had nothing to do with what I was thinking or working on at the time. However it must have been 'retrieved' for some reason and I suppose it was because I was becoming concerned with some aspects of Exetel that the advantage of absence, even though it was only a week, often allows to occur. Personally, I agree with a similar quote attributed to WSC that: "Democracy is the worst form of government except all the others that have been tried " There are several major defects in the theory of universal suffrage among which are: 1) 50% of all voters in Australia are below average in mental abilities 2) 70% of all votes in Australia are meaningless as they are cast in "safe" electorates that always return a member from the same party which means that the government of the country is elected by less than 30% of voters, half of which would be rated as of below average intelligence. (the only realistic explanation for the choices made by the Australian electorate since Federation) However the way a small private company is managed doesn't have any relation in any way to the way a government operates or is chosen. The most startling and obvious difference is that you need no experience nor any real ability to be be elected to a parliament where you will be involved with the 'dispersal' of thousands of billions of dollars and the making or breaking of millions of people's lives whereas you will only get to a position of 'authority' in a small private company by having a great deal of experience or some very real ability. I wasn't thinking about government but small private company management and, seeing I'm beleaguered by other people's thoughts at the moment a comment by Theodore Roosevelt: "The only time you really live fully is from thirty to sixty. The young are slaves to dreams; the old servants of regrets. Only the middle-aged have all their five senses in the keeping of their wits." As someone who is now past 60 and feels his own physical and mental inadequacies more acutely each day (and regrets a great many things a great deal) I have been looking in to the future, as much as that is ever possible, to find ways of better managing Exetel and, perhaps because of the inadequacies of thinking clearly that come as Roosevelt' describes them I am struggling to find sensible solutions. Unlike 'government' democracy is not only useless in commercial management ( irrespective of the drivel that has been spewed out in academia, and quasi businesses, for the past three to four decades) "consensus" management is as pernicious as democratic management for a small company in a competitive and changing marketplace(s). I suppose I was driven to contemplating this airy fairy theorising because of what I saw (I hesitate to use the word 'sensed') on my return to Exetel's North Sydney offices yesterday and the unease that caused - although I can't explain, even to myself, what that was. In practical terms it's going to be necessary to change many aspects of the ways that Exetel is managed to make the plans for the new financial year become a reality. Perhaps I have to face up to the 'fact' that Roosevelt was correct in his observation and people over 60 simply aren't as effective as they need to be and it's past time to find someone younger. I have tried to do that in the past and failed - quite possibly from egotism in the belief that no-one could possibly know how to manage things better than I can. I don't need yet another very difficult decision to make right at this moment so I'm going to content myself with taking Rupert Murdoch as an example of 'exceptions proving the rule'. However we will need to find ways of making our current inexperienced management come to grips with the concepts of not only taking responsibility for more of the key decision making but understanding that co-operating with and helping each other is an essential element of running a company or any part of it. As Scipio the elder used to say at the conclusion of every address he made to the Senate: "Carthago delenda est" - substitute Carthage for noun of your choice and destroyed for adjective of your choice. Monday, May 5. 2008Cool Economic Winds Are Becoming ColderJohn Linton I suppose it's inevitable that when you return from a week spent somewhere close to the equator you notice that the Sydney temperatures seem much colder than when you left. So too does the 'economic press' - at least in terms of general 'signs'. I read the Weekend Financial Review more closely than I would normally do over the weekend and noticed a brief article on page 16 of the AFR commenting on deteriorating payment terms by 'big businesses' to their smaller suppliers. In summary the article offered the following data from Dun & Bradstreet: 1) Average invoice payment time increased in Q1 2008 to 55.8 days - the highest level since 2001 2) Businesses with more than 500 employees took an average of 62.7 days to pay invoices 3) Payment time has increased 5.6 days in Q1 2008 compared to Q4 2007 4) The increase in invoice payment time from Q1 2007 to Q4 2007 was 3.8 days You don't have to be a financial genius to realise that many small companies are being hurt very badly by larger companies significantly impacting their cash flow. Fortunately for Exetel we have corporate customers who don't fall in to these pernicious categories and, when I checked, we only had two corporate customers who hadn't paid their April invoices within the trading terms of 15 - 21 days (unsurprisingly a bank and one of the top three global accounting practices). However I can fully understand the difficulties that non-payment on time by our corporate customers would incur. Today's IT news had a piece on the ongoing decline of IT jobs for the third successive month: http://www.itwire.com/content/view/18037/50/ and other comments about the continuing conservative attitude of companies regarding new projects and more rapidly winding down current projects earlier than planned: "The IT&T sector fell again last month by 1.92%, bringing its fall to 9.73% in 3 months." and "Recent news that big four bank Westpac is planning to send more of its functions offshore will augur ill for IT&T, according to Olivier, as well as the embattled Financial Services and Banking sector which itself has fallen 11% over the past 3 months." While all of this was easily forecastable from November 2007 it is still a bit of a shock to realise that all these signs are exactly the same as