John Linton's Personal Musings

John Linton

Exetel's first service was residential broadband and that service has remained the major revenue earner for Exetel for the whole of our short existence to date and is likely to for some time yet. However we have begun to make changes to our 'product line up' yesterday that, over time, will change our 'marketplace landscape' considerably - both in terms of our customer demographics and the services from which we derive our revenue (assuming that we remain in business during whatever eventuates later in 2009).

We started making the changes to our broadband plans yesterday and will complete that process before the end of this week. I still, personally, have no sensible view on what will happen over the coming three months in terms of any 'down turn' in the Australian economy and any subsequent 'flow on' effects (and less than no idea beyond June 30th) but have formed the view that we need to 'improve' our offerings ahead of any 'negative events' that include the possibility of 'compellingly priced marketing programs' from one or more of the major carriers.I am making the assumption that the major carriers will be affected by any financial problems before anyone else and will act in the ways they have done in the past in their attempt to improve their 'market shares' and 'protect their revenue streams'.

With a day to go in Mach our new orders for all of our major revenue contributors are running at or over 35% greater than in March 2008 but part of that is due to the fact that Easter was in March last year. Still, the increase is extraordinary even taking that fact in to account. I will be fascinated to see what now happens in each month of the last quarter of this financial year.

I think that one of the contributing factors to our very good start to 2009 has been our very attractive VoIP offerings and our equally solid 'naked' ADSL2 services. From what I read (and I'm aware of the dangers of believing statements in Australia's media) it seems that every provider that has their own, realistically priced, VoIP service is doing very well with that aspect of their service offering so it is consistent that Exetel would be performing at a similar level. This played a major part in our deliberations of how we could improve our 'whole of service' communication offering to residential users in the plan changes we made yesterday and will make over the next day or so.

The main change to our ADSL1 plans is the inclusion of 100 no charge VoIP calls local/national to wire line services. The retail value of this new 'add on' for ADSL1 users is equivalent to a $10.00 monthly price reduction if they are using another VoIP provider (or Exetel VoIP) and much greater than that if they are using 'standard' telephone call services. On the average $A45.00 monthly charge for an Exetel ADSL1 service this new 'add on' is the equivalent of a 22% discount on a customers monthly ADSL bill if they were to make 100 VoIP land line calls a month - an unheard of discount on a service which is already priced at the lowest cost in Australia.

Our view is that or VoIP business has been continually growing at an increasing rate since we introduced 'naked' ADSL2 in December 2006 and it is rapidly approaching becoming a 'top five' revenue earner for the company. For us to achieve the call numbers/minutes carried 'thresholds' we need to achieve better per VoIP call pricing we need to quadruple the number of call minutes we deliver to our suppliers and one of the ways we can do that most easily is to attempt to convince every one of our broadband customers (wire line and wireless and mobile) to use our VoIP service.

"Free" (which this 'add on' truly is for once in the history of communications in Australia) is a high risk way of accomplishing the required growth but it has a couple of upsides in the longer term and is affordable for us in the shorter term. In the short term it's obviously going to be a 'profit hit' and quite a large one but, if our calculations are correct, the increase in broad band sales will mitigate that loss and, if we have got the numbers 100% correct (something we have never achieved so far) it will actually cost very little.

The longer term upsides are that VoIP is never going to a service that Telstra and Optus 'embrace' as they have too much 'standard' telephone call revenue at gigantic margins to ever make that practical and therefore it gives a small provider such as Exetel an true, and ongoing, 'edge'. The other longer term benefit is that Exetel's VoIP service is extremely good and we have in depth knowledge (and over three years experience) in delivering high quality VoIP both for ourselves and our customers and it will become a key business service over the next two years - which is a market we will be concentrating on from now onwards.

At the end of some 9 - 12 months it should deliver us the VoIP minute volumes that will have made it practical to diversify our 'VoIP network' with termination points in all capital cities and multiple redundancies across the network which will be essential to be able to bid for VoIP services to the larger corporations and government departments.

