John Linton's Personal Musings

John Linton

I looked at the preliminary December recurrent billing numbers that will be run tomorrow over breakfast this morning and, as usual they reflect another record month for Exetel continuing the unbroken 'run' since we began the business on 1st January 2004. While this was expected, it would be odd to contemplate otherwise in what is still a growing market, I was somewhat surprised at the continuation of the trends that have become more evident over the past 5 months.

When we began in business 100% of our revenues came from ADSL1 and all of those services were provided via Telstra Wholesale with IP provided by Powertel (as it was then). This began to change, but only very, very slowly as we added first business SHDSL services (from Optus and Powertel) and then our first attempt to free users from Telstra's copper network with Unwired. In that first, very exciting first year we went on to add wire line telephony services and then mobile services as well as expanding the initial hosting service options.

At the end of 2004, because of the rapid growth in our ADSL1 take up (and at that time we only operated in NSW) the revenues derived via the Telstra network still accounted for more than 90% of our total revenues. This stayed pretty much the case for most of the following year and it remained the case until we added ADSL2 services from both Optus and Powertel. It's over the last three years, as the revenues from ADSL2 accelerated and the other eight service types we now offer became established, that the percentage of revenue from Telstra based services began to decline. In December the percentage of revenue Exetel derived from 'non-Telstra' based services will exceed revenue derived from Telstra ADSL1 services for the first time.

What is really interesting overall, at least to me, about this trend is that non ADSL based services will account for almost 35% of our revenue having increased from around 25% at the start of the year.

Another obvious trend, in ADSL, is the increase of churning customers versus 'new' customers which has increased from an average of 12 - 15% a month  to an average of 24 - 27% a month.

All other services continue to increase in both monthly revenue and in terms of percentage contribution to total revenue which was our major objective at the start of calendar 2008 and more 'emphasis' was put on that in the FY2009 plan.

So with only the non-recurrent revenue actual amount in doubt for the complete 12 month period it is obvious that we have had a very successful 12 months and actually slightly over achieved all of the monthly, quarterly, half yearly and pretty soon yearly targets we set over 12 months ago. Given the quite unusual conditions that have prevailed since the election of that bunch of educated morons to be the Federal "gubment" I got some quiet satisfaction from these results.

What I am far from satisfied with is the general uneasy feelings that persist in at least my mind about the coming six months for which I hold grave misgivings.

Although we have done a considerable amount, as the CY 2008 service type percentage contributions demonstrate, to making our overall business less reliant on any particular 'product' assault from a major carrier we are still very vulnerable if economic conditions over the next few months result in even more predatory actions by companies such as Telstra. My concerns were exacerbated over the past week by several conversations with people I know in multi-national companies who tell me they are now in to their second and third 'wave' of retrenchments and other cut backs with all of them citing pressure from regional Asian or US 'head offices' plus their own views of the 'business climate' in Australia, and especially in NSW, over the next six months.

We have reduced, by almost 50%, our planned service take ups over the coming six months and have therefore reduced our planned expense lines, particularly capital expenditures, accordingly. With the five months to November still tracking above the previous plan this may sound overly cautious but it is a simple observation that it's far too late to plan for lower revenues once they have begun to fall which then requires sudden and deep cuts in expenditure done with very little time for consideration.

I have never been a big fan of the mythical "Plan B". I always have a Plan B and a Plan A but I implement the planning around those ideas as a reverse of what I understand the 'conventional' view of those concepts to mean. My version is the Macchiavellian version but his exact quote escapes me but Wellington's version was "first ensure, as far as it may be possible, that you cannot lose - then use the freedom of planning that position gives you in taking advantage more boldly of the opportunities that occur that you could never have have planned for to see just how much better than that you can do".

We have taken all of the "recession planning for the under fives" actions beloved of the business school academics which, hopefully, now gives us the security and comfort to 'attack boldly' any opportunities that may arise from our competitor's errors or that our innovative thinking can now create - without the fear of sudden adverse overall 'market' changes to limit our abilities should such opportunities arise.

At least - thats the theory. 

John Linton

...and the future of a Telstra constructed NBN would destroy Australia.

Hopefully Krudd and SS (who I'm told are avid readers of the pearls of wisdom and insights these ramblings impart on a daily basis) will understand why this is the case from these pointers?

I have never paid any attention to Westnet's offers, and therefore prices, believing them to be some part of the Western Australian 'ethos' that is beyond my comprehension as someone who has only visited that part of the world for, at most, a few days at a time and never actually grasped why it is so different to "the Eastern States" (as NSW, Qld and VIC are so quaintly referred to) but establishes the fact that West Australians do consider that everywhere else in Australia is some homogenous 'mass' that is completely different to themselves).

However, as we consider the future of copper broadband in Australia and what a small company like Exetel needs to do in the short, medium and long term we have had to consider the effects of Telstra's road to Damascus type 'epiphany' of suddenly and enthusiastically making its ADSL2 network available to all and sundry having argued for so long that it is "totally against Telstr's interests" to do such a thing. For anyone silly enough to have read, let alone remembered, what I wrote some 15 months ago about why Telstra would do exactly that at around this time I won't be repeating that obvious 'strategy' - everyone either totally understands it now or me repeating it one more time won't make a difference.

So this is not a 'reprise' of the bleeding obvious and the old Heinlein assurance that "it's impossible to underestimate the stupidity of people who run Australian communications companies (sorry, that should be of course -  "the power of human stupidity).

In considering the likely offerings to be made by ISPs over the coming six months it's impossible to ignore what Telstra will attempt to do in terms of re-pricing its ADSL1 services and the positioning of its ADSL2 services. What will, or will not, happen with ADSL1 is not yet clear but what Telstra would like to see the positioning of ADSL2 as in relation to the future pricing of the unlikely NBN is put in an interesting context by the pricing that WestNet (and PeopleTelecom before them) has put on ADSL2 services using Telstra's wholesale ADSL2 costings.

Obviously, I have no knowledge whatsoever of what the WestNet/TW contract costings are. What I can do is read pricing tables:

http://www.westnet.com.au/internet/broadband/

Now, despite the assurance that the two sets of ADSL2 plans "Pro" and "Reach" have "different pricing, features and conditions" - they actually only have different pricing (I can't see any difference in either the 'features' or the 'conditions').

What the PRICING shows is that Westnet used to offer pretty over priced ADSL2 (which I'm assuming was on Optus infrastructure or maybe some of the post takeover customers were on iiNet infrastructure - it isn't referred to on the web site which describes everything as being "Westnet").

Now Westnet (via Telstra ADSL2 infrastructure) offers even more ridiculously over priced ADSL2 services that vary from $A30.00 to $A40.00 more per month than the identical ADSL2 services they offer, concurrently, on Optus(?) ADSL2 infrastructure:

1 gb for $60.00 rather than $30.00 on non-Telstra

3 gb for $A70.00 rather than $A40.00 on non Telstra

7 gb for $A80.00 rather than $A50.00 on non Telstra

15 gb for $A100.00 rather than  $A70.00 on non-Telstra

25 gb for $A130.00 rather than $A90.00 on non-Telstra.

If you don't want to "bundle" the ADSL2 service with a ludicrously high set of telephone call charges (PLUS flag falls of 37 cents FGS!!):

http://www.westnet.com.au/phone/home-phone-services/home-phone.aspx

the monthly ADSL2 charges are increased even higher by another $10.00 a month!!!! (Have these people never heard of VoIP???)

However the point is not to ridicule Westnet's pricing per se (it's self evidently ridiculous and needs no words of mine) but to understand what the new pricing is based on, presumably the differences in costs between what Telstra charge wholesale customers and what the other ADSL2 supplier to Westnet charges - and you are hard pressed to argue against that being anything other than DOUBLE the cost for the same speed and characteristics service.

Now iinet, in explaining its recent backflip - backflips seem to be a common characteristic of WA communications companies - (Eftel's reversal of "we are ongoing profitable" two weeks ago to "oops, we actually lost $A2.5 million" yesterday comes to mind) on its rationale for acquiring Westnet made the point that Telstra Wholesale had made it "an offer it couldn't refuse" to keep the Westnet business on the Telstra network rather than moving it to the iiNet network so......you would have to assume that.....well.... that the ADSL2 pricing was equally compelling....wouldn't you? It is unlikely to the point of non existent that iiNet/Westnet wouldn't have been conned in to buying at anything but TW's best 'deal'?

So Westnet/iinet are getting the best possible 'deal' from Telstra Wholesale that ipso facto manifests itself as paying twice as much for the same ADSL2 service? OK....as PTB once remarked about "suckers"......but if Krudd and SS (if he hasn't yet been promoted to Ambassador to the Holy See) are paying attention they would see something that Telstra is apparently doing. That is to make it appear that "the whole industry" accepts that it is REALLY expensive to supply high speed broadband to the 'bush' - just look at what the 'independent ISPs are charging for ADSL2!!!

