John Linton ......It's gonna be a bright, bright, sunny day (Johnny Nash):
http://uk.youtube.com/watch?v=HagzTRmUBIE
.....but actually the rain hasn't gone - it's bucketing down here.
I have had some time to consider two aspects of Exetel’s future planning for the coming five years on the flights and in the many waking hours of the early morning that are available due to a time displacement of five and a half hours.
I have previously alluded to the major problem that any small communications company in Australia faces especially one that has built a large portion of its business based on providing broadband services that are sourced from either Telstra or Optus. That, very simply put, is that there can never be enough money made available as ‘profit’ to actually make it worthwhile doing for any length of time – and, in my opinion, that ‘length of time’ is now receding rapidly in the planning ‘rear view mirror’.
Irrespective of any future changes that may or may not be made by Telstra the fact remains, in my opinion, that Exetel can never add enough value to a Telstra sourced service to ever make any real difference to an end user’s value. I’ve always known that doing this would be difficult and have been encouraged along the way by the fact that other companies had found, apparently, that it is possible to buy a base ADSL or telephony service from Telstra at a realistic price and add sufficient value to offer an end user a ‘better’ service than Telstra may choose to provide.
I had thought, and I fully understand that it’s the fault of my own naivete that I was so wrong in my thinking, that over time and as volumes of business grew, margins might slightly improve in terms of buying base services and that a rigorously operated, tightly cost controlled and amazingly fully automated operation would be capable of not only providing a differentiated service but would be able to do so at a lower cost to the customer and still leave enough for the ‘business’ to become and remain ‘financially robust’.
I think if that was going to happen – five years is long enough for it to have happened by now. I can only, and sensibly, conclude that it hasn’t happened by now and therefore it’s not going to happen.
Not exactly an Earth shattering view and one might well observe that it shouldn’t have taken almost five years (on top of previous direct experience) to reach such an obvious conclusion. A valid view point – what else can I say? For even the most pragmatic of people, the triumph of hope over experience can still cloud the most incisive of minds – and I think it’s a long time ago that my mind, by the kindest of measures, could be described as incisive.
As it’s such a major decision it couldn’t possibly be made based on one person’s view.
However it doesn’t take much of a look at the communications industry in Australia to see, and only based on the published and verifiable ‘evidence’, that outside the two other largest mobile carriers and possibly TPG/SPT , Internode (about which there is no useful published information) and undoubtedly some other company or maybe even two that I have either forgotten or am unaware of, that only Telstra is a successful communications company in Australia.
Every other communications company that has based all, or a significant part of their business on using Telstra Wholesale services either has ‘disappeared’ or has struggled on not making any money – though undoubtedly iinet et alia would dispute this jaundiced view (to which my reply would be – look at the accumulated losses on your balance sheet).
However – this isn’t an exercise in whatever other companies may or may not have achieved (as I clearly can never know any realistic details). It is based on looking at the future with the actual facts and figures of close to five years direct experience all of which say there is no realistic commercial future for a small company like Exetel basing any future plans on buying services from a company such as Telstra – or indeed any company that either does or is likely to adopt the same or similar ‘policies’.
…and by “similar policies” I mean the bizarre situation where a small company finds the ‘retail arm’ of its wholesale supplier having its retail arm directly approaching its customers offering the end user lower prices than the wholesale customer can buy for – quite a bizarre business situation when you think about it. What possible reason would a sensibly managed commercial organisation have for spending money to offer a customer they already have (via their wholesale business) cash incentives to resign with their retail business for less money than their wholesale customer was already paying them?
I can only think of one reason - but perhaps I'm not bright enough to understand what's really happening.
So – ‘no more over priced ADSL tail circuits and back haul costs for Exetel’ – from any provider – there is no way that Exetel can make any progress at all in pursuing that ‘profitless’ path. We can probably stay in business and even make a small profit and probably continue to ‘package up’ an end user offering that may well continue to appeal to some tiny percentage of the overall marketplace for a year or so but – among other things – where is the value in doing that in the wider ‘scheme of things’?
There isn’t any – for anyone.
Buying HSPA Layer 2 services (not Layer 3) from a carrier, at the moment Optus, removes several of the issues that render ADSL services so impossible for Exetel in the future and are a realistic ‘transition phase’ because a small company (and Exetel is a good example) can much more easily ‘construct’ an end user offering that wouldn’t ‘compete’ with the carrier’s own multiple market directed offerings but would address marketplaces that the carrier itself couldn’t and would never want to address which goes a long way towards resolving the problems of a wholesaler who ‘prefers’ to do their own retailing.
The other point is that there would be a true competitor to Optus (Vodafone)in this country that would eliminate almost all of the problems involved in the ADSL versions of broadband and its ‘add on’ services. Again, a company based on something different is much more easily ‘transposed’ to geographic areas other than Australia should that ever be considered to be a sensible thing to do.
So the issue resolves itself to something quite concrete – not providing ADSL1 services in the not too distant future or any other ‘services’ that are in any way dependent on a wholesaler who will see every market as one in which their retail operations should have precedence.
Distance and a different environment provides greater clarity of thought – or is it the propensity to have two, or three, for the road?
Damned if I ever could tell the difference.
Damned if I ever really cared now I come to think about it.