they were prior to the last two major downturns in the Australian economy which resulted in very, very painful results and a lot of hardship for a lot of people. According to the various economic commentators there is now no guarantee that the RBA won't again raise interest rates either in May or shortly thereafter which would see even more distress in the house/unit owning section of the communities around Australia and make it even tougher for people with maxed out credit cards. Then there is the current 'treasurer' and 'prime minister' telling everyone they can get to listen to them that next weeks budget "will contain some very tough decisions". Apparently these tough decisions are necessary because "the government wants a solid budget surplus to protect Australians from any overseas events". The contempt this statement shows for the Australian electorate is breath taking. They assume that everyone has forgotten (never knew?) that the previous government not only produced 11 consecutive budget surpluses that completely paid back the gigantic debts of the last Labor government but that the current financial year (courtesy of the last Costello budget) will be the 12th consecutive surplus - and a very large surplus at that. Nice to return to Alice in Wonderland country - or more accurately - "Kevin in Blunderland" ....it's hard to believe that a majority of Australians actually voted for this vacuous clown. Sunday, May 4. 2008What A Total Fiasco!John Linton We got back to Australia yesterday evening and had time since then to catch up on the Australian business press I had missed for the last week. I don't know what anyone else makes of the various reports and statements from Stupid Stephen and his running dog mates at Telstra and the plaintive retorts by Optus and some of the small internet providers but all I can say, to paraphrase one of the long list of disastrous Labor prime ministers, is - 'Heaven help Australia because the Federal Government certainly won't". After 17 years of attempting to make telecommunications deregulation work in Australia Crazy Kevin, at one stroke of a pen, has used an insane and completely unscoped and unthought out and just plain stupid electoral promise 'sound bite' to totally f*** Australia. He is paying Telstra back big time for their support of Labor in the last election and who cares if Australia's internet and telephone users have to pay double or treble for basic data services because of his craziness and deluded stupidity? Only every Australian who wants to use the internet and related services to help them run a small business or help their children study or just entertain themselves at a reasonable cost. What other 'tender' (and what a joke that word is in this context) anywhere in the world for any major project would have a three month 'deadline' for the submission of bids? Obviously the answer is absolutely NONE. So what is the ONLY conclusion that ANYONE can come to when a Federal Government makes an insane electoral commitment and then 'delivers' on that commitment by issuing tender that only one organisation can respond to in the time frame? I can think of two words - one is graft the other is corruption (or are they just synonyms?). Actually I don't think either word is correct - I think the only words that are applicable are "inexperienced delusion" or if you just want to use one word it's hard to go past "crazy". .......and these are the people 'running the country'. I see the 'opposition' wil use whatever leverage it has in the Senate to block the deal - I assume that's possible over time - and all that means is that nothing will be done for even longer which suits Telstra even better. At some stage the full ramifications of what they are doing will eventually dawn on the dummies who are attempting to put the deregulation clock back 17 years in the 'cause' of 'popular politics' but that will only happen: a) When as much damage as possible has been done b) After even the morons in the Labor Party caucus actually understand what Crazy Kevin's quick fix to his election sound bite actually means. c) They work out a way of getting out of their self inflicted mess that allows them to appear to have "listened to what Australians are saying". I couldn't find anything else of interest that had happened in communications in Australia over the week I was away except the brief look I had at the share prices of those ISPs and comms companies that are listed on the ASX. Telstra and Singtel seem to be holding up well but the small and tiny ISPs all seem headed for their 12 month lows and some of them seem hardly worth keeping listed their share prices are so low and each have the majority of their shares held by a very few people. I guess another sign that current shareholders have little confidence that the future is anything but doubtful and almost certainly factor in the current political/Telstra machinations. Oh well - as voter in a 'safe' electorate I can do nothing about the wide sweep of Australian politics and the results of those politics so all that can be done is to get on with what is possible and attempt to stay alive in an increasingly distorted market place. It's a new week tomorrow and undoubtedly new perspectives will be available. Saturday, May 3. 2008One Day Australia May Catch Up With The 'Third World'John Linton Some of the figures quoted were quite startling: 1) Revenue in the last financial year of $A19 billion (from a population of 5 million in their home country but with over 7 billion coming from Asia and another 6 billion from their neighbouring countries - Sweden and Denmark and five Central and Eastern European countries). 2) Over 50 million subscribers in their four Asian countries. 3) Telenor pioneered and provided the pre-cursor of GSM in 1983 and made GSM the standard in Norway in 1993 4) Telenor had double the penetration of mobile phone users per head of population of the next most used countries in the EU (France and Germany) by 1999 and that 'saturation' drove them to use their GSM expertise to set up in so many other countries. It's worth reading if you can find a copy. What was even more interesting, and surprising, to me was the fact that you can get high speed HSPA data services in Sri Lanka at faster speeds and lower costs than you can obtain them in Australia. They have an 'entry package' of 1.5 gbytes for the equivalent of $A15.00 a month. Sri Lanka Telecom offers speeds of up to 7.2 mbps down and 1.98 mbps up for approximately $A10.00 per gbyte for a 15 gb package and 3.6 mbps down and 384 kbps up on a 5 gbyte package........ .......amazingly they don't then make additional downloads prohibitively expensive to generate some 'profit' on their give away package pricing. Excess data is charged at 1 cent per megabyte. And there's no catch to the set up pricing - a choice of M3 modem or data card for less than $A80.00 and an activation charge of $5.00 for the SIM. And there's also no coverage 'catch' (at least according to the material I received which says "usable practically anywhere in the island of Sri Lanka). It seems to give the lie to "Australia's vast spaces and sparsely populated areas drive up the cost of data services......." type verbiage which is the stock rebuttal to "but other countries have.....". I don't think the population spread in Sri Lanka and the topography is any less challenging that that of Australia and I would say for certain the terrain/population difficulties in Pakistan, Bangladesh, Thailand and Malaysia also rank right up there on the scale of impossible terrains to deal with and with population's spread right through those impossible terrains. Not that it matters in Australia today as the three major mobile companies all claim to be able to by the end of 2008 provide HSPA to 98% of Australia's population. It will now be interesting to see if they can deliver the data at a speed of 7. 2mbps and priced at $A10 per gigabyte with excess usage priced at 1 cent a megabyte. Apparently there is no reason why that can't be done given that it is now available in a country such as Sri Lanka. It's a pity that TeleNor isn't bidding for the current federal government tender - Australians in remoter areas of the country might be able to get high speed internet at the same prices that third world countries pay for their high speed internet today rather than pay some Telstra monopoly/Labor incompetence sky high price in 5 years time. Friday, May 2. 2008I cried, because I had no shoes.....John Linton On the flight to Colombo I read an article in a US paper (I forget which one) that reported on the unfortunate top business school graduates who had been 'pre-hired' last year before they graduated by Bear Sterns and now their $US180,000 a year first year of employment jobs were no longer available to them and it was much too late for those affected to apply to other broking houses. Apparently, according to the article, these first year employees could have expected to have earned another $US200,000 on top of their 'base salary' in performance bonuses. It made me realise that I had pretty much made a complete financial hash of my own working life when a first year graduate in the USA is earning twice as much in the first year of their working life as I do in the last, or 'lastish', year of my working life.....enough to make you cry...... ....and then we drove from the airport to the hotel and witnessed at first hand for the second time in a few months how cheerful so many Sri Lankans are who work so back breakingly hard for less a day than most Australian's would pay for their work day sandwich lunch. Because we had finished all of tasks we came to accomplish and because it was one of the myriad of public holidays in Sri Lanka yesterday (unknown to us when we booked the trip) which meant we couldn't really talk to any of the people we might have liked to talk to, we took a trip 'up country' by car to see the elephant orphanage and another widlife 'park' where you could gain an initial understanding of just how much communication is possible between humans and elephants. In an attempt to try and alleviate the incredible stress of driving through Colombo's nightmare traffic as much as possible we left the hotel at 6 am in the morning and partly because of the early hour and partly because of the public holiday the 'city' part of the driving was pretty easy - leaving the city. As for the 'country' driving - all I can say is that it added a previously unexperienced level of sheer terror to anything I've previously experienced. Apart from the main business, government and 'embassy' districts of Colombo it's pretty clear to a casual observer that poverty is very common throughout the parts of the city we have driven through to meet with various people. Of course there are some very nice houses and some very nice districts but the overwhelming impression is one of 'scraping by' in the majority of cases. Driving on the 'main road' from Colombo in the direction of the old capital city of Kandy made the poverty seen in Colombo seem almost affluent and the hard work done by Colombo residents a cake walk compared to the manual field and paddy labour being done as we drove to our tourist destinations. (whenever we could bear to open our eyes). Of course - similar/same/worse scenes can be seen over much of S E Asia, India and the 'Middle East'. I had read up on Sri Lanka during the time we were evaluating where we would set up a support and development centre and was aware that most of Sri Lanka's 20,000,000 or so people live without most of the 'essentials' of Western/Australian life and that, apart from the highly educated, a common monthly wage is less than $A50.00 and often less, much less, than that. Seeing what that means first hand is not something 'research' can convey to you - or at least to me. Seeing 60 or so elephants in 'the wild' or close to their 'natural state' was quite an experience (despite being a tourist in the midst of other tourists) and it was something that will be quite unforgetable. It was counter pointed by the 'mahouts' and other personnel who tended and cared for the elephants who, our driver told us, earned around 50 cents a day for a seven day a week, 12 hour a day working life with 'accommodation' provided in a communal shed and their food. The disparity of what's available to a child born in Australia (or the USA, Europe etc ) compared to a child born in Sri Lanka is appalling in the 21st Century. Many people in Sri Lanka have no shoes, some people have no usable feet and at least one elephant has no leg (blown off by a land mine in the Wild Life 'Sanctuary' in which he was born courtesy of the civil war now in its 27th year). It puts the current 'crying' about "Australia's terrible broadband speeds and costs" in to perspective. |
CalendarQuicksearchArchivesCategoriesBlog AdministrationExternal PHP Application |