Thursday, October 16. 2008
We'll build a world of our own, that ... Posted by John Linton
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Comments (31) Trackbacks (0) We'll build a world of our own, that Telstra won't share...John Linton .....All our problems and costs we'll leave be-hind us there And I know that you'll find, there'll be peace of mind http://www.youtube.com/watch?v=S9oaXzrsV3Q .....so when you actually come to think about it - why do you need a Telstra land line to provide a broadband service? You don't - isn't it just another 'legacy' that has suited Telstra and has never, until now been challenged by Telstra wannabes, to extend the, what appear to be, considerable profits it makes from the 'sun set' years of a hundred year old (based) copper network. It's very useful and its very convenient but because it's controlled by a monopoly it's very expensive. So I started my List A yesterday with the first entry being that as long as Exetel based any service on any infrastructure 'provided' by Telstra we would never be able to succeed in building a viable business. Easy enough to determine - so many other companies who buy various services from Telstra reached that conclusion a long time ago and have spoken publicly about it for many years. Optus, AAPT, iPrimus, iinet, Internode, TPG 'spokespeople' have all made reference to this scenario in announcing their own versions of fibre, cable, satellite and, more recently, ADSL2 builds of their own to either eliminate or reduce their dependence on Telstra. The only major successes have been the mobile networks built by Optus, Vodafone and '3' and it took a long time for those to reach 'equality' with Telstra and they suffered for many years from the disparity in user numbers via the 'inter-carrier' charging regime. Your own ADSL2 DSLAM network doesn't really address the problem (you have to rent Telstra 'real estate' to house your equipment, you have to rent Telstra copper lines from the exchange to the end user, you also may have some fairly difficult and time consuming operational 'hoops' to jump through) and no matter what you do the end user still also pays Telstra if they want to make land line telephone calls (or pay Telstra via the ISP for that privilege). So - any version of ADSL2 is still far more expensive than it should be when provided by a non-Testra ISP or communictions company - at least that's the way it looks to me. But why is there this 'hang up' on providing broadband ONLY via a network owned and controlled by Telstra? Why is that the "safety" of a Telstra land line for 'emergencies' such a major 'stumbling block' to removing Telstra's charging regimes from every deployment of broadband? In the 1970s it was called FUD (Fear - Uncertainty and Doubt spread by the incumbent dominator in a particular market. I suspect it's still FUD. So here's my current thoughts to deal with List A - Point 1: 1) Use HSPA for 256 kbps ADSL1 users a) 90% of Exetel's current 256/64 kpbs users download less than 1 gb a month b) HSPA is 2/3 the price of ADSL1 at less than 1 gb download per month (maximum $20.00 instead of minimum $30.00) c) Replace land line telephone calls with VOIP - save 50%, at least, of current call charges (10 cent local calls and 10 cent STD calls 20 cent per minute calls to mobiles) d) Cancel land line rental (save $19.90 to $30.00+) e) Replace land line with mobile 'standby' service at a cost of $10.00 tops including free hand set. f) Amend the web site along the lines that any sensible user would be crazy not to replace their 256/64 kbps service with an HSPA service that is so much cheaper and probably 6 times faster. g) We have removed the 256/64 ADSL1 services from our web site pricing sections and replaced the 'old' pricing with this statement: "If you are considering an ADSL plan at 256 kbps download speeds we believe you would be much better off considering an Exetel HSPA plan that will give you speeds between 512 kbps up to over 1,000 kbps and will cost you less than an ADSL service for low download usage. To see whether an HSPA plan will suit you please click here" h) Contact our current ADSL1 users who download less than 2 gb per month and appraise them of the compelling reasons why they might like to consider moving from ADSL1 to a much faster and much cheaper service. What we learn from these 'initiatives' we will then use to address the 512/128 kbps users and 1500/256 kbps users.I think it is probably best if we just discontinue offering the telstra 8192/384 service to new users and use ADSL2 as the alternative. That's as far as I got yesterday in 're-constructing' Exetel's business plan to allow Exetel to retain more control of any future business it might be able to do and to simplify the relationships it has to 'manage'. Our aim would be, one way or another, not to supply any 256/64 kbps ADSL1 services by some time in early 2009 by replacing them with much faster and much lower cost alternative services. Wednesday, October 15. 2008Moving Forward - HopefullyJohn Linton I haven't read Orwell's 1984 since I was in my early teens so my recollection of Airstrip 1 and Airstrip 3 are hazy and I never could understand how Winston Smith came to realize he did actually "love big brother". I do recall how the book made an indelible impression on my understanding of, if not democracy, then of the inalienable right for any individual to think in whatever they wanted and to express whatever view they wished to do (other than urging armed insurrection against the elected government or to express specifically proscribed public utterances or making general statements likely to cause 'affray') in a free society of which I believed then and now Australia is. Apparently I was mistaken in that understanding at least in thinking that everyone living in Australia would understand such inalienable rights. Apparently a sound and simple knowledge of personal 'liberties' (as defined in the Australian Constitution and, one would have thought, of common knowledge to any person living in Australia who has completed the first two years of a high school education in Australia) is not well understood by everyone living in this country and some of the personal views I express from time to time on these very personal ramblings (which as is clearly stated represent, and only represent, what is uppermost in my mind at the time I open up the 'edit' screen and start typing) are deemed to be somehow "unacceptable". To any other sensitive soul (who also doesn't have any understanding that "Big Brother" was a fictional character in a novel and the "thought police" actually don't exist) the remedy to not being "offended" by what I (an individual of no possible 'power' or 'importance' or even 'relevance') think and sometimes express in this, my personal 'scribble pad' of things that pass through my mind is DON'T WASTE YOUR TIME READING MY RANDOM THOUGHTS. My personal thoughts, at any given point in time, are completely that - my personal thoughts and if they 'offend anyone' .............construct a two word phrase out of a vulgarism for sexual intercourse and one of the states of an electric light switch and apply it to yourself. (the above is a typical example of the pointlessness of what passed through my mind as I opened this edit screen a few minutes ago). I looked in to my metaphorical 'crystal ball' last night and saw a different future for Exetel probably caused by the communication that lead me to remember how affronted I had been when opening this screen today - but not entirely. In a couple of months, Exetel will have been in existence for 5 years and over that period has built up a quite sophisticated delivery network and an even more sophiticated set of procurement, provisioning, support and management tools that have constantly changed over the past five years and are built in ways that allow them to be constantly changed over the next five, or whatever, years. Most aspects of Exetel's operations (and this may well be because of my limited knowledge of other well run companies methods and processes) are far superior to those I've observed over the last few years used by the companies I visit or deal with or are run by friends and acquaintances. So it occurred to me last night that it was past time to move away from using all of this hard won 'sophistication' (and of course all of the immense efforts that have gone in to creating it) to benefit organisations who I wouldn't, as the 'earthier' of my two grandmothers was known to say, "bother to spit on if they were on fire". We, or more accurately I, haven't put enough thought in to exactly what we should do over the coming five years and I've now spent almost six weeks developing a plan for the future without asking myself some very basic questions - the most important of which is "why are we doing what we are doing at the moment at all"? I actually don't have a good (in strategic terms anyway) answer to that most basic of questions. So I looked in to the crystal ball and when its swirling clouds gradually cleared they showed a very different picture. I jotted down the main things I saw and will now tear up the last six weeks work and try and construct a viable set of plans to move from where we are today to a place we really would like to be today but where we should definitely plan to be within the coming 18 months or so. While it looks impossibly difficult, like all planning to do something you've never done before and haven't got a clue how to do it, I will start with two lists: List A - writing down every thing we find difficult or irksome today List B - writing down every thing we believe we are good at and enjoy today The plan then becomes to remove all of List A from being part of the future operation and replacing each one with something from List B. Pretty simple to do in concept and, I suspect based on previous experience, not that difficult to do in reality. Just very frightening in terms of cash flows and investments and, as with all planning, ensuring the right people are available or can be found. It should only take a week or two and then maybe I won't receive any more missives from the thought police......... .......providing I have the mental acuity and strength of will to do something that hard....one more time.