So, together with an increase in the 12 midnight to 12 noon download allowances 'across the board' plus the decrease in per gb rates on the pay as you use plans and increases in the 12 noon to 12 midnight download allowances on two higher speed plans we are basing our current 'round' of plan improvements mainly on the additional value of truly free VoIP calls.

VoIP seems to me to the best way of dealing with the large carrier's predatory "marketing" campaigns and I also very much doubt that smaller providers than the large carriers have got either the 'bravery' or the inclination to do what Exetel is going to do. So, hopefully, a unique approach to the dangers of the immediate future.

John Linton

....it simply must be wrong because there has never been a time in the history of commerce where any marketplace and product offering didn't continually change under the twin pressures of competition and growing customer sophistication.

I have spent most of my waking time over the weekend considering how to address the issues that are likely to confront our small company in the current uncertainties and the widely (almost consensually) predicted "much tougher times" that are "imminent". My personal views, which are not based on any real knowledge, are echoed by two articles in today's Australian:

http://blogs.theaustralian.news.com.au/janetalbrechtsen/index.php/theaustralian/comments/beyond_the_g20_freak_show_protestors/

and

http://www.theaustralian.news.com.au/story/0,25197,25260080-7583,00.html

It really doesn't matter whether you voted for the current uneducated fools posing as a federal government or not - there is little doubt that the the glowingly 'pink' Albrechtson and the "hate Howard with a virulence mostly unmatched in Australian print" Ergas certainly voted Labor - their points are that Krudd and his unknowledgeable lackeys are only making everything worse and ensuring a difficult situation becomes a disaster with their stupidity/doctrinaire blindness that is unmatched in the history of the Federation.

So little to no hope to be found in "things getting back to normal" in the near future when even the commos, pinkos and fellow travelers (even with their preferred Labor PM universally adulated in the Australian opinion polls - just how stupid does that make the Australian electorate?) are writing about Krudd's destruction of the country not only for the present but for the ongoing future. Krudd's robotic defense, as promise after promise fails to materialise, is that of the true charlatan - "it would have been worse if we hadn't [fill in pointles action promised from your personal selection of over 20 by my count] - try starting with the 75,000 additional jobs that would be created by his Christmas cash giveaway which, breathtakingly, has become 20,000,000 jobs planet wide now he's grandstanding without a safety net and his ego has zero restraints. Where are all these jobs that "have been saved" and who did the arithmetic to come up with figure? Nobody of course - he just plucked the figure out of..............

Nothing to see here.....

I have mentioned several times this year that while I read about the various estimates of decline in the Australian marketplaces I see nothing in Exetel's day to day results that indicate anything but strong growth and my subsequent puzzlement as to what may be happening in the marketplaces that we operate in. Nothing has changed - new orders over the weekend continued to be strong despite the last days of every month being 'slower' than those of the rest of each month. In fact, for the first three months of this year every product/service we offer has continued to grow more strongly than at any time in our company's short 'history'.

Having considered the non-action of making no changes to the current plans (based on there being no need for change as everything is going so well) - I rejected it. My reason for not 'doing nothing' is based on the long history of commerce and military campaigns that it is almost always too late to make changes when it eventually becomes obvious that you should do so - nothing more - and that improving your position might cost you some money in the short term (if it eventually turns out that in fact no subsequent changes need to be made) but making improvements can hardly damage your current situation if it turns out that changes don't become necessary.

So....it's a tough decision to 'give away' money on plans that already delivering very thin profit margins but we will shortly have around $A2.00 a customer in known cost reductions and an unknown, but not inconsiderable amount of further cost reductions across a number of the services we offer. While an amount of "$A2.00 per customer" doesn't sound much it actually turns out to be more impressive than it initially sounds because, depending on the 'plan element' only somewhere between 10% and 40% of total users of a service actually use the full amount of all 'plan elements' in any given month.