Did anyone else happen to notice that Telstra's NBN "proposal" contained an identical estimate of $A30.00 a month for an NBN with 1 mbps connection as Wesnet's new ADSL2 Telstra price of $A30.00 but on "NBN" they ar proposing an included download of 200mb?

I'm sure that's just a coincidence. However, coincidence or not, it will be interesting to see what Internode prices it's ADSL2 over Telstra at compared to its ADSL2 over Optus and ADSL2 over'Internode'.

My reading is that if, somehow, Telstra gets to build an NBN then it will be priced at double what anyone else would offer prices to end users - and Westnet et alia will be used as Telstra's "good buddy" examples of why that is justified.

Hopefully Internode, WestNet and the others have acquired the mandatory long spoon prescribed for use in these situations. 

John Linton

...and then there's Telstra's reality.

I wish I had read Eric Blair's most famous novel more recently than during my last year at prep school (back in the days when there was still attempts at providing real education) so that I could better reference my views that there can be no closer extant example of the embodiment of the "Airstrip One" society since the end of Enver Hoxha's regime than that of today's Telstra.

You may recall , should you have read 1984, that in the world of Airstrip One words meant what Big Brother said they meant and he could decide to change the meaning of any word should he choose to do so - exactly the way that Telstra's employee's seem to use language as a sort of asymmetrical warfare, without exception from my personal experiences over the past 20 years of dealing with several dozen Telstra employees. While it would be foolish to extrapolate one person's dealings with a tiny sample of over 50,000 other people at any given time the remarkable consistency of that unrepresentative sample does give a fairly strong indication that it has some credibility.

The amount of "Newspeak", Duckspeak" and their instigators - "Doublethink" while still sometimes including more than a few words of "Oldspeak" make it impossible for me to actually hold a "conversation" with a Telstra employee because I end up doubting my own sanity (even more than usual). I have attempted to restrict the contacts I have with Telstra employees because, it seems to me, that I speak a form of English and Telstra employees speak something that sounds similar to an English-like dialect, which at first hearing seems to closely resemble some version of what most people would recognise as "English" but where many of the words, although they seem to be familiar, actually appear to have a completely different meaning in their usage than they would if I had used the identical words.

Not only do they have a completely different meaning the first time a word is used but when the same word is used a second or subsequent time, although the pronunciation appears to be identical ,the context in which it is used seems to imply it means something completely different each time it is used. I can realise why this sounds like I am the one with the comprehension problem - possibly I have developed dementia but people have been too polite to point this out to me. Let me cite some examples likely to have been used in Eric Blair's novel to attempt to clarify my point:

"No fault found" - a fairly simple phrase that is commonly used in the communications industry.

My understanding of this phrase is that it means that some sort of error/fault was reported that on thorough investigation turns out to be not true.

An Airstrip One's citizen's understanding of this phrase means that every fault reported by Exetel on behalf of a customer turns out not to be true irrespective of whether the fault reported by the customer existed up to the time an Airstrip One employee/contractor visited the premises and the fault was then rectified because it never existed and therefore the customer (Exetel) would be charged for the false reporting of a fault that never existed.

"A true statement" - something that is commonly used to define the accuracy of a set of words formed into a sentence.

My understanding of a true statement is a set of words that describes a situation that several independent observers would agree represents a correct description of the subject of the statement.

An Airstrip One's citizen's understanding of a true statement is anything they say or that is said by another Airstrip One citizen to a non-Airstrip One citizen is a correct statement even it apears to be self evidently completely illogical or just plain untrue.

"A false statement"

My understanding of a false statement is a collection of words formed in to a sentence that a disparate group of independent observers would mutually agree did not correctly describe the subject of the statement.

An Airstrip One's citizen's understanding of a false statement is any statement made by a non-Airstrip One citizen that contradicts, either completely or in part, any statement made by an Airstrip One citizen even though the Airstip One's citizen's statement may have contained a direct contradiction within its own wording or directly contradicts another staentin an immediaely prior or subsequent sentence.

I was reminded of this inability of mine (which renders me completely inadequate to discharge the duties inherent in the job I struggle with daily) when I tried to decipher what the words spoken in this video actually meant:

http://www.zdnet.com.au/news/communications/soa/Video-Telstra-s-Milne-backs-iiNet/0,130061791,339293549,00.htm

I suppose I had trouble from the very first statement - to the effect that "Telstra had never received any copyright infringement notices from anyone". As someone who has worked for 5 different ISPs over the past 15 years (all of whom were/are far tinier than Telstra) where the number of copyright infringement notices were a daily occurrence I had to wonder what immunity from those automated processes Telstra enjoyed to allow a 'senior executive' to make that claim on a public forum?

On the basis that the first statement was an indication of my ability to comprehend the meaning of any subsequent statement I stopped watching the video.

I must get hold of a copy of the two novels so I can better understand today's Businessspeak.

John Linton

Too little ability to understand what it all means.

Too many things seem to be happening simultaneously lately with a plethora of 'information' requiring some sort of examination as, at least from my viewpoint, most of the information deluge seems, at least on a cursory reading, to contradict the information that immediately preceded it - or maybe it is simply that I can't understand what seems to be going on in the commercial 'world' generally and the Australian communications market specifically.

I thought that the TPG annual general meeting report was a model of succinct information delivery and was very impressive in almost every respect. As a brand new shareholder in SOT I was pleased to get promised a half year dividend equal to 10% of my investment and to know that TPG was doing so well and was scheduled to do even better:

http://www.asx.com.au/asxpdf/20081126/pdf/31dtthbtc6ycvk.pdf

I still find it remarkable that TPG is so much more efficiently run than every other communications company in Australia that it makes more money per shareholder dollar than any other investment in Australia (quite possibly in a far wider area than that - other than places like the Golden Triangle) but there is no disputing the presented figures - especially in the context of where they were reported.

I suppose I would have expected a little more detail supporting the FY2009 projections (5 months into the planning period and an AGM should have made that both possible and expected I would have thought and this did create the one scintilla of doubt in my mind) and I remain surprised, probably more than surprised, that the report confirms that TPG has over 1,200 employees yet still outperforms the industry overall in net profit per revenue dollar - even better than Telstra which is very encouraging to know that a monopoly can be outperformed in a key area of endeavour.

I was vaguely surprised by the announcement that Internode was going to resell Telstra's ADSL2 network having made a not insignificant investment in a small ADSL2 roll out of its own. I was even more surprised by the 'sub announcement' that Internode was also going to re-bill Telstra's wire line services though I assumed that this would have been part of the 'whole of business discounting' concepts so beloved of monopolies. Not that there is anything remotely wrong with picking up the revenue from wire line re-billing (and I imagine the profits associated with the call charges) but it seemed to be another change of direction for Internode and one that seems to be more in line with a desire to quickly 'bulk up' its annual revenues as part of a sale/listing process rather than a strategic move of some sort; now seems an odd time in that company's life to finally move into such an old fashioned product/service.

I will be interested to see how Internode deal with the price disparities between their own ADSL2 costs, the costs they pay Optus for the ADSL2 services they have only recently been offering and now the Telstra ADSL2 costs. Perhaps it will be simplified by simply stopping selling the Optus ADSL2 services and moving the few customers on those services to Telstra but that will still leave, without of course knowing any of the contract details, a pretty large gap between Internode's internal ADSL2 costings and the costs they will be charged by Telstra for an identical service. I only base that on the two ISPs who have published ADSL2 pricing based on the Telstra ADSL2 network (PeopleTelecom and Pacific) whose ADSL2 prices are simply not competitive.

I read the statement of claim by AFACT against iiNet yesterday and feel that my initial view that iinet is in a for a great deal of expense and considerable 'pain' is, if anything, understated. Only a complete fool would ever be stupid enough to venture a view on what the outcome of any court action is going to be and I would like to retain at least the illusion that I am not a complete fool - yet. I can say that the statement of claim is worded in exactly the way I thought it would be and it does confirm that AFACT has gone to a lot of time and a great deal of cost to build the body of evidence it's legal advisers determined would be necessary to substantiate the points they would need to prove in court to obtain the short, medium and long term results they are looking to establish.

So, it looks to me as though AFACT's counsel will proceed to court with everything they had on their wish list and had pre-prepared to argue while iiNet continues to bluster about "executioners" and "not knowing who uses our IP addresses" and other fatuous and self denigrating nonsense. Perhaps when they find a suitable legal team to act on their behalf the first thing iinet will be told is to stop their representatives making a bad situation even worse by making any comment that makes them look as stupid, and as 'guilty' as they have in the past.

On the other hand - "Never mind the law suit - X-Box Live content downloads are free". For Heaven's sake!