Tuesday, October 14. 2008Perhaps Not All HSPA Is Equal?John Linton I had an interesting 'chat' with a 'chain store' earlier this morning regarding selling our HSPA service through their Australia wide outlets. It's an interesting concept but only a few minutes of conversation were enough to establish that it would not be possible to put in to operation. The reasons were their 'standard' requirements in terms of exclusivity, 'merchandising', product packaging, stock holdings, discount from list and payment terms. It was an amicable conversation and I learned a great deal in a very short space of time so it wasn't a waste of time - at least for me - and the person I was speaking to seemed to be grateful for the 'knowledge' I was able to provide on some aspects of HSPA based on my very limited experience of the services we have been providing over the past few weeks. One very interesting comment he made was that he had bought our HSPA service on the first day we accepted applications and his experience so far was that it performed better at his home and his office and in various places in between than the 3G service his organisations was currently selling and the other three services he had tried out over the past six months. He went on to say that after we migrated the services from the Optus Layer 3 to our own Layer 2 service last Thursday night there was a noticable speed improvement and there were an increased number of occasions when he reached sustained speeds of 2.8 mbps down - something he had never achieved on the 3, Vodafone, Virgin or Optus HSPA/3G services his company had trialled over the last few months and almost never achieved on the Telstra 'high speed' service. Several of our other HSPA customers (plus Steve) have said the same thing. He was curious to hear why we thought that might be the case, other than coincidence (with Optus upgrades to the locations he mainly uses or school holidays or whatever) but I had nothing to tell him as we have no ideas why it should be the case except things we have no way of really determining. We left it at that and I said I would get back to him if the situation changed or if he could change the commercial terms he was adamant about - not a likely scenario on either part I would think. It made me think though. We will break a long held view on not using advertising at the end of this month when we put a full page ad into the October 30th edition of BRW. It's a very simple ad and a version is being used on our web site here: http://www.exetel.com.au/special-hspa.php We will run this ad in a number of other 'business' magazines between now and late November as part of a different approach to 'addressing' the business marketplace in Sydney and some regional areas of NSW and Queensland. Our decision to actually spend some money wasn't generated by this morning's conversation (obviously) but the more I consider some of the things that came up during that short 'chat' the more I think that HSPA might benefit from a completely different 'marketing' approach(es) to the one we have taken since January 2004. I think that HSPA will be something that will completely change Exetel over the coming 15 months if it becomes even half as 'successful' as I think it might. In my long career in 'technology' selling there has only been one other time/product/opportunity of having a single product that was good enough in it own right to do well but was actually 'destined' to do spectacularly well because of the combination of a short time when the 'manufacturers' of the product were open to any views on how the product should be sold and there was not only no competition but the competition that existed was 'prevented' from actually competing. That was in 1978 - a very long time ago and a scenario that probably only I can remember - most other people in the industry then having now died, and the ones in it today would not have been born then or would be at some phase of their school education. If they were 'adults' in 1978 they would almost certainly not have been involved in the technology industry in any meaningful way. Strangely, or perhaps not so strangely, it's going to be the 'pressures' that organisations like Telstra exert on small companies like Exetel that will accelerate the growth of HSPA and to a degree that wouldn't exist without such pressures 'backfiring' on the 'bullies'. An example is the haste with which we will now have to move to attempt to move our low end ADSL1 users away from Telstra onto an HSPA service - something we had not planned to attempt until mid 2009 we will have to now see how it can be done "next week". However that will be constrained by the pricing we can obtain for a suitable HSPA modem. The 'foot print' of HSPA is much larger than that of Optus ADSL2 and therefore the number of current Exetel low end ADSL1 users who could benefit from an HSPA service is almost 100% compared to less than 50% for a, more expensive, ADSL2 service. This means, for the first time, we can genuinely offer a broadband service that uses no part of the Telstra infrastructure and therefore cannot be negatively affected by Telstra's high prices and constraining business practices. It's obviously something that has many 'challenges' but then so does anything worth doing. As it seems unlikely that Exetel will be alone in reaching this very obvious conclusion the 'pressure' that Telstra may try to exert will almost certainly not produce the results they anticipate. However Telstra will not be the only influence that will accelerate the transfer of low end ADSL1 users to an HSPA or similar solution. I think a major driver will be the mobile carrier's policies that will try and prevent the use of VoIP over their networks and the pressure they put on the mobile hand set manufacturers will also 'back fire' in ways they haven't anticipated. So a once or twice in a lifetime opportunity if we have the skills, courage and money to make it happen. Monday, October 13. 2008The Communications Industry Faces Interesting TimesJohn Linton One thing that I have always liked about the technology industries that I have been involved with for the whole of my working life is that they constantly change both in terms of the companies that operate and the technologies that are deployed. The current falls of all types of stock prices around the world over the past year has been the subject of 'blanket' media coverage for several months now and is now part of the 'world wide financial crisis' so the continuing loss of value of communications company share prices is of miniscule importance to the wider world of 'real people. You may remember that I said that this URL: http://markets.smh.com.au/apps/mkt/industrylisting.ac?code=50 gives a 'snap shot' of the communications companies listed on the ASX - and what a sad and sorry story it tells at the moment with even Hutchisons (with their $A3 billion mobile network) falling to 'penny dreadful' status of 9 cents valuing its whole ten year plus investments in Australia at less than $A80 million. Similarly TPG's shares fell perilously close to 'penny dreadful' territory at Friday's close of 10.5 cents valuing TPG/SPT at a little over $A75 million - and this is a company that unequivocally states that it will make over $A90 million in profit in this financial year. Same story with Macquarie Telecoms (annual revenue of over $A200 million but a market valuation of less than $A20 million) People Telecom with annual revenue of $A100 million but a market valuation barely above $A7 million and so on. Even Telstra and Optus have dropped 10 - 15% over the past few months. None of this means very much in the long run - undoubtedly the worthwhile companies will regain favour with the share buyers and their stock prices will reflect that change in confidence. But it does mean a great deal in the short to medium term with the $A falling precipitously to levels not seen for more than 3 years and with all the pain for the comms industry such falls bring. I made the pessimistic forecast some 10 months ago that if the "NBN" tender ever was awarded it would be lucky if the first spade hit the dirt before 2010 and that 'pessimism' (according to Stupid Stephen at the time) looks like wild optimism right now. Not only that huge financial infrastructure investment is now under threat of much more expensive costs from the $A slide but, as everyone is now saying, just FINDING investment money (let alone at a realistic price) is going to prove difficult. This was rammed home to me in no uncertain terms over the weekend when I received two new quotes for Huawei E169 HSPA 'sticks. The first one was from the UK supplier whom I talked with in London in early August who sent me an upbeat email reducing the price he was prepared to let Exetel have them at; which was a nice reduction. However since I last talked to him the $A has fallen so much his quite large reduction actually turned into a price increase. The same effect from a quote direct from the PRC which we could have considered because the initial shipment quantity was less - two month ago it would have been a significant saving to us but now it's not much below our current Optus price. So the "global credit crisis that isn't affecting Australia" is affecting Exetel and, doubtless, any other comms company, large or small, that buys goods denominated in $US - which includes all the mobile handsets as an example of how end users will be affected. Of course forward buying of currency will mitigate the affect for a while but the pricing will be affected sooner rather than later. Even the upgrading of the various carrier's ADSL2 DSLAMs will now cost more than was budgeted for (less any forward currency cover) and new exchanges will cost far more than they would have 