So, for instance, we could include the 100 free VoIP National calls on all ADSL1, Non Naked ADSL2 and HSPA plans (currently they are restricted to "naked" ADSL2 plans) without having to cost in a $400,000 increase in our supplier bills.Similarly we could increase the 12 midnight to 12 noon allowance from 54 gb based on our monthly increase in actual usage of the 12 noon to 12 midnight period - and as we expect to significantly add to that bandwidth at a much lower cost than is available today (in the near future) that would not impact our costs at all. We will also make the various 'bundled' options more attractive and also try and find a financially sensible way to add HSPA as a back up/travel option to our higher end ADSL1 and ADSL2 plans.

Depending on some more 'investigation' today (and probably tomorrow) we will consider doing all of those things together with a number of other 'riskier' plan changes. Our expectation is that we will therefore ensure that the current strong growth in almost all services continues to be maintained and that, if we have 'guessed correctly' that growth may strengthen.

Then again.....there's the Krudd factor that is far, far beyond a small company's risk minimisation planning to deal with......maybe there won't be an Australia worth living in beyond the current year?

John Linton

...by everyone concerned.

I mentioned that one of the key reasons for going to Sri Lanka in February was to interview a short list of applicants for the position of General Manager of the SL operation. We did that and from a high quality set of choices selected the person we thought would be the best person for the position. He came to Australia last week for a week of 'familiarisation' both with the systems and processes currently being used by Exetel and, probably more importantly, to get some first hand knowledge of the different people with whom he will be working in the initial months in the position.

Being a 'brand new' employee of an 'overseas employer' there was an obvious, and totally expected, reticence to make any 'criticisms' of what he saw and an equally obvious bias towards being overly polite and 'praising'. Anyone, new 'foreign' employee or otherwise, wouldn't be expected to display any other attitude.Two almost certainly genuine observations he made were things that I have never thought about - that Exetel's 'key employees' were "so very young" and that an Australian company employed so few "Australians" with so many different ethnicities and countries of origin being very evident across the Australian office's personnel.

His background - long association with technology companies in Si Lanka and other countries in that region and his most recent tenure being the start up, growth and management of a small ISP in Colombo allowed him to contrast his last five year's experiences with our experiences over the last five years. In is, deferentially polite terms, the contrasts were very much in "Exetel's Favour" and some of that was almost certainly genuine. The major aspect, on which he continually commented, was the breadth and depth of automation and the fact that we had not 'bought' any 'off the shelf' software but had developed all of our provisioning, billing, support and personnel management systems from ground zero and integrated them from Day One into the data base that runs the company.

All very expected in many ways and it shouldn't have caused any reaction other than a mild degree of 'self satisfaction' which it undoubtedly did. However there were some things that were less pleasant to hear (although I'm sure he didn't intend to have that effect) and it did cause me to wonder why I hadn't taken the same view that he had so casually asked questions about.While the points he made weren't "Earth shattering' they were important and I, and other people, should have picked up on them long ago - extremely annoying.

We have always been very conscious about seeking our customer's feed back on every aspect of the ways in which we operate Exetel and have made, literally, over 1,000 changes to our processes based on customer feedback over the last five years. However, perhaps it has needed an in depth explanation by the key people in charge of the different parts of the company's operations to an intelligent, concerned (he is now going to carry the direct responsibilities) and experienced 'outsider' who is given access to the 'real' inside operations of the company to actually expose a number of things that we had better pay closer attention to in the future. Nothing 'seriously dramatic' right now but very definitely things that were beginning to show the negative effects of ongoing neglect.

So it will be good to have someone heading up the overall operations of the Sri Lankan company that has the in depth local knowledge of how things really work there and the people who can help you make them work - something we have never had any knowledge of and would never have any way of obtaining that knowledge. While we are still a long way from ending the program of sending Australian based people to Colombo to continue the process and system and product knowledge transfer we will be able to develop the future activities of the SL business with far greater knowledge and 'on the ground' presence and decision making.