Then there was yesterday's tender submitting event. I have no idea of the contents of the various submissions and therefore have no view, even if I would be capable of understanding the contents of any of the submissions (which I wouldn't), on how good, bad, compliant, non-compliant those documents are or aren't. What is apparent is that, whatever the contents of the documents, there is a very high probability that by this time next year there will be no executed contract to build a NBN.This will be partly because of the ridiculous RFP, partly because Telstra can't allow anything to happen at all and partly because the whole fiasco is such a mess the Senate will tie any process up in knots while they examine every aspect of it. Of course, if Telstra somehow manages to win then Australia, in some years time, could have a NBN priced like this:

http://www.australianit.news.com.au/story/0,24897,24710963-15306,00.html

So we have the last of the main 'independent' ISPs throwing in its hand and reselling Telstra's ADSL2, you have the fourth or fifth or whatever 'largest' Australian ISP (I can never understand how iinet keeps referring to itself as "Australia's third largest ISP" - don't they read the information in the public media?) being dangerously engaged in serious litigation that will, whatever anyone may think now, take a major toll of a great many aspects of that company and Telstra determined to make a dog's breakfast of the ill fated/ill conceived/massively badly executed NBN tender process that will ensure virtually all investment in communications infrastructure over the coming year (with the possible exception of that by TPG) is brought to a halt.

Maybe if I stopped reading the daily 'press' I would be less confused?

John Linton

...or any other 'senior executive' for that matter? Perhaps even a salary of $US1.00 per annum is far too much for someone who loses half a trillion (real) dollars?

http://online.wsj.com/article/SB122762976460756705.html

Yes, I realise it's simply a 'stunt' and 'window dressing' for the total screw up of every party concerned but it highlights an issue that will become more and more relevant as more and more money is lost by public companies that then get hand outs from the tax payer (never let that canard "government money" ever be said in your presence without correcting it to TAXPAYER'S MONEY).

Australian tax payers, courtesy of Krudd and Whine are already forking out for Fast Eddie Groves extravagant life style and are also paying for the massive carelessness of the dummies who run Australian banks and we have just been committed to paying for the stupidities of the, largely foreign, lunatics who try and build cars in Australia - and that's BEFORE the real hand outs begin.

It's almost certainly no different in the communications industry - what CEO or senior executive of ANY of the communications companies that operates in Australia is actually worth (to the shareholders) the sometimes quite extraordinary money they award themselves? I'm not talking about Trujillo et alia's mega millions - Monopolies can afford to pay mediocre, and less than mediocre, people whatever they are careless enough to allow to happen - the cost is simply passed on to the customers so that the "planned profit" is never affected by their wrong and careless decisions and indolent work styles.

What 'penalties' are levied on the various senior executives of almost every communication company in Australia for their ongoing ineptitude of running companies at losses year after year? None that I can see except when the irrational decision making reaches the point where the company goes broke - a fate more prevalent in the communications industry than any other at a cursory glance. Try composing a list of the communications companies that have ceased to exist in Australia over the past 5 to 10 years - you select your own period. I can get to over 100 over the last 10 years - almost one a month - and that doesn't include companies like AAPT that have lost so much money and degraded so much asset value that they account for almost 30% of all money lost in Australian communications in that period (not counting the 'investment write downs' by Hutchison/3 which may be recouped in the long term).

It seems that the concept of rewarding senior executives based on the increase in returns to shareholders is a forgotten concept by the majority of shareholders and by virtually all company boards of directors. (not by Exetel's board that discusses senior executive salaries every six months or so and has, for the past 4 years declined to increase the salaries of the three key decision makers on the basis that their performance didn't merit any increase - I think that makes Exetel unique on this issue - but it almost certainly shouldn't be - irrespective of the size of the company).

These ramblings were not occasioned by the WSJ article on IAG but on a number of references in today's Australian media about the likely fall out from the Federal Gumment's (using Julia Gillard's pronunciation's contribution to education standards in Australia - whose cruel joke was it to make her Minister for Education?) likely implementations in the Gershon report:

http://www.financeminister.gov.au/media/2008/mr_322008.html

that would involve getting rid of Canberra's obscenely bloated 'IT consultant' numbers and that decision's ramifications on employment generally in the IT/Communications sectors in Australia. I have two long term friends who run large IT consulting companies who are badly affected by the preliminary discussions they are involved in concerning projects in 2009 which are being 'downsized' quite dramatically and they, together, are talking in terms of some many hundreds of 'retrenchments' and maybe many more than that between now and the end of the financial year.  If you read the same industry media that I do you will have noticed the increasing number of negative statistics concerning IT job advertising and recruiting generally. I don't know of any IT company that hasn't either completely canceled or significantly scaled down its graduate intake program for next year.

http://news.smh.com.au/business/skilled-vacancies-drop-48-in-november-20081126-6i66.html

Even tiny Exetel has stopped hiring in Australia and isn't replacing people who leave - and we plan to keep growing over the balance of this financial year at a rate well ahead of the "ABS average". I have also regretfully replied in the negative to over a dozen applicants looking for internships over the upcoming long university break and am now getting 'desperate' pleas in return offering to work for nothing if they could just get some work experience - something we ethically won't do.

It seems to me that the IT industry won't be immune to the unemployment that has already become a fact in the finance industry and the automotive manufacturing and distribution industry and real estate and retail.......and whatever else has currently been affected. I'm not sure what this means for senior executives in IT; perhaps they will all get their annual bonuses and pay rises for 2009 and just retrench a few more people to pay for their increases. As one of my friends told me when I raised this issue "Well, these are tough times and we need our very best people to make even more efforts and they'll be working longer hours so we must take that in to consideration in determining their remuneration for next year".

He used to be such a tough minded man who was never afraid of making tough decisions - it seems longevity in senior management removes those qualities - at least when it comes to decisions concerning your senior colleagues. Perhaps he is looking over his metaphorical shoulder and doesn't want to 'set any precedent' that his board might see as something to apply to his own remuneration if he took a tougher/more realistic attitude to executive remuneration?

Perhaps bad times justify senior executives being paid more while they 'retrench' people below them or offer them remuneration reductions ?

http://news.smh.com.au/business/wages-to-fall-05-per-cent-in-2009-ilo-20081126-6hx3.html

If the AIG situation wasn't such a 'stunt' it would be an example of what rigour should be applied to executive remuneration.

John Linton

TPG/Soul's share price closed at 9.5 cents yesterday reaching, for the first time, the 'penny dreadful' status it had been hovering above for some time now (penny dreadful = share certificates valued at single digit cents for those who are unfamiliar with the old fashioned term first applied to ultra cheap pulp fiction):

http://hfgapps.hubb.com/asxtools/Charts.aspx?TimeFrame=D6&compare=comp_index&indicies=XJO&pma1=20&pma2=20&asxCode=SOT

Of course the overall share market has followed a similar trend and it may well be the case that TPG/Soul is simply a 'victim' of the "GFC"  - like so many other listed companies. Indeed the overall performance of communications companies has hardly been 'stellar' over the last calamitous share price 12 month period as can be seen from this chart:

http://markets.smh.com.au/apps/mkt/industrylisting.ac?code=50

The utterly surprising aspect of TPG's massive slide (it is now worth less than 20% of what it was at the time of the merger of TPG with Soul) is that the market capitalization of the company ($A64,999,02) is far less than the current 'market guidance' TPG is giving the ASX on its likely profits for the current financial year (only 7 months away) of a little over $A90 million!

http://news.theage.com.au/business/sp-telemedia-reports-full-year-loss-20080923-4m5l.html

The other two penny dreadful ISPs (People Telecom and EFTel - admittedly valued much lower than TPG - make either no money at all or an 'on paper' profit of SFA) but TPG has announced, and subsequently confirmed, that it will make more money than any other Australian communications provider except Telstra and Optus and it will make a gigantic PE that makes Telstra's look like peanuts and, as far as I can see, is better than any other share currently on the ASX - by a very long way.

Like every other person with very little knowledge of how the Australian share market operates, I have no real understanding of how share prices are set and why they change but I would have thought that a company that has a market value of 2/3 of its announced and confirmed annual gross profit is something that has never been seen before - though I would re-iterate that my knowledge of the Australian share market is slim/slight/non-existent. It was such a bargain that after resisting the temptation to buy shares in TPG several times over the past few months I couldn't resist any longer when they reached 10 cents and just had to buy some.

At today's TPG share prices David Teoh could buy up the 61% of the company he doesn't already own for less than $A40 million (a bargain based on the fact that the dividend that he would receive on this year's results would be around that value) which would also leave him with $A110 million 'change' from the $A150 million he was paid in cash when he sold TPG into the merged entity (as well as receiving almost 40% of the shares in the newly created company). So what does all this mean?