3 months ago. So, not much joy if you're thinking of buying a few thousand HSPA modems (or ADSL1 or ADSL2 modems for that matter) and definitely not good news if you're importing HSPA/3G equipment to roll out/expand your 3G networks round Australia - all of that just became a lot more expensive. But in reality - nothing that has so far happened has actually affected many/any Australian buyers of products and services except in a positive sense that petrol is much cheaper and house prices have fallen which is good news for house buyers if not for house sellers. However it will have an effect and the UK, which is 2 - 3 months 'in advance' of Australia in dealing with the global financial crisis which isn't meant to affect us indicates what we will soon face: http://business.timesonline.co.uk/tol/business/economics/article4926946.ece This article, and those around it, also likens the likely current 'recession' to be as harsh as the 1982 years rather than the , relatively, milder 1992 - 1995 and Dotcom problem times of 2000/2001 - very worrying if they are right. Apart from hardware costs I get the first uneasy feelings about how Ms McKenzie and co will deal with the current 'slow times' being felt by the various 'suppliers' to the wholesale comms market. In recent weeks I have met with several of our suppliers all of whom say or imply the same thing - that their first quarter was 'disappointing' and the current quarter looks even more disappointing. One supplier said they had missed their targets by double digits and another said that apart from Exetel all their other wholesale customers were spending less with them than in the previous quarters. I felt really good for a nanosecond until I realised that it probably meant that I was too foolish to have negotiated as good pricing as their other customers. If times are 'slow' right now, it almost certainly means they will get slower over the next few months. On Friday afternoon TW met with two of Exetel's personnel to discuss various issues and the impression we got was that TW had failed to generate much interest in selling ADSL2 to their wholesale customers and was now attempting to find ways of being more 'persuasive' in the only way that Telstra knows how to be persuasive. I read the brief reports from the two Exetel people over the weekend and it gave me a bit of a jolt - not that TW had put anything in writing and because both Exetel people said what was presented was very confusing I didn't have any facts but the metaphorical 'hair on the back of my neck' definitely 'bristled' with foreboding. I didn't know what if anything to make of the implications. As far as I can tell the current ADSL1 business is growing strongly and it has been a 'no worry' part of the Exetel business for some time now. However I now believe (based on nothing but a frisson of - it would be dramatic to use the word 'fear' - but something more than unease) that the various actions we had planned for mid to late 2009 need to be brought forward and brought forward to late 2008 if that proves to be possible. It seems to be wise to make more effort to convince our ADSL1 customers to consider an alternative to their current broadband service much sooner than I had anticipated. Oh well - sadly - I wouldn't know what to do with a quiet week anyway. Sunday, October 12. 2008"We'll all be rooned,"John Linton ....... said Hanrahan, In accents most forlorn, Outside the church, ere Mass began, One frosty Sunday morn - (John O'Brien). Well its far from a frosty morn in Sydney today though Whine Swan must not have known that after his rambling, boring, pointless and just plain pig ignorant waste of time on ABC TV. It was enough to make me choke on my morning coffee. It reminds you that some of the dimmer bulbs in the Australian electorate have voted for these morons who, very, very clearly, have absolutely no idea of what is going on in either the world's or Australia's economies (understandable as neither CK nor Whine have any financial credentials or other related knowledge whatsoever) but they just have to open their stupid mouths and talk so much cr** they demonstrate that they will be a massive barrier to anyone associated with running the country who might be able to take some sensible actions. Oh well....one good thing came out of Whine's whining this morning - Annette and I immediately used the internet to open an on line share trading account after not trading shares actively since we participated in creating Exetel as we were fairly sure that there would be no time for 'hobby' share trading and every second of every day would be needed to operate a fledgling business during its early years. I'm sure I know less than Whine and CK and rest of the poorly aided union apparatchiks, pop singers and TV 'personalities' that masquerade as an Australian Federal Government in Canberra - but at least I invest my own money and take the responsibilities for what happens as a result and I try and do so based on a career accumulating information and then acting on that information and then testing the results of those actions before taking further actions. Something NOT ONE of the so called current "Senior Federal Ministers" can claim is the case with each one of them (is anyone else concerned that a major 'slice' of the current Federal budget is being put into the hands of a Minister of Defence who didn't finish high school?). The President of the Russian Federation is not the first, but he is head of the largest country so far, to use the word "depression" to describe his country's financial situation. Maybe he knows what he's talking about - more probably not - but the Russian share market has fallen 60% which is quite close to the 83% in the US in July 1929. Shortly after CK's pathetic and totally uninformed rant on to Kerry O'Brien Thursday night (there is nothing wrong in Australia - our economy is in good shape etc etc) the ASX fell a record amount to a low that is 40% off the record high of a year ago. However, and this is from another totally uninformed person so take it for what it's worth (nothing), despite the chances that the stock markets around the world will keep falling - at some point they have to stop simply because people are selling shares below the price of the actual cash and cash equivalent securities held by the companies whose shares they are selling. While the people selling may have to sell (for all sorts of reasons) there will no longer be any reason for people not to buy. I read this while Whine was making ridiculous comment after ridiculous comment: http://online.wsj.com/article/SB122368241652024977.html It's a very incisive look at facts(?) and figures and towards the end makes this point: "Nearly one in 10, or 876 stocks, trade below the value of their per-share holdings of cash -- an even greater proportion than Graham found in 1932. Charles Schwab Corp., to name one example, holds $27.8 billion in cash and has a total stock-market value of $21 billion." A combination of Whine's irrational and irritating whining and the easy to understand "how to invest in a market crash for beginners" outlined in this article sent us scurrying to a computer to re-open an on line share trading account. I doubt I have any knowledge at all of how to either pick the 'bottom of this bear market" or know anything about individual companys likely future performances but I can read a balance sheet and do the simple arithmetic involved in calculating the C&E/PPS value of a company without needing a calculator and that might be a 'good start'. Fortunately, and more by good luck than good judgement, we moved all of our superannuation out of shares and into cash 18 months ago (when we were thinking of investing in a CBD floor for Exetel) and didn't bother to move it back as we dithered and delayed and generally procrastinated. So perhaps it's time to buy back in to the share market? The chief of the IMF, and the IMF's chief economist make some interesting observations about how far markets might still fall: http://business.timesonline.co.uk/tol/business/economics/article4926584.ece so sometime in the next week or so might be the time to buy. One thing's for sure - there's no point expecting the current d***heads in Canberra to do anything to look after any Australian citizen - we're going to have to do it for ourselves. PS: ...and for those that think my anti Rudd rhetoric is simply a reflection of my 'class bias' - what hope is there for that clown who vehemently insists over and over again to Kerry O'Brien on Thursday night that "there is no problem in Australia" and then turns around today (less than 72 hours later) and talks of "a serious financial crisis affecting all Australians". What a complete f***ing idiot. Did he finally read a briefing paper from one of his staff? Rudd is already the very worst prime minister this country has ever had, (in a country not known for having prime ministers of any great ability) and he gives every impression of going on to set a record of don't give a toss stupidity that will never be approached in the future. And for anyone reading this who voted Labor in the last election - don't forget he is treating you as if you were a complete idiot by thinking you won't notice his 180 degree reversal of 'position' in less than 72 hours. Saturday, October 11. 