We also now have a list of things we need to do in Australia brought into focus by listening to someone who has a different set of experiences but an equally sound knowledge of running a small company in a difficult market. Not that we lacked a very long list of things to do 'immediately' but perhaps our focus had begun to move away from things we thought no longer needed the same level and/or quantity of attention that they in fact do. It, yet again, reminded me that I have to reduce my involvement in so much of the detailed operation of Exetel and enhance the responsibilities (and accountability which I have always been very lax about) of the current Australian personnel.

At its very prosaic level it is a timely reminder that nothing ever continues to run perfectly without constant and insightful attention to detail.

...I'm disappointed that, yet again, I have had to be reminded of that elementary aspect of running a small business. 

John Linton

......that times will get very tough in Australia over the coming months:

http://business.smh.com.au/business/difficult-times-ahead-warns-cba-chief-20090327-9e50.html

and any hope for Australia of a "China lead recovery" is dispelled by almost every economist within or outside that country with this 'info piece':

http://online.wsj.com/article/SB123810562770552071.html

indicating that our 'government's' claims of export orders to the PRC "protecting Australia" are almost certainly as nonsensical as their other stupid statements.....

......but Exetel's order intakes in March are already at record levels and are amost 40% up on a very good January and more than 30% up on an even better February....so there are very mixed signals.......perhaps we are still in the "phony recession" with the real impact still somewhere in the future?

I have absolutely no knowledge or even remotely enough intellectual ability to properly undersand what is reported in the more sensible and thoughtful sections of the international financial press - except that there are no 'good news' stories from either the USA or the EU - at least none that I can find. The Australian business and financial press is, as far as I can see, almost worthless in general understanding of the future financial situation in this country and their 'reporting' of even current 'facts' appears to almost always be distorted to the point that actual events aren't actually reported factually followed by sensible analysis of the FACTS but are always twisted to follow some unseen political or other agenda.

So Exetel is still following the view that business life is going to become very hard 'real soon now' and that caution and conservatism are the only ways to make current and future decisions. What continues to puzzle me is that there is absolutely no evidence of that in our minute by minute, daily, weekly, monthly and now quarterly 'figures'. I must be missing something but, for the life of me, I can't figure out what is happening that seems to be 'denying' the overall consensus of what we should be seeing. Maybe we have our own 'personal Chinese economy' equivalent that really is protecting us from the general world wide business down turn?

I keep reading into what 'people who know' appear to be really 'biting their tongue' about not saying which appears to be that the current economic trends are pointing to a 'depression' rather than a 'deep recession' and that all the talk about 'reforming the world's financial systems' is just obfuscation for no-one having a clue what went wrong and certainly less than no clue about how to recover from whatever deep financial trouble the developed world is now in. Problems of this magnitude don't end with 'financial troubles' though, because lack of income brings far more serious problems than some companies ceasing to exist and the 'sociall' consequences of not being able to legitimately keep yourself and those for whom you are responsible fed and clothed and schooled leads to truly dire consequences.

The crass stupidity of "the bike gang wars" and the even more stupid "Lebanese immigrant drug wars" that have dominated Sydney's media for the past 10 or so days are far more frightening than the financial press. The concepts of the acceptance by the NSW Police, the NSW Government (and even the NSW Public) that its "OK" for criminals to act in the ways they do to "control the drug traffic in NSW" is astonishing. Perhaps the UK press is correct and it isn't the financial system that is broken but the financial problems now being experienced are simply an aspect of the break down of 'civilised western societies' where disregard for the laws and respect for other people's lives, health and property are a quaint old fashioned notion of the past.

http://www.timesonline.co.uk/tol/news/uk/crime/article5988491.ece

I have some personal experiences of the last three Australian 'recessions' and they were extremely unpleasant and the scars (mental rather than physical) the early 1990s inflicted on me personally haven't given any indication of fading with the passage of time. The 2001/2 dot.com bust was mild by comparison though many people I knew then and still keep in touch with today never recovered their desire to continue taking the risks of running their own businesses and they are very different people today than they were up to that time. I'm sure that many other people who lost their incomes and perhaps their homes in previous recessions were equally emotionally affected and may well also have never returned to being the people they could have been.