I have no idea. What I completely fail to understand is why does a company like Macquarie Telecom, who as far as I can see (based on their public statements) has no hope of making a profit in this or any other year have shares changing hands at 12 times the price of TPG?

http://hfgapps.hubb.com/asxtools/Charts.aspx?TimeFrame=D6&compare=comp_index&indicies=XJO&pma1=20&pma2=20&asxCode=MAQ

and their share price has fallen less than 10% over the same period that TPG's has dived over 80%? No profits made in the past, falling revenue, no profits forecast for the future, and an obsolete product/marketing strategy - yet - yet - they aren't being sold down to the floor like TPG has been - they are almost the same price now as a year ago which means they have massively outperformed the market generally.

Someone (obviously a multitude of people) clearly know(s) something that I am missing completely.

I guess I will keep buying TPG shares for as long as they stay below 10 cents because, well, I can't think of a downside. Perhaps the announced profits won't actually happen (I guess from the fact the shares are not being snapped up by TPG employees there could be some doubt about that) - but TPG will issue a revision to its current year profit guidance if the board believes the current guidance is wrong. Even if TPG's final profit for the current calendar year is only half what the company currently states then the dividend would likely exceed the price paid for the shares at today's prices. And with 5 months already completed you would have thought that TPG would have already announced a revision if things weren't tracking to their previously announced predictions.

I never thought I would 'invest' (perhaps 'gamble' is a more appropriate word) money in an Australian communications company other than Exetel, particularly one that in other circumstances could be regarded as a competitor, but the likely return versus what I can see of the likely risks make it both affordable to take a 100% loss if that comes to pass. I suppose I'm also amused in some perverse way to think that I can buy on today's market the same shareholding I was 'promised' in TPG in the late 1990s for a 50th of the profit I made out of the shares I was subsequently given in the company I went to consult for after TPG; for whom I did the same consulting job as I did for TPG (for more than double the consulting fee). 

I suppose it's even stranger to actually want a 'competitor' to succeed in their planned revenue/profit endeavours - but I'm pretty sure there is no conflict of interest - just a gamble on what looks like a bargain for a relatively trivial amount of money - and quite possibly no worse a decision than buying CBA, ANZ, NAB and WBC shares based on today's and the immediate future's likely performance.

Life is strange.

John Linton

It has now been 2 months since we 'launched' the Exetel/Optus HSPA services using our own, very different, understanding of what HSPA could sensibly address at this stage of its sustainable speeds and geographic coverage. We took a completely different view to Optus itself, its wholly owned retailer - Virgin and the virtually identical approaches taken by Vodafone and 3. (I could never actually work out what Telstra were aiming to do).

Two months, that were impacted by various misconceptions of Optus' "readiness" and therefore a delayed release that completely screwed up the timing of our carefully planned calendar opportunities, are obviously not enough to make any sort of valid judgment as to how successful, or otherwise, an Exetel/Optus HSPA service will become over the next 9 - 12 months.

Because of the delayed release, our planned 'roll out' had to be scrapped and we will not really now be able to 'push' the HSPA service until February of next year which, at least in some ways, may be better for a number of reasons all relating to the current 'economic uncertainties'. Having said that - the initial take up of the HSPA service is now around 10% of the total 'net adds' of broadband services over the initial 2 months which is around the middle of our expectations after the release program had to be 'junked' because of the delays. The numbers can't really be analysed in any meaningful way because they aren't yet large enough and we haven't had the time over this period to do the work required.

One of the most pleasing aspects of the first two months has been the very high level of 'satisfaction' being reported by the first 500 users who have now had time to use the service in most areas of Australia and trying out most of the applications that we see as being important to the future success of an Exetel HSPA offering. In particular, VOIP has worked well for most people in most places and my personal use of our HSPA service has only been VoIP and I'm more than satisfied that it meets all of my needs - I haven't called anyone so far who has commented on my using VoIP over my Nokia N96 and when I ask some people I've called they say the call just sounds like a mobile call.

We continue to develop the Exetel SMS over IP service for HSPA and continue, via the Exetel Forum, to work with our users to perfect that offering and bring it up to the same standard as the ADSL version. A combination of VoiP over mobile call rates and 5 cent SMS over HSPA is a true reality for an Exetel/Optus HSPA user today and will only improve, in terms of pricing, speed and coverage, throughout 2009.

The other really pleasing aspect of these early days has been the faster, on average, speeds being achieved by the early users. After the plethora of bad press that Optus/Virgin received leading up to our delayed release and then continuing over the past two months we were prepared to be disappointed in early user experiences but that hasn't been the case. In fact, overall, the early user's experiences have been the reverse of the reported Optus/Virgin reported speeds with the majority of Exetel early users reporting average speeds of well over 1 mbps (sustained) and many cases of over 2 mbps in quite diverse locations.

Unfortunately we haven't had enough time to reach the numbers of users we need to properly analyse the service's performance in enough detail to allow us to be as emphatic as we need to be to heavily promote/push the service in the Christmas lead up, so we have scrapped those plans. Perhaps that isn't a bad thing, but I'm conscious of losing time in a take up of HSPA services that continue to accelerate with reports of there now being over 1 million Australian HSPA users - a remarkable 'acceleration' in take up over the past 12 months.

It is impossible, for us, to estimate what will happen in terms of any aspect of business in calendar 2009 let alone how an embryonic service will develop in an unknown marketplace in unknown economic conditions. Our current plans are very much under review including our estimates that we would have 25,000 HSPA users by the last quarter of 2009. We will still aim at making it compellingly attractive for our current 256/64 and 512/128 ADSL users to move to HSPA if ADSL2 isn't available to them and we will aim at building an integrated mobile offering based on HSPA as a major differentiator to current 'standard' mobile offerings.

One way or another I am determined not to put up with having to deal with Telstra for much longer and waste even more of the little time of life that remains to me.

We see a very real opportunity of making a great success out of HSPA in rural and regional areas via our agents in those areas and, for the first time in Exetel's 'history' we will support our country agent's HSPA promotion activities with local advertising. We have great reports from over 100 Exetel HSPA users in rural areas on NSW, Queensland, Victoria and WA and we see this early performance indication as a 'green flag' for the type of HSPA plans we have provided together with the 'unique' Exetel VoiP, SMS and FAX over HSPA that we can offer that none of the carriers will be able to do (or want to do more accurately).

Both those initiatives, even if they 'fail', will help Exetel change very significantly as a communications company and, hopefully, we will be able to continue to set the standards for providing the lowest priced communications services to residential and business users. If they succeed then .........far too early to even think about success.....especially in times like these.

John Linton

....can go from 'no problem' to free fall in less than 12 months, have it's shares valued at 'zero' and warn it's government it may have to stop operating because it is running out of cash with no chance of anyone lending it money.....why would anyone responsible for making decisions within a commercial enterprise not view the immediate future with grave concern and their ability to 'manage' it with the same level of concern?

OK, General Motors has made ridiculously large and stupidly fuel guzzling cars for two decades after it was obvious that was a truly dumb thing to do and then added the equivalent of Fred Flintstone as a designer to ensure these monsters reached the nadir of butt ugliness - model after model - year after year.

But, by no stretch of exaggeration were the people who ran GM over the last 20 years not among the brightest of business school graduates and highly competent in general terms. So it's possible to dismiss whatever happens to GM as being the result of decades of ignoring the obvious for reasons inexplicable to any outsider. Similarly the apparently identical afflictions affecting Ford and Chrysler can follow the same dismissal. But BMW, Mercedes, Toyota? OK - tough times mean decisions not to buy expensive items - cars are at the very top of that list - but all these companies seem to have been caught by surprise.

?????

So....think about that.....three of the largest auto manufacturers in the world are on the brink of disappearing and the next three are in serious slow downs...and none of them saw this coming? In the case of the three US makers their collapse would almost certainly put the US into a true depression with 3 million people added to the near current record high number of unemployed and who knows wat the effects in Germany would be. So the two largest economies in the world become crippled for an indeterminate but long time resulting in....what?

The concept is so unimaginable that the US government will HAVE to prevent it happening so that will be alright then - OK? It prevented the major US banks from collapsing and then bailed out the mortgage market so no problem to do the same for the auto makers? Something like that will play out I, like most people who bother to think about it, assume. It may well change, forever, the economic conditions that have existed since 1946 and will also tranform th government on the 'free world'.

So it's possible for huge companies (not in businesses run by masters of the universe who just play with numbers and have no real 'products') but who have dominated their market sectors to, literally, go from boom to bust in 12 months? I know the list goes on and this scenario has been diminished in seriousness by inventing a term for it and then reducing that term to its acronym/initials (GFT) in a perfect execution of the Orwellian process of deceiving the 'people' coupled with Krudd's never ceasing overseas trips to "address the crisis" but the fact remains, in case its escaped your attention, that businesses around the world are totally screwed and the economies of the countries they operate in are similarly screwed along with large sections of the citizens of those countries.