2008A Strangely Good Week.......John Linton ......contrary to the concerns of daily worsening financial news. I don't know why we should be able to accomplish so much so positively in a week (following four previous weeks of depressing news) when so much truly dreadful news started each day and then continued to get even worse as each day progressed but this week just past was one of the best weeks in Exetel's short life to date. There were many highlights - almost an embarrassment of highlights compared to over 200 previous weeks in fact. The turning on of the Exetel true Layer 2 HSPA service late on Thursday night without any problems was the culmination of a two year 'search' and then 5 months of intensive and extremely well executed system development by Exetel's always brilliant programmers and process builders who have delivered yet another tightly and cleanly coded model of automation for a new and complex system. It may sound simple to do for people who have developed so many cleanly coded interfaces to a carrier's own procurement and support sytems plus the coding of user facilities that make manual 'intervention' almost non-existent in every aspect but, from what I've observed of other companies over the years, that isn't the case. There is still some tidying up' to do but it was a brilliantly planned and executed major project and, as far as I know, no other wholesale customer of any of the mobile carriers in Australia has a Layer 2 HSPA service - and none are planned. Our introduction of weekend support started last weekend with a smooth implementation as did our 'Public Holiday' support (with one minor glitch caused by day light saving). Our gradual build up of support and other services in Sri Lanka has allowed this to happen as part of our long term planning and it was really good to see another very positive and tangible sign of the rewards for the risks we took and the multiplicity of problems we have had to overcome. Earlier in the week we received our invitation to BRW's cocktail party to announce their 2008 Top 100 fastest growing private companies as Exetel had been included in that 'list' for the first time and while it may not seem very important it, like Exetel's inclusion in Deloitte's Fastest 50 technology list in 2007, adds something to our 'credibility' - particularly with both our current business customers and in our future attempts to acquire business customers. Despite Monday being a public holiday in NSW we had a near record week for broadband applications with ADSL2 applications approaching 50% of the total on three of the 7 days. It was also a week in which there was a higher number of churns to Exetel as a percentage of total new applications than in any previous week since the third month of operating the company. This was despite increasing the activation cost for both ADSL1 and ADSL2 by $45.00 and $60.00 respectively. And the icing on the cake was we signed more new corporate customers for high end services in one DAY (Friday) than we have signed up in any WEEK of our existence to date. So - the week ended on a very big high and the immediate future looks very promising. Of course, one week in a company's 'life' is not indicative of anything in particular but it certainly is nice to have a week where every day something very positive and/or pleasurable occurred - that doesn't happen all that often even for the most easily pleased of people of which I don't think I'm one. I think I'll have a day of from Exetel's issues today and see what it's like to 'play in the sunshine' on a very nice Sydney day.
Friday, October 10. 2008If you can keep your head when all about you are losing theirs...John Linton ....then you're either a man 'my son' - or, more likely, you are too stupid, or in case of CK - too stupid and too dishonest, to understand the gravity of the situation. (apologies to Rudyard Kipling). I was irresistibly reminded of Kipling's "If" last night when CK, in one of his more somnolently measured, moon faced grinning and totally ridiculously wrong discourses was assuring the Labor sycophant (Kerry O'Brien) on the ABC's 7.30 report that all was well with the Australian economy - he clearly doesn't look at the ASX daily or read the financial press reporting increased unemployment and record levels of personal and commercial bankruptcies. He was making his stupid statements a few hours before Wall Street plunged yet another 680 points: http://online.wsj.com/public/us and the world's economists were almost universally stating that the US was in for a 'severe and long lasting recession' which would drag the rest of the world down at the same time that Australia's economic fairy godmother (the PRC) was advising it would require 20% less iron and coal in 2009 which will drag mining prices down even further and will result in job losses in more than WA: http://business.smh.com.au/business/fulltime-jobs-go-20081009-4x4p.html Perhaps he can't read? It would be the only explanation. And so we start another day with a cold shower of continuing bad news on all economic fronts - but I am going to try and not be depressed by the unending deluge of depressing 'news'. Despite the moon faced moron's comments there very definitely are very obvious signs that Australian business is experiencing difficult times which undoubtedly means that Australia's people generally are experiencing difficult times. One clearly obvious sign that I can see are the eagerness of two of our 'take it or leave it' suppliers to suddenly be very anxious to offer us 'deals' that amount to previously unheard of discounts on their supplied services - 30% in one case and over 30% in the other case. Of course, the take it or leave it attitude remains with the conditions of the offers which make it impossible for us to consider either of them but the fact that they have moved so dramatically away from their previously immovable positions on price is at least very, very strange. Even Telstra Wholesale, who either completely ignore us or treat us with a contempt usually reserved for slow witted children by bullying teachers of obscure subjects is insisting on forcing their attentions on us - which must surely be a sign that they are running out of buyers for their services. Why TW would attempt to 'sell' us anything after loftily dismissing every attempt we have made to create a realistic buy/sell relationship over almost five years can only be because they are in some sort of regulatory 'trouble' - it's impossible for a company like Exetel to deal with a supplier like Telstra if there is any other commercial alternative. I was strangely 'cheered' by those three 'approaches' which, together with the strong increase in daily orders, seems to be a vindication of the old saying "that it's an ill wind that blows nobody any good" (resurrected in my mind a day or so ago by someone pointing out to me that I was sounding very depressed). Perhaps a long and deep recession will be an accelerant for low cost infrastructure and highly automated companies like Exetel because even more people will look to reduce their expenditures on outgoings like broadband, mobile and wire line telephone call costs? Maybe, as more than one person has pointed out to me, in tough times lowest priced providers of goods and services do much better than in 'good' times. That would be very nice should it prove to be the case. Another, more ephemeral, measure of the 'toughness' of the marketplaces in which Exetel operates is the 'hate level' shown towards Exetel by employees of other ISPs and their cat's paws. I receive, either directly or via this blog or via the Exetel forum, a number of 'negatively phrased' emails/PMs each week. It always gives me a good feeling to know that Exetel's mere continuing existence is annoying to so many people - and how life deprived do these d***heads have to be to waste their time writing the bile dripping and invective dominant 'missives' they send me? Over the past 3 weeks the number of these communications has almost quadrupled to over 4 each day - and that has to indicate something is going wrong at companies such as Internode (whose IPs dominate the new high levels of abusive communications - more than 60% of the total). Perhaps the 'chill winds' of "a plateauing market" will require less over staffed ISP organizations in the near future? So - keeping your head in these difficult to understand times will remain a challenge. Maybe due to my ignorance, almost certainly true, I think I would prefer to have Exetel's heavily automated, very low cost, operating structures than any other ISP's in Australia if, despite moon face's assurances, times do get tougher than they are today. Thursday, October 9. 2008HSPA Does Everything We'd Hoped For......John Linton .....so why has there been 'bad press' concerning the performance of the Optus 3G network? Over 100 of the early users of the HSPA/Optus service have now 'reported back' regarding their early experiences and impressions of using HSPA in every State capital city, the ACT and more than 40 regional locations (mainly in NSW and QLD but at least one in every other State). With 3 exceptions (two of which turned out to be 'configuration' issues) all report that the service performs at or above, in 22 cases well above, their expectations. All but 4 stated the set up was extremely simple and required little more than plugging the modem in or following the instructions for mobile handset activations. All but one user said that VoIP using a mobile handset (either Exetel's or another providers) was of excellent quality (several said better than a mobile call) and some users said they actually achieved speeds in excess of 3 mbps. It's very early days of course and these 'early adopters' are likely to be above average technically and phone competent. However I have to say I'm more than pleased that the 'horror stories' reported so gleefully by the anti-Optus press have been conspicuous by their absence. My own limited testing of the HSPA service was 100% positive in several locations in Sydney (including the alleged 'dark hole' in St Leonards) and I've seen/heard nothing since we shipped the first sims and modems to change that cautiously optimistic view. I am