It's going to be a difficult weekend, for me, as there are so many 'directional decisions' we need to make to be able to form a clear view so that we can make a range of subsequent decisions across the breadth of our operations that have real ramifications on how we conduct our small business for the balance of this calendar year and neither endanger ourselves nor any of the entities and people that depend, in some greater or lesser ways, on those decisions being made correctly.

Perhaps some 'head buried in the sand' attitudes will be a preferred way of not looking at anything for too long or in too great a depth?

John Linton

.....though that's a really tough call as almost everything in broadband advertising and promotion is far from the truth.

Even the stupidest person on the planet would have to understand that the word "free" and the offer of a product or service from a commercial enterprise are mutually exclusive.......or unless you read the various advertisements and web sites of ten of Australia's larger ISPs and telephone service providers you would have thought that.

I have no idea when the outright lie of "FREE!" became a common occurrence in attempting to promote a product but I would hazard a guess it goes back to "washing powder" products in the mid 20th century (this view is limited by my own age of course - it may well have been long before that when my mother explained to me that the word "free" was used to claim that the buyer could get 25%, or whatever, more washing powder "free" by buying a larger container - at a higher price). That dissembling was subsequently swamped by the over use of the word "free" to promote virtually every product ever produced and then every 'service' in every marketplace in the world.

Over the past two months I have looked at almost 150 advertisements and web site promotions for a variety of communications services and the word free has appeared over 220 times in those 'promotions' which any mathematical genius would be able to determine, after a few attempts on their calculator, to be approximately 1.5 times per product/service' promotion'. I think it can be concluded that the word "free" has now been so debased by larcenous marketing/advertising people that it is completely meaningless in any form of advertising and promotion in the 21st Century.

As we approach the, self imposed, dead line of April 1st to 're-jig' the pricing and inclusions of most of Exetel's product and service offerings I have become increasingly at a loss in terms of how to "present" Exetel's offerings in more appealing ways rather than the 'this is our price for these services' approach which we have taken for the whole of Exetel's existence to date. Our approach to date has been to present our services as clearly as possible with as little use of the top row (upper case) symbols of the keyboard as possible and no flash or colour or cartoons etc.

While I'm not 'hung up' on this aspect of product/service pricing presentation, I have become aware that Exetel is one of the very, very few companies in our various areas of the marketplaces in which we operate that doesn't "promote" it's services in marketingese. This point is continually being made to me via an increasing number of well wishing customers and non-customers who point out that we continue to name our ADSL plans with meaningless numbers and letters rather than taking the trouble to use words such as "Big Kahuna" (whatever that may mean) for a large download plan or "Super Extra Fast" or whatever for plan types or categories. That's very true.

In any event we won't be changing from our prosaic plan numbering methodology (I have too much respect for the intelligence of the average customer to assume using 'jargon' would make any difference) but I have been wondering whether we should be using more 'promotion' rather than relying on the customer's ability to compare price + inclusions for the price to reach a decision. So, being relatively imaginative and relatively literate I played around with creating web presentations along the lines of some of the more extravagantly set out offerings from other companies who indulge in those practices. I concluded that my prosaic nature and a vestigial regard for the truth would make that sort of thing impossible for Exetel while ever I played a part in such decision making.

We do need to more rapidly increase our HSPA take up and it would be good if we could more rapidly grow our mobile business but we are heavily constrained in doing any more than we currently do in terms of lower pricing or "free" inclusions as we already, in line with our basic reason for being in business, offer those services at only a marginal profit. We would have liked to add a 'free' HSPA service with some of our higher priced ADSL plans but the issue is the cost of the Huawei HSPA modem which is really expensive and we have still failed to find the 'magic' box that we were hoping would make that possible by now. Similarly our inability to provide 'free' mobile handsets has always limited our mobile sales and offering really low 'real' mobile call rates only appeals to the intelligent buyer/user of mobile services.