Exetel have completed this past Friday the very painful process of raising our prices (with the objective of reducing our growth plans from aggressive to slightly below 'neutral') and have cancelled every single capital expenditure project we had in place. We didn't do that lightly, in fact we did it with a great deal of anguish but we did it because it appears to us that it is in fact possible for any 'industry sector' to face circumstances which any company within that sector, however well run, may find it impossible to deal with.

A prime example occurred this week (which we, as a company, could see coming and did prepare for and some ten days before AFACT lodged their statement of claim we had inside information that it was about to happen and we had some fear that we were the target despite our 'precautions') in the law suit brought against iinet. If that law suit had been brought against Exetel we would have found it very difficult to deal with both in terms of management time that would need to be devoted to it and the sheer amount of money (between $A750,00 and $1 million) it would cost over the coming 9 - 12 months. We could have survived it but we could not have grown in that time and we may well have needed to 'down size' the company.

That is an obvious, and unrelated example to the GFC, but it starkly illustrates the point of what happens when a major change occurs in your business. GM faced the situation where, suddenly, the number of people buying their cars dropped by 50% and then fell further - no amount of planning (and there appears to have been none) could deal with that circumstance.

I have no concern that Exetel is in better financial and operational 'shape' now than it has been at any time in its existence and has sensibly diversified its service offerings across products and market sectors to an optimum extent and I am very sure there is no competitor to Exetel that has a lower cost of operation. Having said that - I would have no idea how Telstra Retail will deal with whatever effects it will feel over the coming year and, based on their previous actions of their rolling promotions' we have, and can have, no defences against them and their depradations could be quite damaging.

So, we have completed all the steps, with the exception of some tidying up, of PLAN A and we have put in place the steps that would allow us to evaluate the benefits, to us, of PLAN B and then there's PLAN C - actually we haven't got a PLAN C.  What truly concerns me is that I am having to make decisions that could be completely wrong and the GM/Ford/Chrysler disaster indelibly points out that when in doubt do nothing isn't an option.

Then again perhaps it's all a storm in a tea cup and Krudd will save us all.

(come to think of it - I'd better give some thought to a PLAN C)

John Linton

...that of Stupid Stephen to the post of Federal Communications Minister In November 2007?

..and yes I know that standard has been set remarkably high with almost all the Whitlam appointees (including Whitlam himself) challenging Rex Connor for this title.

This question was brought to mind when I read part of the transcript of the Telstra's Chairman's address to shareholders in this morning's paper:

http://business.theage.com.au/business/telstra-silent-on-broadband-bid-20081121-6e64.html

Now let me say that I, personally, regard Mr McGaughie as flagrantly incompetent to be the chairman of Telstra as I have regarded the previous incumbent and therefore don't expect him to ever say anything either logical or correct and especially if it is on a subject that has any relationship to, or bearing upon, telecommunications.

However I would expect the Federal Communications Minister, even if he is as stupid as the current one and who almost certainly knows less about telecommunications than the current chairman of Telstra to have, long ago, debunked the outright lies and total cr** that has become McGauchie's 'mantra":

"Mr McGauchie said a split of its business would "wipe out jobs", significantly increase costs and dent productivity"

These claims are so totally nonsensical (and they have been made several times over the past few months) that there have been many opportunities for SS to rebut them using nothing more than the statements themselves and applying basic commercial logic to them a la:

Splitting Telstra Would Wipe Out Jobs

Why? How does splitting the current operating divisions of Telstra wipe out a SINGLE job?

If such a split was to made then all the current jobs would remain exactly as they were before you cut the Telstra organisation along the dotted line separating infrastructure build, development and maintenance from the bit of paper listing the retail sale of the various services? Sure - some current Telsta employees might go and work for a Telstra competitor but 'jobs' will not decrease - unless of course Telstra is so significantly over staffed that the 'jobs' shoudn't be there in the first place.

Splitting Telstra Would Significantly Increase Costs

Why? How does cutting the Telstra organisation chart in two pieces increase costs?

Everybody listed on the mythical piece of paper one millionth of a second after making the separation and thereafter will continue to do exactly the same job at exactly the same remuneration as they did before the scissors were picked up. It seems highly likely that some costs (retail sales spring to mind) would actually significantly reduce.

Splitting Telstra Would Dent Productivity

Why? Everyone will remain doing exactly the same job at exactly the same cost as before and no tiny issue or task will be done any differently. It seems likely that when the retail side of Telstra becomes leaner and more efficient that productivity would actually increase.

Even someone as stupid as SS, or as stupid as SS's staff must be, should be able to demand a public explanation of these statements phrased much more incisively than my casual words written without research or more than the time it takes me to type the actual sentences.

But they are never rebutted and that, among all the other stupidities and inactions of this minister and his office, has allowed the current situation to develop where in just on 12 months in office SS with the full 'support' of Krudd has placed Australia in the position of re-monopolising the Australian communications industry because they were so totally, stupidly incompetent that they have allowed 'Sol's Puppy' (I claim no authorship for that phrase but I can't get my brain to recall who first used it) to continue to make these outrageously incorrect statements in the Trujillo bluff poker game with the clearly intellectually out-gunned Labor 'government'.

The ONLY result of Telstra separation would be lower prices for Australian residential and business users and a higher share price for Telstra share holders.

Of course, that bald statement of mine can be easily dismissed on the basis that I haven't supported it with any factual/referencable evidence.

WHICH IS WHAT SS HAS ALLOWED TELSTRA TO 'GET AWAY' WITH FOR THE 12 MONTHS HE HAS HAD THE RESPONSIBILITY!! 

You actually don't need to be either very bright or to have any great depth of commercial understanding to KNOW that McGaughies statements are the sheerest nonsense. You need to be even less bright and have less commercial understanding to know that my 'bald' statement is likely to be correct based on every previous transformation of a government monopoly in to one or more privately owned enterprises and that true competition always produces the best results for both customers and shareholders.

So Conroy gets my vote for the single most inept minister to have ever held federal office and will have done more in 12 months to ruin the future lives of all Australians than any other individual since January 1st 1901.

(Rex Connor can now relinquish his hard earned crown).

John Linton

.....as ostriches always do.

This was inevitable and the timing was equally inevitable:

http://www.itwire.com/content/view/21814/1085/

In June of this year an organisation called AFACT began sending extremely aggressive 'letters of demand' to a number of ISPs requiring them to cease aiding and abetting copyright breaches. It was clear from the letters that AFACT was following a strategy designed by its legal advisers to take one or more smaller ISPs to court to test the provisions of the current newer clauses in the copyright act. It was equally obvious that they would continue to issue 'detailed' lists of copyright breaches weekly until they had established clear non-compliance/non-co-operation that would 'trigger' a clear reason for going to a court on the basis of the ISP's 'intransigence' in refusing to deal with the situation 'commercially'.

Since we set up Exetel in January 2004 we have always been conscious that, because of the gigantic amounts of money involved, copyright holders would have to take some sort of legal action against ISPs. Our view was validated a few months later with the successful suing of People Telecom and the very large costs involved in that action. As a very small and financially very vulnerable company a law suit against Exetel would have almost certainly sent us out of business then and even today it would require a large amount of additional funding from our personal resources with no certainty of success.

Exetel has, from its very early days always forwarded allegations of copyright infringement to the end users as identified by the IP address in the infringement notices. When AFACT begin to send us infringement files (in a cumbersome and difficult to deal with format quite different to the agreed international 'standards') we nevertheless wrote the code/scripts necessary to automate the process of forwarding those notices and instituting the 'block pages' that required acknowledgment by the customer that they had deleted any infringing material/the allegation was in error before they could restore access to their service.

Our view then, and remains our view now, was that AFACT had engaged a law firm to 'design' a strategy that would 'manufacture'the evidence required to exactly support a law suit based on establishing the ISP as the guilty party in copyright breaches. There is NO doubt that the SC(s) constructing this stategy for AFACT knew exactly what evidence would be required to mount the action they planned and therefore (as a recipient of that first letter) you would have to have been a complete fool not to very quickly work out what would happen if you took the approach that iinet not only took but then whined and grandstanded about in the media. Some of iinet's public statements were breathtakingly stupid and absolutely incredible from a technology company.

When we got the first letter from AFACT we sent them a strongly worded reply advising them that we were quite certain that we were taking every action required by even the widest interpretation of the current law(s) to ensure that we played no part in 'aiding and abetting' copyright infringement and then passed all future correspondence to our lawyers. We met with our lawyers who suggested our most prudent action would be to seek advice from a qualified expert on copyright law and our processes of dealing with copyright infringement notices.