encouraged by these early results and will continue to monitor the service performance closely over the coming weeks. Tonight we will 'turn on' the direct feeds in Melbourne and Sydney and move from the full Optus 'platform' we have been using to the full Layer 2 service we have based the current offerings on. A nervous night for a few of us here and at Optus. Obviously I read what the carriers are doing with their 3G offerings and, to some extent, what companies who buy Layer 3 services (iPrimus, Dodo) are doing with the 'standard' carrier plans they buy from the carriers. The price per gb war seems to have run its course, at least until the 'buy now for Christmas' activities commence though the recent flurry of decreases/increases in the "pre-paid" offers I found strange. I read this brief report on Vodafone's latest pricing: http://www.itnews.com.au/News/86271,vodafone-struggles-with-mobile-broadband-pricing.aspx and you may remember this report on Optus' price increases from last week: http://www.itwire.com/content/view/21036/1103/ So what do you make of it? Vodafone effectively positing that the retail price of a gb of HSPA traffic is $A8.00 and Optus saying it has a cost of $A30.00. (meanwhile iPrimus, who resells an Optus HSPA Layer 2 'bundle' says the price of 1 gb is $6.50. Telstra, of course, says that the price of 1 gb is $A60.00 because it is better data that goes faster in more places - but then Telstra doesn't really figure in this situation for all of the usual reasons. When I was in London in early August investigating what possibilities might exist for Exetel to operate an HSPA business in the UK/EU I learned a great deal (at least from a zero knowledge base it seemed to be a great deal) about buying wholesale HSPA data. At realistic levels (100,000 users a year) the prices quoted by three carriers were almost identical - the equivalent of $A0.006 per megabyte plus VAT. This would make the COST price to a buyer around 1 Australian cent including the network components of delivering the data in usable form to the end user - meaning 1 gb of data would COST $A10.00 without adding anything for a profit margin. Personally I can't see that the Australian carriers have any better economies of scale that their UK counterparts (I would think the reverse would be the case). So I'm truly puzzled at how iPrimus buys wholesale from Optus yet then sells at 40% below the cost of the raw data in the UK. The answer is, of course, that Optus don't charge iPrimus per gb of data but, as it's a Layer 3 offering, they charge them for an Optus plan minus a discount. Which, of course, makes it even more puzzling that Optus is able to accommodate a price of $A6.00 per gb minus a wholesale margin and minus their own margin. Some magic has been done after crossing the equator apparently as the much larger UK carriers don't seem to be inclined to offer that sort of pricing - and I don't mean to Exetel - I mean to a wholesale customer doing 10,000 sign ups a month. And then you add in to this mix the recent increase by Optus of their pre-paid service that sets a retail price of around $A30.00 per gb which seems just a touch too high? I have no idea what it all means. So, having been pleasantly surprised about how well the actual performance of the Optus HSPA/3G network has 'turned out' our major concern is to establish a profitable price point at which we can sell a realistic HSPA service - and I'm 100% certain that $A6.00 per gb could only result in a massive loss at the rates we buy at - which I thought at the time were pretty reasonable for the coming six months. I really must back away from commercial negotiation - I'm obviously past my use by date if iPrimus can buy at one third of what Exetel buy at! Then again..... Optus, Optus/Virgin and iPrimus HSPA/Optus users apparently have a different experience than the few early Exetel users which must mean......... ......it's all beyond me........because it can't mean what the obvious explanation a non-technical network person like me would conclude it meant.
Wednesday, October 8. 2008The First Signs Of 'Market Slowdown'?John Linton I see the NYSE fell another 500 points yesterday and that the UK government is going to have to buy into Britain's fifth largest bank (HBOS) to prevent it going broke: http://online.wsj.com/article/SB122337732542911119.html?mod=article-outset-box http://business.timesonline.co.uk/tol/business/economics/article4902837.ece It will be interesting to see how the ASX goes today as to whether the 1% cut by the RBA has any effect in preventing the Australian share market losing more value today - the $US700 billion 'bail out' in the US only seemed to make the NYSE fall even faster. Perhaps both the 'bail out' and the RBA cut have simply served to confirm that the US and Australian governments have no idea of what to do either but have finally recognized that something appears to be badly wrong. I think my original thought that the best thing to do at the moment is to stop reading the financial press as, apart from the deluge of negative articles, I don't get the impression that any one writing, in even the most conservative and thoughtful papers and magazines, actually has very much more idea of what is going to happen than I have (and I have no idea). I was pleased to see that yesterday was a near record day for Exetel in terms of service applications but, while being very pleased to see something positive amongst all the bad news that streams out of my computer screen, I realized that the figures were inflated by Monday's public holiday in NSW. Nevertheless it was one more contradiction in a maze of 'business indicator' contradictions that I am trying to make sense of in terms of the day to day decision making required in anyone's life. Everything that I read and hear tells me the economy is coming to a screeching halt but in our day to day business I can't see any real signs of that - I seem to see the reverse in some ways - either that or I'm completely misinterpreting what I see and hear. One puzzling aspect of the ADSL applications yesterday was the very high percentage of churns from other ISPs - over 30% of all applications instead of the usual 15% - 20%. The percentage of churns versus 'new user' applications has been climbing over the past few weeks but over the past few days it has very significantly increased. A few days aberration is not something to make any decisions about but when I looked back it is a very definite trend starting some two months ago but as it was very gradual I didn't notice it. If it continues I will have to take some view as to what, if anything of importance, it may mean. Perhaps just a confirmation of a market that is growing more slowly than in the past? The other interesting, and largely positive, signs are that all of the 'add on' services that Exetel introduced over the past twelve months are growing more rapidly (SMS via email, FAX via Email, VoIP and equipmentless VoIP, all of our hosting services). These are very low cost services, mainly, and therefore their financial contribution has always been very small but I hadn't really noticed how much they had increased - particularly over the past three months - I don't know what to make of that beyond the obvious concept of more Exetel customers have become aware of the value of these services. Perhaps there are more signs that the overall commercial activities in Australia are slowing. I am getting a much greater level of 'contact' from people wanting to sell Exetel something - both from people we already do business with and from people who want to do business with us. Even our bank follows us up regarding the facility they approved for the purchase of commercial real estate and the funding of HSPA modems - an unheard of event in my experience in dealing with banks. They must have run out of people to lend to if they actually call us to see when we want the money they approved! In particular I had, for me, a long telephone conversation with a quasi-competitor yesterday. I have known the CEO of the company for some years on a casual basis but have never had any personal dealings with either him or his company so I was surprised to get a message to call him/email him. The purpose of the call was not really clear to me but, if I interpret it correctly, it was to sound out our ability/willingness to provide outsourcing of their ADSL services (or to outsource part of our business) to allow them/us to reduce operational costs and to improve our 'economies of scale' in our smaller PoPs. At least that's what I understood the conversation to be about. We have contractual reasons why we couldn't consider 'outsourcing' our inter-State operations to anyone - even if we would consider such a thing operationally and strategically sensible - which I don't in any way - so I closed that possibility off quite quickly and expected the call to end shortly after that. However it didn't as he was apparently quite serious in looking for some sort of cost reduction via a "PoP sharing" arrangement or a total out sourcing arrangement. I listened as attentively as I could but as the concept made no sense at all to me, on any basis, even ignoring the very obvious conflict of interest aspects of it we agreed that it wouldn't be possible and ended the conversation amicably. I am all for ensuring that operational costs should be constantly examined to ensure they are kept to the minimum. I respect and admire 'lateral thinking' in business that goes beyond the obvious and the 'tried and true' but the concept of sharing key operational facilities with a competitor is so far outside my concepts of the 'nine dots' it's out of sight. I think I need to find myself a dark cave to hibernate in until the current madness is all over.