So the issue now remains what we do and how we 'present' our services in terms of making changes to what we currently offer. Fortunately there are still a few days to make that happen because right now I don't have a clue. While I really dislike any sort of "me too" approach to the market it seems that our only way of reducing the prices we sell services at is to increase the 'bundling' options we offer. This sort of approach has never 'sat well' with me as I've always regarded it as needlessly complicated and price increase by stealth - or whatever the more correct description is. (in the same way I personally regard mobile "caps"). However I think it's probably long past the time that my personal prejudices have to be put aside and more thought put in to how that could be accomplished.

So, any ideas you may have along these lines would be appreciated as I have none at the moment.

John Linton

wasn't the best "choice" to "defend the ISP Industry" against the combined might of the entertainment industry....at least if the various statements in this article are anywhere close to the truth:

http://www.zdnet.com.au/news/communications/soa/Crux-of-iiNet-defence-due-by-April/0,130061791,339295644,00.htm

I have previously expressed my views on the stupidity of comments about illegal downloading via P2P processes made to the media by the CEO and other executives of iinet but I really didn't expect a competent SC to mouth slightly watered down versions of those mixtures of arrogance and stupidity to a judge. Now, I understand that Telstra et alia are almost certainly both 'running' and partially funding iinet's court room travails on behalf of their cozy cartel and therefore you would expect a degree of unreality and crazy denial of self evident facts but.......really some of the statements, assuming they are correctly reported are just plain "cloud cuckoo land".

For instance if this is how iinet's SC is going to run his case then they are doomed to not only lose but seen to have acted both irresponsibly and dishonestly:

"iiNet's barrister, Richard Cobden, SC, said the ISP was not required to act on a "mere allegation of copyright infringement"

Exetel, like many other ISPs, received the AFACT infringement notices and they weren't allegations; they contained exact and specific information about the title downloaded, times, IP addresses and actual content. Any rational and vaguely knowledgeable person or entity receiving such a notice would be in no doubt that the "alleged" copy right infringement was in deed factual and exact - if they did in fact have any doubts a simple check of their own logs would have removed that. Attempting to run an argument that it is an unsupported allegation is just plain nonsense.

Similarly trying to run this argument shows the level of "straw clutching" they are indulging in:

"They also claimed that, because files are broken up into tiny "packets" before being sent over BitTorrent, this may not be enough to suggest a "substantial portion" of a copyrighted file was distributed."

How patently ridiculous and so totally dishonest! And, should they wish to be taken seriously on that claim, how totally embarrassing for an ISP (which presumably knows how IP traffic is routed) to try and say that P2P processes are so unreliable that they don't actually deliver complete files!!!

It's a pretty clear indication that iinet have no defence and that their SC is either struggling to understand what is going on, being deliberately mislead on the actual situation or is hoping that all the technical jargon will not be understood by Cowdroy and they can somehow obscure the situation to the point that iinet will escape with a slap on the wrist 'settlement'.

It seems to me it was only iinets deluded sense of self importance that has caused them to be selected for the expenditure of large amounts of money and management time defending the indefensible. It was Michael Malone's pointless personal hubris (rather than the arrogance which is the more usual stock in trade of his 'co-defendants') that sees them in 'the dock' at all - it could have so easily been avoided and so easily been avoided without any effect on their business at all using the quite simple processes available to both iinet and iinet's customers.

How would this have occurred? It's so simple I am amazed that iinet chose their brash stupidity approach rather than the sensible, and glaringly obvious, business approach that was available to them. Which was:

1) on-send the notice to the customer whose IP is mentioned in the infringement notice stating that (as requested) if a second or third notice is received from AFACT that their account will be terminated. Total compliance with the AFACT request - problem solved - good corporate citizen - no waste of money and time on court case  - no looking like a total goose in the eyes of the Australian internet user community.