Our objective in taking a qualified SC's advice was to ensure that, should AFACT have 'selected' Exetel as the suitable 'recipient' of their law suit we would have been protected from any 'damages' claims by having sought and then acted on qualified advice as to whether the allegations being made by AFACT were, in 'fact', sustainable claims under the law(s) as it/they stood then.

Unlike iinet, based on their public statements, Exetels handling of any copyright holders (including AFACT's) 'allegations' are compliant with not only the law(s) as it/they currently stand but go some considerable way to meeting the realistic assessments of where case law interpretation may in fact expand those current requirements to.

Not wishing to sound as arrogant (and as it may turn out, quite as wrong) as Michael Malone, Exetel's decision to put in place painless forwarding of copyright infringement notices plus the ability of the person alleged to have infringed copyright to deal with the allegation within a few seconds completely complying with the current legislation allows Exetel to comply both with the 'letter of the law' and with the 'spirit' of the current law in that our actions may well reduce unintentional and/or 'unauthorised' use of the Exetel internet service to in fact breach copyright

It should have been clear right from AFACT's issuing of their first letters of demand (this was an Australian based organisation acting for Australian based companies citing Australian law) that this scenario was going to be different from the US agents previous attempts. A court action such as the one now being taken against iinet was inevitable and it was going to be costly. What also should have been clear to anyone with half a brain was that the 'head in the sand' attitude adopted by iinet, among others, just courted the exact result that has now transpired.

It appeared to us that both Telstra and Optus would avoid being the 'chosen sacrificial lamb' due to their track record and long experience of using the Australian legal system to their continual advantage and their immense legal budgets are already in place and fully funded rendering legal action against them highly likely to be both enormously more expensive and highly protracted.

It was therefore going to be inevitable that, in this scenario AFACT, was going to choose a much smaller company (and we believed Exetel was just big enough and totally financially vulnerable to be such a target) that would do everything possible, by the limitations of its financial resources, to keep the costs of defending such an action to the minimum - which would therefore keep the time frame to the minimum and thus allow the process of coercing ISPs in to aiding the copyright holders in reducing the use of the internet as a source/tool of copyright breach.

There was never any chance therefore that Telstra or even Optus would be the target. The cost efficient way of getting a wider/deeper interpretation of the current sections of the copyright act subject to court judgment is to take the action that AFACT have now commenced. Should they be successful in getting a judge to rule "against" an ISP and then subsequently get that judgment upheld on appeal - perhaps as far as the High Court, then they will have achieved very significant progress in reducing the use of the internet to breach copyright.

iinet have selected themselves as the defendant in this test case by not only ignoring the requirement to deal with AFACT (in whatever sensible commercial manner they may have chosen to do so) but their MD/CEO has run to the press alternating between grandstanding and whining and making his company a very obvious 'target'. Perhaps he is relying on the IIA to part fund his company's defence?

You don't have to have much of a 'legal mind' to work this out.....it appears Michael Malone doesn't have much of a 'legal mind' and was the cat's paw used by the IIA.

John Linton

....(thank you for that gem of perception Mrs Gump).

As someone who makes no attempt at hiding his total contempt for the complete stupidity of the current bunch of morons posing as a federal government in Canberra, even I have to recognise that in a democratic society enough people voted, presumably after carefully considering what they were doing, to empower what must be the dumbest ever collection of uneducated no-hopers to make decisions on their behalf.

My own credentials for labeling Stupid Stephen and Crazy Kevin as totally clueless in terms of comprehending either the fabric or delivery of the internet in Australia go back to the day after those bozos were elected - so nothing I say here is of the 'Johnny come lately' bandwagon joiners such as the most recent people to spit the dummy on that pair of moron's stupidities. Michael Malone for instance:

http://www.itwire.com/content/view/21799/127/

Oh dear - poor love - he's wasted his time and money on his posturing via the Terria bid (what a total piece of nonsensical 'wankery' that was!) and now he's setting himself up as the chief posturer on the other election sound bite 'policy' of Internet filtering. Perhaps someone should tell him that he wasn't elected to any government position and he can't make arbitrary decisions about popularly supported elections issues - it's called DEMOCRACY - not geekish elitism (if you can actually use those two words together).

Irrespective of what Mr Malone, or anyone else thinks or says, 50.0000001% (or whatever it was) of the people who voted in the last election voted for the people who promised them an NBN and the end of (child) pornography web access. They also voted for a whole raft of other lunacies that the Labor left apparatchiks put forward which are actually even more stupid than the National Broadband Nightmare and "no child will be able to access web pornography by December 2009" - the Dudd must be channeling that previous Labor Idiot - Bob Hawke as to who can be remembered for making the most irresponsible comment by an Australian Prime Minister.

So back to Mr Malone's pointless posturing - I particularly liked:

"We're going to participate in the trials because we intend to break it."

Oh dear - sorry love - nothing that you/iinet do (nor what anyone else does) is going to break anything or demonstrate anything that is meaningful in any way. What Krudd and SS want actually can be done, more or less, for the targets they are aiming at - being the children and young adults known to or associated with the cross bench Senators they have promised to do this for. It's politics - stupid; it has nothing to do with what you/your technical advisers either know or believe they know and, contrary to the statements in the referenced article, it is quite possible to 'filter out' even quite determined access to any web site, and again contrary to the comments in the referenced article, it's quite possible to block access to any specific type/stream/user list traffic if someone with the authority (like the Federal Government who have passed the appropriate legislation) authorises that to happen.

Of course, you can pass legislation and deploy a police force to ensure the legislation is enforced but that won't stop drug dealing, car theft, burglary or rape - or access to child pornography via the internet. It will reduce it.

Similarly you are quite correct that no legislation and the subsequent enforcement of that legislation will eliminate the exchange of child pornography but, unless I have misunderstood what SS and CK are saying they have a mandate to do, they aren't claiming what you are putting in their mouths (and, bear in mind, this criticism of your childish 'straw man' umbrage is coming from someone who believes those two people's every utterances are complete hog wash).

As Steve W has pointed out in his blog, any IP address can be null routed which will prevent any 'casual user' from inadvertently reaching that IP address's contents - which as I understand it is the purpose of the exercise - not what you are claiming it to be. Achieving the ability to eliminate all but determined access to a list of web sites will meet the important Senators' requirements and allow SS and Krudd to point out that they've delivered on their election promise without any cost to any ISP (including iinet) or the tax payer and without slowing down any other traffic in any way.

Will this mythical list being null routed prevent 'determined' access to a child pornography distribution ring's hideous content? - of course not - but how many children and teenagers are going to know how to access those secretive sources? How many of them who do know how to do that are not already corrupted beyond redemption by the total failure of every other aspect of their upbringing to date?

Simple answer - none.

As for:

"What's good for a six year old boy is not going to work for a 15 year old girl who needs to do research for high school assignments. A one-size fits all approach to filtering will never work," Mr Malone said.

What a truly pathetic piece of plain misinformation cloaked in sanctimonious grandstanding. Null routing will almost certainly block some incredibly minute (to the point of being beyond calculation) number of "non child pornography" related content but that's completely irrelevant as you would well know.

So - null routing (a no cost/no traffic delay) "solution" will do everything that SS and CK claimed it will in their election 'manifesto' and, of course, it will not in any way interfere with the sick minded people who use the internet to traffic their filth. But then it was never intended to.

If the Federal Government wanted to go further then, despite the comment that:

"Mr Malone said that the $44 million the Government is purporting to spend on ISP filtering would not be nearly enough to cover Australia's more than 700 ISPs".

If you understood current DPI technology and how to write the associated scripts related to the tracking/blocking/diverting of particular types of data and particular destination or source addresses (should the Federal Government actually have that information which I wouldn't be able to comment on) then you would, or at least should, know that you can, with minor speed degradation that would be unnoticeable to any user other than the measurement fanatics, prevent even the most closely guarded traffic from reaching its destination (as well, of course, of actually detecting it's true source - something that a determined authority might find much more cost effective in "fighting the war on child pornography" that current expenditures are failing to do).

I may well be wrong, I often am, but I would put the cost of using the next generation of DPI based equipment at something like  a once off cost of 50 cents per internet user - which, probably by total coincidence, would be around the $A44 million currently estimated for the purpose.

Personally, I think the whole concept of any government wielding such total control of what its electorate can and can't access is abhorrent and only truly stupid people (a title for which SS and CK clearly qualify) would even think of inflicting such dangerous controls in a democracy.

However to attempt to say that it COULDN'T be done TECHNICALLY and at a REASONABLE COST is just as stupid as the people who say they want to do it in the first place.