Tuesday, October 7. 2008The Recession We Have To Have......John Linton ......and so we reap the 'rewards' of Keating's legacy when he proclaimed the requirements for financial market deregulation as his own (rather than simply the doctrinal 'model' of the IMF's bright young things retyped and issued without change) and proceeded to remove all previous government controls on the Australian economy. It would be unfair to ascribe all the blame to the pig farmer, Howard and Costello never demurred and Costello even went a little further in at least two key elements in his almost 12 years as Treasurer. It all went so well after Keating's recession (and ignoring the blip referred to as the dotcom boom and bust) - until now. I see the Australian dollar fell below 70 cents last night and has only limped back over 70 cents this morning. Looking out of the window I see the ASX has shed 133 points in the first hour and a half of trading: http://business.smh.com.au/business/stocks-extend-slide-on-global-rout-20081007-4v7k.html http://www.timesonline.co.uk/tol/news/ and my read through the financial press of three continents earlier today indicated that both the US and UK were already in a quickly deepening recession and the rest of the major European countries would be in the same state once they released the September quarter figures. Perhaps the first European country affected by these financial 'events' has already "collapsed": Whine Swan and CK know even less about finance and Australia's economy than the clock collector and are quite useless in this, or any other, financial scenario so nothing can be expected from the 'government' - oh, apart from their increasingly inane comments that "Australia's banks are well protected..." and other such stupidities (have they heard of SunCorp?). Talk about a total waste of space. Three quarters of Australian companies recently surveyed stated that they would either not hire new personnel over the coming quarter or would be reducing personnel and two thirds of those same surveyed companies said they would be raising prices between now and Christmas. So despite what CK and Whine Swan say - it's not "alright". In fact it's very far from "alright". The Australian dollar's continuing decline from the $US0.96 exchange rate at the time I was overseas in July/August to today's sub 70 cent rate means that all sorts of aspects of Exetel's business have become more expensive over the past three months and are giving every indication of becoming more expensive. Some of the more obvious examples of products and services denominated in $US are: Cisco routers and switches have increased in price by 25% over the past three months and look set to increase further International minutes have increased by between 20% and 30% depending on destination IP bandwidth 'spot pricing' has stopped falling and has both increased and become less available Less important costs such as couriers, utilities and 'low cost' hardware have all increased significantly. At the same time 'terms of trade' (which haven't affected us - at least not yet) have significantly tightened as some of our providers are even more directly affected by $US exposures than we are. We notice a continuing deterioration in both the number of our customers who default on payments and then the length of time it takes them to remedy those defaults. All of this is happening allegedly BEFORE we have a problem - "....Australia remains unaffected by over sea's events." I wonder what things will be like if we ever do have the recession Whine and CK are saying will never happen here? It seems to me, and I freely admit I have very little/no knowledge or understanding of what might or might not happen in Australia (let alone in any other country), that it is a time for significant caution and 'exposure reduction'. How far caution should be extended is going to be the key piece(s) of judgment required today and then every day until it becomes clear what actually is going to happen. I see little alternative to increasing our prices for most of our services and reducing the rate of new sign ups to reduce our current growth to around half of the current levels. It seems a great pity having devoted so much time and effort to constructing and get started on carrying out an ambitious growth plan for the current financial year and beyond but if the current "events" can send a country and its whole population broke it would be extremely arrogant to think a small, not far from start up, communications company is somehow 'protected' - even if I believed 10% of the cr** spoken by CK and Whine. I'm beginning to think that these times have become too 'interesting" for me. Stop Press 2.00 pm: http://business.smh.com.au/business/rba-shock-rates-cut-by-1-20081007-4vi1.html Contrary to what Whine and CK have been mouthing I see the RBA has said that "financial markets had taken a "significant turn for the worse.'' I guess they should know.
Monday, October 6. 2008Phase Four Of P2P 'Control'John Linton It seems a very long time ago now that we realised that P2P usage had the ability to wreck the plan models we believed were what were required in the future broadband market and set out to find short, medium and long term solutions to those very real dangers. In fact it was two and a half years ago (four and a half years if you count our initial 'free time' initiative) - which in this business can be a lifetime for a small communications company being much longer than most start ups actually last. We have had our share of issues, problems, set backs and every other problem inherent in pioneering anything and there have been more than a few times that I felt like giving up and changing the models and objectives. Many of the problems we encountered were clearly our fault (lack of knowledge/lack of planning/lack of patience/lack of......) but many more were associated with deficiencies or shortcomings in the deliveries of the 'promises' made by the hardware and firmware providers. Irrepective of who or what caused the various problems at the various times we have gradually managed to gain a much better understanding of the elements of P2P in terms of network provisioning and we have gained a great deal of knowledge in how to deal with P2P in the future using a range of hardware and software 'tools' that didn't exist 30 months ago. Our initial 'protection' against P2P downloads swamping peak time bandwidth was the introduction (from the second month of our being in business) of the 'free' off peak period which encourages our customers to use low bandwidth usage times of the night to start file downloads. We have modified the conditions and time frames of this period over the last almost five years and have got it progressively 'more right'. Our seond ' bandwidth control 'phase' was to install 'bleeding edge' hardware to just identify P2P 'packets' via DPI (deep packet inspection) and restrict the amount of bandwidth the network made available for P2P protocols. This was very successful, from our point of view, initially as it reduced the amount of raw IP bandwidth we needed to buy to handle total customer volume by slowing down P2P downloads and effectively spreading them over the less used time periods. However the software was not perfect and, due to the necessity of keeping up with the constant changes the P2P developers kept making to their encrypton and other processes we went through periods of 'mis-identifying' other protocols as P2P which resulted in some customer dissatisfaction while we waited to get the fixes and, doubtless, cost us a number of customers. These phases lasted too long and were commercially unacceptable but, although we almost reached the point of abandoning the use of the DPI equipment we persevered and have not had a repeat of these issues for almost 12 months now. Our third 'phase', which we started almost a year ago was to install another 'bleeding edge' piece of hardware that cached P2P traffic thus, in theory, eliminating some of the raw IP bandwidth but still using the customer connectivity bandwidth which meant that it didn't produce the same level of savings as simply reducing total network bandwidth spend for P2P but did reduce the most expensive component of it and, a major plus, actually sped up the delivery of the most popular P2P files. One, major, drawback of this box was it actually required us to more rapidly upgrade the 'customer side' of the network bandwidth which, for ADSL2 12 months ago, was as expensive as raw IP bandwidth for Optus ADSL2. However contract re-negotiation partially addressed that issue and our ongoing knowledge increase and broadening skill set began to address the other issues. Which brings us to today - the start of the fourth (of now five) phases in re-engineering our network to eliminate the 'curse of P2P' and to both further reduce the cost of providing P2P data (which now acounts for over 75% of all data on our network) and to remove any 'speed constraints' that we have previously had to apply to P2P. Over the next few months we will 'reverse' the way we have managed P2P by using the Allot boxes to 'protect' all non P2P traffic by dynamically ensuring that all types of the end to end (customer - data source - customer) non P2P traffic has more than enough bandwidth at all times to ensure no 'saturation' can ever occur while at the same time using the raw IP bandwidth savings an 'unrestricted' P2P cache generates to buy more 'customer side' (and therefore much lower cost at the moment) bandwidth to handle the increase in P2P traffic that will now be generated. That's the theory and, doubtless, as with the previous three phases it will take time to make 100% effective but it is a sensible way of operating a network that has so much strain imposed by P2P capabilities in an ADSL2 environment. Fingers crossed as the first phase begins today.