"but we can't do that because we would lose a lot of customers?" (the real fear/reason for the current 'denials')

2) Include in the notice sent to the alleged infringing copyright customer the innocuous comment that you understand that the IP cited may actually not have been being used by the customer at the time of the infringement as it is dynamically allocated and if that is the case then you suggest that they log their modem off and then log it back on to acquire a different IP address. There can then be no second notice sent to the original alleged 'infringer'.

Not totally in the spirit of the respect for other people's property rights but well within the legal processes of assigning dynamic IPs under which iinet has operated for its entire existence and also well before any copyright notices based on IP addresses existed so no possibility of being accused of anything AFACT might have in mind.

But why take that eminently co-operative, responsible and painless way of dealing with a difficult business situation when you can grandstand in the media that:

"iiNet has previously said that the case was "like suing the electricity company for things people do with their electricity".

What a dimwit Malone must be (or whoever used him as a cat's paw to speak those truly dumb words) to use such a stupidly flawed and inapposite analogy. If Malone et alia truly don't understand the concepts of corporate responsibility to that extent you have to wonder who ties their shoe laces for them each day when they get dressed.

Hopefully someone will point out to iinet's 'legal team' that they can call off the case apologise to AFACT for not taking the requested actions more expeditiously and get away with a notional costs settlement.

They can then write the few lines of code that will on send any future copyright infringement notice together with whatever words they wish to include that will re-assure their end users about the ongoing security of provision of their service. The incorrigible thieves will not be discouraged but it's highly likely that the responsible parents who then realise that they are bringing up their children to be irresponsible thieves and also possibly bringing retribution on themselves will reduce the level of theft of other people's property.

So some good will come of this action if only iinet, et alia, stopped behaving so commercially irresponsibly. 

Then again....hubris exacts a very high price before common sense eventually prevails. ("Whom the God's would destroy, they first make CEO's of pretentious Australian ISPs" - apologies to Euripides)

John Linton

I read this with some interest earlier this morning:

http://www.itwire.com/content/view/23997/53/

not because I have any particular regard for Skype but because it's another indication of how business users will have to make more effort to understand the advantages (operational as well as cost) of ditching their ancient PSTN/ISDN technology telephone services for the really much more useful, and so, so much lower cost VoIP services.

Skype (and I have to say it's a service I've never used) has become very successful with its no cost telephone call offerings and like the recent announcement by Microsoft and Google (I referenced in a previous musing) has a well known 'brand' and quite considerable credibility when it comes to offering business services. I was particularly interested in the article because of our upcoming office move and the nightmares associated with moving a 16 hour a day/7 days a week telephone service used by Exetel's many tens of thousands of users.

We have used a Mitel VoIP system for around three years now and have been exceptionally happy with it - apart from saving us tens of thousands of dollars in call charges each year it integrates with our data base via an Asterisk interface to provide a lot of our automated customer contacts (order confirmation and progress, fault fixing confirmation and progress etc). It also provides us with an Australia wide and international single point 'office extension PBX' which has simplified the integration of our Sri Lankan office at virtualy no cost.

But now we have to move it 150 meters 'up the road'.

So, we have been working on dispensing with our Mitel (or indeed any other proprietory telco manufactured 'box') and moving all of our PABX functions to a full Asterisk based solution which, despite the Mitel's many excellent features simply doesn't have the ease of integration with our data base that we believe we will need in the future and also costs money to maintain and more money to buy the proprietory handsets.

My preferred solution is to finish the testing of the Asterisk development over the next few weeks and install the in house developed Asterisx box at the new premises with only a 1300 interface that we terminate on our Quintum switches and link to the Asterisk PBX via ethernet/VoIP. This would allow us to have two telephone solutions in place during the move and we only need de-commission the Mitel box once the move is complete. (Of course, if it's all a complete or partial disaster we will then have to admit defeat and quickly re-locate the Mitel to the new premises).