So - I guess iinet will go ahead and try and "wreck" this stupid trial (perhaps Mr Malone has mistaken his importance in the country's decison making hierarchy and he thinks HE is the elected governent from the way he speaks?) - Exetel will try and show them that null routing will achieve all their political intentions (as regards the cross bench Senators) even if this means helping them wriggle off the hook of one of their more senseless election winning inanities. It will be better to null route (at no dollar or speed cost) a few thousand web sites than have inflicted either your or their ideas of how packet control should be deployed.

PS: I guess it just isn't Michael Malone's day:

http://www.smh.com.au/news/technology/biztech/film-companies-sue-iinet-for-allowing-piracy/2008/11/20/1226770617457.html

Not only is it becoming clearer to him that doesn't he run the Federal Government his outspoken legal interpretations have allowed his company the opportunity to spend a lot of money seeing if he is right in his legal views too.

John Linton

....so how happy can we make you to get you to buy more from us?

Among the more bizarre aspects of the GFC (and it's non-impact on Australian business - I guess Krudd will have trouble maintaining that piece of fiction to the employees of Holden, Ford, Toyota, CitiBank, HSBC etc, etc for much longer) has been the dramatically increased frequency and level of contact that we are experiencing from our current suppliers and would be suppliers who seem to be becoming increasingly generous in their offers and promises that we could achieve if we would buy more from them.

I am well aware that Exetel is not a large or important customer of any of our current suppliers and the number of contacts I would have with them would vary from zero a year most years with the largest supplier to Exetel, Telstra Wholesale (whose account managers in my opinion, probably because of our insignificant size, are so junior and ill informed that meeting with them or even accepting a telephone call from them is a total waste of any person's time) to a maximum of three a year with the three or four main suppliers that we have some sort of reasonable relationship with. Most of our smaller suppliers I would have no contact with at all from year to year other than the occasional email exchange.

Over the last two months and especially over the last 2 - 3 weeks it seems that my day is constantly interrupted by calls and emails from one supplier or another 'wanting to catch up' or 'been meaning to buy you lunch for a while' type contact. Over the last 7 working days this type of call has averaged 3 per day which for a 'reclusive' and to be blunt, plain antisocial, person like me is an astonishing amount of attempted personal contact. I seldom, if ever, accept invitations for 'lunch' from suppliers - I long ago outgrew the sort of food and alcohol that even the most spendthrift of corporate expense allowances could afford in terms of viewing such events as being enjoyable gastronomically and my basic nature finds it difficult to prolong business discussions for longer than 20 or 30 minutes and I'm pitifully inept at filling in the rest of the time a 'business lunch invariably involves' with 'small talk'.

I have got an unmistakable impression that business is not good for a wide range of the larger suppliers to the wholesale communications market that includes buyers such as Exetel. There are obvious exceptions like Netcomm whose new contract with Telstra has sky rocketed their revenues and helped them reach targets they would seldom have dreamed possible and therefore our never too frequent contact with them has become even more infrequent - but they appear to be the exception.For the majority of our suppliers times appear to be not as rosy and we are being offered some very attractive 'deals' which, unfortunately we are not in a position to seriously investigate because of our total uncertainty of what the future is going to bring - or not bring.

Like everything else in life - almost all of the really good offers and opportunities seem to become available when you're not in a position to take advantage of them - like IP pricing at the moment which was beginning to reverse the trend of constantly falling and "due to the fall in the dollar" was beginning to increase from the extreme lows of a few months ago. Now I'm getting enquiries that if Exetel could sign up for much longer than we would ever consider we can get some amazingly low pricing from 'new' suppliers/brokers at prices below any of the levels I thought were deliverable when our current contracts come up for renewal mid 2009.

The same with ADSL modems - prices $20.00 less than we currently pay for the lowest priced product we currently sell which is a 'discount' of around 55% for an equivalently featured 'box'.

The same for ADSL2 'ports' and back hauls - offers of 15% less, minimum,  than the prices we are paying today.

Same story with HSPA data - a minimum of 20% less than our current contract rates.

...and those are only examples of the offers we've actually received - which accounts for less than 25% of the people who want 'face to face' meetings to discuss a wide range of 'building blocks' we currently use.

Of course our contractual situation doesn't allow us, even if we thought it appropriate, to chop and change suppliers based on better pricing - we can't do that 'over night'. What is actually concerning, and I know how strange this sounds to describe receiving offers of much lower pricing as being concerning, is that while we might be able to take up some of these offers in 3, 6 or 9 months or so our competitors, or at least some of them, are presumably able to take up these offers now or in a shorter term than we can. You could, easily, look at this scenario pessimistically.

Or you could look at it again and ask yourself "why are these suppliers cutting their prices in such significant ways?" To which there is, generally, only ever one answer - they aren't selling enough at their previous prices. Which turns the pessimistic view on its head because if that were to be the case, then it means that Exetel's competitors whom the suppliers were forecasting to buy the products and services now being offered at significant discounts aren't buying in the forecast quantities. I see some 'evidence' of this in the pricing movements of one or two ISPs but nothing that would indicate that they have stopped buying from their wholesalers in the sort of volumes that would cause the discounts we are being offered.

Contractually we can't take any real advantages of the offers we have received at the moment even if they 'improve' as more than one person has said to us. Obviously we would take them in to consideration when our various current contracts are at an end and we can always use the actualities of today's offerings to ensure our current suppliers do their best for us between now and then. It's going to make things tougher for us than they already are if our competitors get financial benefits from these low offers but I would think that most of them would be in the same situation that we are with contractual obligations that can't be broken without a good reason or sensible 'notice'.

Flip a coin - take your pick - are things not so good for a good many ISPs in Australia? Or are they all about to get huge benefits from much lower 'building block' costs?

John Linton

.....according to a "vital information for small businesses" pamphlet from a major bank I glanced at over what passes for breakfast this morning. Thank you for the reminder - I never would have thought of that.

I suppose it's nice that the banks still have money to waste on this sort of nonsense seeing they are all in such financial distress - this one particularly - Citi Group who at the same time I was reading their advice to "small businesses" was announcing on the FOX business news that they were laying off 52,000 of their staff and cutting their expenditure by 20% in 2009 after getting a major whack of the US Government's bank bail out money. Not sure I want to seriously consider advice from 'financial experts' with 'credentials' like those guys.

Any small business is more than aware that cash flow is the vital part of staying in business and if they don't know that they aren't in business  - they didn't pay their first month's bills. I guess the genii who operated Citi Group should have taken their own advice - apparently they didn't see a "down turn in the business cycle" (their CEO's words in his staff cutting announcement this morning) despite the world's stock markets being constantly mauled by the 'bears' for the last 12 months and their company's loan defaults increasing each month for the same period.

(Maybe I should run a major bank on the basis that ever since the Dudd was elected I have been saying that business 'feels bad' and have been taking very cautious actions ever since that time  - in terms of 'conserving our cash flow' and not committing Exetel to any borrowings - it would have been hard to do any worse than the people in charge over the past 18 months).

When I think back to the time that I began to suspect something was 'not right', about the time Krudd was elected and he started making his ridiculous statements about how Australia would proceed under his 'visions' (I always thought visions were what teenage girls suffered from in semi-religious societies or what you got from chasing the dragon?), I am very grateful that we pulled back from borrowing large sums of money to deploy 120 ADSL2 DSLAMs and buy a 450 square meter floor in a Sydney CBD office building. We did proceed with the completion of the Inter-State deployment of our own PoPs and a, for us, significant investment in setting up the company in Sri Lanka - but they were cash investments with no loan/lease implications in to the future - they were, as always at Exetel, funded out of monthly profits.

Perhaps more by good luck than good judgment Exetel has actually improved most of its financial ratios over the past 12 months:

Total Employees to annual revenue now 1:$A1,200,000 (from 1: $A1,100,00)

Total Employees to customers now 1: 2,250 (from 1:2,100)

Salary dollars to customers $2.00 per customer (from $2.50 per customer)

which, as far as I can gather from what I read about business ratios in our sort of business, makes us more efficient than all of the US and European, and even the Japanese commercial  'super stars' - though I wouldn't put much credence on some of what is currenty being reported.

It's really good to be able to 'rattle off' such encouraging numbers but the cold, hard reality of today's business environment and its very unclear futures is that no-one can be sure about what's going to happen so the only real strategy, for conservative people like those who run Exetel and who are using their own 'capital', is to ensure that all expenditures are reduced to very lowest levels they can be and any 'spare' cash that the company generates is 'hoarded' and not spent.

Inevitably that meant, for us, increasing our prices and in theory doubling or perhaps even trebling our small monthly profits if the various unknown future situations turn out on the neutral to good side rather than on the bad to terrible side. If they don't turn out as bad as they could do then we will have built up a small cash reserve for the first time in Exetel's "life". If they turn out negatively then we have a better chance of surviving intact than we would have done had we not taken the precautions we have put in place. Whatever happens I don't see Exetel having to fire 20% of its personnel (or any for that matter) but I'm pretty sure that will not be the case with more than one or two of the companies with which we compete - not to mention Australian companies generally.