Sunday, October 5. 2008'Life' Is Ending For More Than A Few Small 'Players'John Linton I think last week was a record for approaches from 'intermediaries' determiining whether Exetel would like to acquire small communication service providers - a total of 8 plus two enquiries about 'consolidation' or taking over Exetel. As we are a very small company with no 'presence' or track record in the acquisition of other companies it makes you wonder just how many small/tiny companies are looking to 'exit' the communications supply market - almost certainly a lot more than the eight in one week who approached us. (though an alternative explanation could be that these 'exiters' have already been rejected by the more likely buyers and are now even more desperate to find a buyer). I didn't waste any of the time of the people who approached us and emphatically said that we had no money to make purchases of 'customer bases' and we had zero interest in spending our and their time pursuing discussions that could have no positive outcome. An indication of the desperation of two of these 'intermediaries' was to get calls back to offer to provide the customer bases for no immediate payment but a future payment based on an agreed set of terms linked to profit generated from the customers over an agreed period. I pointed out to these two people that there was at least one company who specialised in such transactions and suggest they contact them. I think it is just one more indication that the business of providing communications servces is getting unbelievably tough. I have alluded to the 'assault' that BigPond has mounted over the past 18 months on other ISP's ADSL customers offering 'incredible' deals to move to Telstra ADSL2 and was amused to finally see the start of protests at the, apparent, new levels of dishonesty allegedly reached by one of the 'out sourced' telemarketing companies being used by Telstra: Exetel has lost over 6,000 customers over the past 12 months to Telstra's telemarketing to our customers (one can only wonder how these telemarketers know the person they call is an Exetel ADSL1 user?) and some of the offers that have been made were amazing - assuming they were true and as we had copies of letters sent to our customers detailing one of these "special offers" the offer we saw in writing was truly amazing and I would have dumped Exetel to take it up. So I can imagine how even smaller companies than Exetel would have been adversely affected. Another aspect of the pressure on smaller service providers is the increase in enquiries we have had over the past three months from people looking for an alternative VISP arrangement as their current provider has tightened their terms/raised their prices 'recently'. Exetel has provided VISP services to a very few companies or around two years now but has never 'pushed' ths service becase of the obvious financial issues involved. However we have developed some very good VISP facilities over that time and have some quite sophisticated facilities in place for VISPs which work very well. I started to look at VISP pricing last night and have made some improvements to the margins a VISP can obtain and will completely revise it over the next few days partly to help our current VISPs make more money and therefore stay in business and partly to rationalise the disparate arrangements we have made with the different VISPs. Perhaps there is an opportunity in this maket segment that might be useful to Exetel and VISPs that are underpressure to improve their margins - assuming we can do that of course. Overall it seems to me that everyone in the communications business needs to tighten their belts and look at making more money rather than growig their voumes as the times don't look like getting easier - quite the reverse. Saturday, October 4. 2008Exetel 'Invents' Zero Down Time ADSL2 To ADSL2 Churn....John Linton ........well, just a bit of lateral thinking able to be done because we have got the HSPA services up and running. Based on the work we have done to provide a zero down time for our own ADSL2 customers on the Powertel/AAPT based ADSL2 service to painlessly transfer to the Optus ADSL2 services we have have designed a new 'churn' process for customers of other ADSL2 services (either SSS or ULL) that eliminates the down time involved in such changes. The process is to loan them an HSPA service if they are in an Optus mobile 3G coverage area - which is now most of Australia. The essence of the 'churn' is: 1) Customer applies A true 'no down time' ADSL2 churn process!! Up until now the need for, say, an iiNet user (but to us much more importantly a Telstra BigPond user) to lose their ADSL service for 3 - 4 weeks if they wished to change supplier was and remains for every other ISP a major problem. We have turned away hundreds of other ISPs ADSL2 users (mainly iiNet) over the past six months by pointing out to them the problems and delays involved in moving an ADSL2 service either on SSS or ULL. Not exactly wildly imaginative thinking (when you think it through it's pretty prosaic) but the end result addresses a problem that ADSL2 infrastructure 'owners' have counted on as a major factor in retaining any customer who selects their ADSL2 service - that they have to suffer a considerable amount of inconvenience if they want to move away to another provider (like the days before Telstra introduced the "ADSL1 churn'" process - something that has been very useful for ADSL1 users. Obviously, as more ISPs provide HSPA services they will be able to make the same offer of 'no down time' transfers to their ADSL2 services available. It gets around Telstra's obduracy in refusing to join in any process which would allow their ADSL2 users to move away from their BigPond offerings and allows those 'locked in' users to move to a more affordable and flexible ADSL service after all the freebies offered by Telstra,and Optus for that matter, (free months, half price months, free modems etc) to lure those users quickly run out. The only difficult aspect of the process is writing the back end code to make the sign up, transition and turn on process simple for the customer and automatic for Exetel so that the cost of doing this is not burdensome on either party. For us - this isn't a major problem as we have a lot of experience in this sort of implementation - for the dinosaurs it may pose more difficulties. Temporary services to bridge the gap in switching providers are an important aspect of business generally but they have always been problematic in communications services based on Telstra infrastructures. The now common and ubiquitous data over mobile services available from at least four sources solves a number of the past problems for all but the very 'heavy' down loaders. I think it will add 5% and 10% to our ADSL2 sales each month for the balance of this financial year and much more than that, between 15% and 20% in the following 12 months when the HSPA service becomes universally accepted and speeds (and costs) have declined from their current levels. In its simple and minor way this 'invention' may prove to be extremely valuable. Friday, October 3. 2008The Future Looks Fairly Depressing ........John Linton .......if you have been reading the financial press in the USA, the UK and Australia recently. Bank 'bail out' or not (in the USA, EU and even in Australia) there seems to be, for the first time I can recall, a consensus of doom and gloom from both sides plus the middle of the political and economic spectra that the world as we have known it for the past thirty years is rapidly collapsing and what will replace it, while no-one I have read offers any firm opinions, will be less pleasant (by how far depends on whose opinion you are reading) and far more onerous - as well as being duller. A summary of the aggregated views, as far as I can determine, includes: Real estate prices will fall by an average of 20% across Australia over the next 18 months Interest rates will increase by 50%+ for non mortgage transactions within 9 months Business bankruptcies will treble over the coming six months Personal bankruptcies will quintuple over the next nine months Superannuation funds will decline in value (including new payments) by an average of 2% over each of the next three years ....and it goes on from there. No-one making these predictions seems, at least to me, to offer any real 'research/statistics' for the different views they propound (they do take 'snippets' from various sources to develop their grand theories of general disaster) but there is very definitely a consensus of total doom and gloom and dark