Among the thoughts that went through what remains of my mind reading the Citi Group pamphlet this morning was the definition of a 'small business'. I seem to get continual comments that I shouldn't describe Exetel as a small business by a surprisingly wide range of people from our banks, accountants, lawyers, suppliers, agents and more than a few customers. To me Exetel is clearly a small business because it is characterised by:

1) It's the smallest, by a long way, among the companies it competes with for business.

2) The top 5 communications providers are all over a market capitalisation of $A1 billion with Telstra being over $A50 billion

3) Exetel's long term and short term decision making and operational management is done by 2 or 3 people.

4) All hiring is decided by one or two people

5) The 'top' management of Exetel is still 'intimately' involved in two way communication with its customers on basic details

In almost every other respect Exetel is operated as a 'small business' - in many ways it's operated as a very small business so there is no basis on which Exetel could be described as anything but as a 'small business'.

Irrespective of how Exetel is defined by any particular person and irrespective of how unqualified Citi Group is to 'lecture "small business" on the virtues of cash flow management I have never lost sight of the key business control objective of managing Exetel's cash as if it was my last cent - probably because it is.

John Linton

We held Exetel's 59th consecutive monthly board meeting yesterday and finalised our 'batten down the hatches' decisions and actions for the coming unknown period of commercial operations in Australia. I still see no evidence of any company CEO who makes public statements in the print or electronic media making any forecast about the futures of their businesses other than that they have no idea what early 2009 will bring let alone will happen to their businesses for the balance of 2009 and on in to 2010.

For the last hour I have been half watching Fox's Monday Money as I scan the rest of the business press and do various other parts of the start of week work processes and, at least it seems to me, that the lack of ability to see what is even happening today is now a complete mystery to any business person who has ventured an opinion this morning. It's not any different to the 'tenor' of such TV 'analysis' that has been broadcast over the past few months and certainly the people commenting are no more respected or erudite than in the past but the consensus is becoming more solid and more, at least slightly, "hysterical".

The consensus, as I heard it from half a dozen commentators over the past two hours, about the G20 'decisions' in New York over the week end was they were inconsequential generally and completely irrelevant to Australia though undoubtedly Krudd will spout some stupidities when he returns from his latest pointless junket. As I could see no possible value coming from that meeting it was already irrelevant to me.

One exception this morning , in terms of credibility, was Gerry Harvey who is always good to listen to because he has always been successful in what he has done and he has been through the Australian economies ups and downs for the past thirty years and his statements have a 'gravitas' that is missing from most others. His comment was that he had no idea what would happen between now and Christmas and beyond that it was a total guess. His advice - take it a day at a time and do all the sensibly conservative things you can - take whatever tough decisions have to be taken and keep yourself very visible to your employees and explain more than you ever have in the past what you are doing and why.

His key advice -

a) don't be tempted to make statements about any aspect of your business to your suppliers or your shareholders or financiers that you aren't 100% certain about.

b) never make a promise to any employee you aren't 100% certain you can keep.

c) Difficult times are a fact of life in business - they come at times you are often unprepared for but they, eventually, come to an end.

Stating the obvious you might well say and certainly nothing new - but it doesn't do any harm to have the obvious re-stated every now and then - particularly when you haven't got a clue about what the future holds.

I'm not sure whether I'm lingering longer than usual over my start of week tasks because there are a whole series of difficult decisions that have to be made as soon as I complete this daily ritual. The tasks involve all of our major revenue streams and while we have thought about them a great deal and discussed them several times it's still a daunting job to actually execute so many decisions simultaneously - or at least serially with no breaks between successive implementations.

We will complete the introduction of the PAYU plans by the end of this week with the ADSL1  plans 'going live' on the web site sometime later today and the ADSL2 plans by the end of the week.

We will also make a decision on how we provide ADSL1 services by the end of this week and see if there is some way of getting away from Telstra's clutches - though that doesn't look as hopeful as I thought it might over the weekend.

The chances of offering a broader geographic coverage for ADSL2 is something that may be possible but I have my doubts as to what is being talked about verbally will actually transform into a contractual offering we can make use of - maybe my cynicism will be proved wrong for once.

We will also consider whether we can move to 'Phase 2' of HSPA delivery this week based on getting the last of the 'loose ends' tied up - again, probably too optimistic a time frame - but maybe things are more possible now so many major suppliers are 'hunting' for new business as their start of year forecasts are now looking so incredibly wrong?

We will leave all our current plans/service pricing in place as it seems that those offerings have retained their 'market appeal' and have exhibited no decline in uptake or retention ability - at least up to today. Our objectives in adding to the current 'marketplaces' that we address is designed to protect us against any sudden change in that situation.

So its a fairly crucial week or Exetel as we put the last aspects of our 'tough times' decisions in place - in terms of our product/service offerings.

Christmas is looking a long, long way away.

John Linton

We've struggled for almost five years at Exetel, and for some years before that with other ISPs to attempt to provide the lowest cost broadband services in Australia without going broke - not the easiest task to take on and deliver but it was the base premise for setting up Exetel in the beginning and remains the base premise today after five very tough years.

Over that time it has been interesting to observe how the 'ISP Scenarios' have changed and I wonder what changes now have to happen for the various ISPs to 'survive' in the post high growth phase of road band take up that is beginning to make its presence felt - at least for some ISPs - at least thats the way it appears to me.

Why do I say that? The main reason is that the dial up user 'population' has almost disappeared in terms of people still using dial up as their primary/only means of connecting to the internet and all the marketing cr** about "5 million times as fast" and "blazing speed" has, or should have, disappeared with that demise. So as there is also no longer an actual major market to aim at that doesn't already have ADSL the concepts of "free" modems" and "free" activations went along, should have gone along, with that demise.

The major marketplace for ADSL now is - other ISP's ADSL customers which, for two years by my observation, have been a primary target for Telstra using their ready to hand customer listings of other ISPs users which, depending on who you believe come from various legal sources or if you aren't that persuadable some cynics may believe they come from other sources - in the end it makes no difference - a list sourced from somewhere is used to contact people who use other ISP services to transfer to Telstra's direct ISP service.

Similarly, albeit completely differently (taking my lead form Dudd's latest idiocy this morning where he described one of his/the G20s "momentous decisions" as being "contentious but likely to be popular" - and there was me thinking that "contentious" was virtually an antonym for "popular") you have the other larger ISPs trying to use some 'unique' aspects of their DIFFERENT ADSL implementations to attract other ISP's users.

Exetel has none of the advantages enjoyed by the large companies we try to compete with so our 'arsenal' is fairly empty and our 'financial resources' cry out for a more accurate description than 'strictly limited'. So we are left with, virtually, nothing to 'go to market with' unless we were stupid enough to try using that discredited, and therefore not used in recent commercial history, concept - the truth?

I wonder how that would work? Well, as it hasn't been seen in commercial use in the communications industry for almost as long as I have been associated with comunications it might be worth a try - if only for the novelty value? I realise that I'm sounding not only sanctimonious but boring so I'll move on to why we are about to try an honest and accurate version of offering broadband services based on making it both clear as to what the user will actually pay and, heres the possible difference, no 'lures' based on other factors that won't really have any bearing on overall and realistic use.

We have started this process with the HSPA services which are based on a small (close to our cost) monthly access fee plus a cost per megabyte of traffic used. No usage - no payment - is the "difference" we offer. We will continue this process with ADSL1 and then ADSL2 plans offered on the same basis - monthly access costs to the end user based on our costs with virtually no margin plus usage based on traffic at a very low per megabyte charge.

Not much difference to the older BigPond et alia plans you woud be correct in saying? Quite right. These plans are quite similar in basic concept (most people can remember that such plans were offered with a paltry ("including a massive download allowance" of 100 mbytes or whatever it was) basis with additional magabytes being offered at 15 cents or some ludicrously high/unbelievable rip off price that was specifically designed to financially devestate the unwary....and, of course, you see the same companies transferring this financial rip off concept to their HSPA offerings today on the old PTB basis of "never giving a sucker an even break".

We will introduce next week 'truthful' plans that are offered on the basis of monthly access charges at pretty much our buy prices and data downloads that are at prices that are a fraction of the cost of what are offered by any other ISP in Australia and we will rely on our true lowest operational costs, by a huge margin, compared to any other ISP to be able to deliver these services to 'low end' broadband users.

I have no idea how this 'initiative will go but we only have the advantages of our low operating costs (the result of five years of pain creating that situation) to 'play with' against the considerably lower buy pricing available to our larger competitors and their large advertising expenditures and of course - their obfuscatory "marketing".

It's a question of making a virtue out of necessity but it's also a question of whether a virtue is an advantage even in 2008 and 2009?