forebodings of global financial change for the worse. A typical example from today's SMH is: http://business.smh.com.au/business/brace-for-economic-misery-20081003-4szo.html ..but take your pick of any of today's articles in the WSJ, UK Financial Times or any of the Australian papers. Right now, in terms of Exetel's business volumes which continue to grow month on month in an unbroken 'march' across the spread sheet for the past 57 months, I just don't get that impression but then I guess the people at Lehman Bros etc didn't see anything wrong with their figures either up to the time they went down the gurgler. So that's no comfort. Payment defaults were higher in the latest bill run than in previous months and there is a noticeable slowness in people making alternate arrangements to 'un-suspend' their services compared to previous months - so I guess that's a sign of something - but initial payment defaults still are less than 1% of all billing on first 'debit' and are reduced to less than 0.03% by the end of any month this year (admittedly up from an effective 0.0% in all 4 previous years). So you would think a combination of continually increasing monthly revenue and full payment of all bills (no bad debt) would not indicate anything wrong, or even about to be wrong, in the marketplaces in which Exetel operates.....and yet....... ....I can't get my head around all the financial 'experts' on three continents getting their predictions wrong so.......... I don't know what to make of the predictions. I certainly don't know what impact there will be on the marketplaces in which Exetel operates currently and is planning to move to in the future. I feel as though I should be planning for and then carrying out major changes to the current business but I don't see the areas or opportunities to do that - and I've been looking for a while now - since January this year. My instinct tells me to become very cautious and stop planning any more growth or new 'ventures' - and this surprises me as I've never been a cautious person; some unkind people might say I've always been reckless - there might even be those who would say extremely reckless. There is no clear direction that I can see either for the broad Australian economy or the communications sector other than slowing growth and and less money. I can't see anything 'wonderful' happening in our corner of the world while the West's major economies are, apparently, teetering on the brink of a 'free fall' to who knows where? Maybe it's time to 'consolidate' Exetel's operations generally and reduce whatever financial exposures we may have even further than we have already done? Probably the only sensible thing to do is to raise prices and carefully and slowly and scale down the size of the whole operation and generate as much cash as possible rather than continually investing back in to the business?. I just don't know. I think the best course of action is to stop reading the financial press for a week or so. PS: The US Congress passed the 'bail out bill' but the result was an immediate 450 point fall on the NYSE: Thursday, October 2. 2008
HSPA Connectivity To Become A Laptop ... Posted by John Linton
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Comments (11) Trackbacks (0) HSPA Connectivity To Become A Laptop 'Standard'John Linton One of the current issues with the Exetel HSPA offering for computer users is the need for the customer to buy an HSPA modem to connect to the service (there isn't the same issue for people connecting via a mobile handset of course). The cost, to Exetel, of an E169 is around $150.00 because we buy in such small quantities and because our supplier is still locked (understandably) in to the 'mobile hardware' mind set of using free hardware to lock customers in to long usage contracts - fair enough - it's a practice used by mobile carriers almost from 'Day One'. It's a bit of a nuisance and certainly detrimental to some potential buyers and an issue that Exetel is working on in a number of ways - none of which has produced an answer as yet. If we begin to be as successful as we hope to be in generating the volumes of HSPA sales at the upper end of our estimates then we will 'take a deep breath' and order the 5 -10,000 units that will deliver a sensible price to our future customers. That decision, should we ever make it won't be until 2009. Until then the only way we can offer 'free' hardware is via the tired old concept of 24 month contacts. While I was in the UK in July I was told that the laptop manufacturers were being 'encouraged' by the large EU mobile network owners (and subsequently the major US mobile carriers) to include HSPA/3G connectivity in to all of their new products either as an addition or by doing away with the current 'standard' dial up modem chip set (and therefore cost of manufacture). I read recently that this has progressed and that we will see the first laptops with HSPA/3G connectivity in the stores before Christmas with all new laptops including the feature as 'standard' by April/May 2009. Perhaps the decision to include an HSPA connectivity capability rather than an ADSL capability is a further indication that ADSL is not seen as the major internet infrastructure now and that HSPA and fibre are the future of residential internet - then again, maybe its just a cost consideration. On balance I tend to think that its one more sign of a shift away from ADSL to other technologies and a consolidation of the move away from wire line telephony to mobile telephony and, logically, to VoIP over 3G. It could be that copper line telephony is in the late sunset phase of its 150 year life and copper internet isn't far behind in its much shorter life. Doubtless the significant 'marketing opportunity' of HSPA enabled lap tops being sold in Australia in the 100s of 1,000s will be seized on by the 'local' carriers and they will be offering 'in store' promotions of their HSPA services to lap top buyers at some "unbelievable deal" price structure. But will they be able to do such a thing given their current 'marketing strategies' and there inability to actually support the service at a sensible level to the end users (based on all four carriers current support performance of HSPA - and if you don't believe me try calling any of the support numbers for HSPA services). Doubtless they will be working on this concept right now (assuming they realise that the lap top manufacturers are actually doing this which, I suppose, is by no means certain). I have been considering approaching the major retail chains to offer an HSPA service as an 'add on' to any HSPA enabled lap top purchase as it would seem to me that it would be a logical thing to buy if you were buying a new lap top. However, as I know absolutely nothing about this type of selling and Exetel is unlikely to have the 'margins' to allow us to do it I haven't given it much thought since returning to Australia. However the recent media reports reminded me that it would be a sensible thing for some capable organisation to do and as I mulled over how difficult it would be I realised that it would be even more difficult for the carriers to do or their Layer 3 resellers - given that they are already selling their 'computer' versions of HSPA at what must be tiny or negative margins and are incapable of supporting the current volume of users they have attracted and consequently disappointed - only my surmise based on not too much information. I was going to bring this up with one or more of the mobile carriers but on the two occasions that may have been appropriate, extraneous and non-business babbling got in the way of raising the subject, so I didn't try and discuss it - I must be getting old as I didn't do what I would have done in the past when such things occurred. As we would need a lot of 'assistance' from a carrier to actually to turn this opportunity into a reality in the time available between now and Christmas and then ongoing I'm not sure that I can spare the time and go through the frustrations of putting all the required pieces in place and I know we don't have anyone else in the company who has the required experience and abilities to do it - so maybe a lost opportunity - at least for Exetel. It makes you wonder though - with something like 5 million lap tops in use around Australia at the moment, just how many of those users will buy an HSPA service over the coming year? Almost all of them? 50%? Even 10% is 500,000 new HSPA users. I need to re-think how to address this marketplace in a way that can't be duplicated by the usual suspects.
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