This has the appeal of redundancy and also the fact that we could eliminate 50 ISDN lines we currently pay for as the 1300 numbers already carry much of our customer traffic and it would be, relatively, simple to discontinue the 02 number ranges - and also save a lot of money. Slam dunk decision. Well it would be except for our conservatism and 'mistrust' of the reliability of a server based telephone system versus 'purpose built hardware'. However that is a really infantile 'fear of the unknown' because our total business is run using a server driven data base and it would be pointless taking a customer call if the data base was 'down' because we couldn't do anything about the customer's call without reference to the data base.

But, there you have it - a decision maker of a 'bleeding edge' technology company having reservations about the development skills of the people who have built every process used by the company over five years and the reliability of the hardware that has worked faultlessly for the same period. Pathetic - but an indication of why so many businesses still use PSTN/ISDN telephone systems when VoIP has been a proven business 'performer' for over three years by my observation and quite probably longer than that. Also why Skype, like Microsoft and Google, may find the task of 'selling' server based telephony more difficult than it should be.

On the other hand it probaly explains Nortel's collapse into bankruptcy and the sad state of all of the other 'conventional' PBX manufacturer who have tried to ignore VoIP and the enormous cost savings over 'conventional' telephony charges..

I think we will, after a lot more agonising and "we'll all be rooned" conversations and cautions, go with the Asterisk solution; if not fully during the move scenario then not long afterwards. The cost advantage is overwhelmingly compelling and the operational advantages (although the programmers have done an excellent job to date) are equally attractive. It does demonstrate that even people familiar with the technology have irrational fears about moving away from tradition or, perhaps more likely, I am just getting too old and its my ever growing conservative attitudes that are holding Exetel back.

There is no doubt that VoIP is more than reliable enough for us to have used it for over three years in our core business proceses and saved ourselves (and therefore our customers) a lot of money over that period. There is equally no doubt that Asterisk has continued to develop a UNIX based PBX capability to the point where it is as reliable and far lower cost than ANY other telephone service solution - even not taking into account its interoperability advantages.

I guess, yet another, brave decision is called for.

John Linton

I filled in a questionnaire yesterday for a market research company engaged by Telstra Wholesale to determine various levels of happiness that wholesale customers feel about Telstra Wholesale compared with (what appears to be a randomly selected 'other wholesale supplier') apparently selected from the answer to the question "what other wholesale supplier do you currently use". I'm pretty sure I've responded to similar questionnaires in the past because I remember thinking why did this on line program select Verizon rather than Optus from whom we buy a much larger range of services on both the previous and current occasions?

It probably is irrelevent but it produced a startling contrast when the questions followed a pattern of asking for levels of 'happiness' first about Telstra Wholesale immediately followed by the same question about (in this instance) Verizon. I would have thought that a 'late' question which asked what percentage of the respondents wholesale spend was spent with Telstra should have been slightly expanded to also include the percentages spent with other wholesalers which could have then been used to better select a company for comparison - but then I know next to nothing about such surveys and their methodologies.

So, I proceeded to mark Telstra Wholesale right at the bottom, or close to the bottom, of the scale in every category except actual performance of the service supplied by TW (in our case we only buy ADSL1 wholesale) while marking Verizon near the top of the scale, in several cases right at the top of the scale, for many of the same questions. While you might suggest this simply reflects my anti-Telstra, unreasonable biases, I wouldn't think that many dispassionate people would answer questions along the lines of "how satisfied are you with Telstra's prices" or how satisfied are you with Telstra's billing issue resolution" in a way markedly different to the way I responded to them.

I wonder whether any respondent answered that they rated Telstra's wholesale pricing as good or excellent? Perhaps some did.

It made me wonder what Telstra Wholesale would expect to see when the market research company provides the consolidation of the various answers to the questions? Would they seriously expect to actually learn anything they didn't already know? Does any company enjoy doing business with Telstra Wholesale? Does any wholesale customer actually think Telstra offers good pricing, has helpful and knowledgeable account management and senior management or handles billing disputes with anything other than arrogant disdain and a total brick wall?

Maybe they only do that for the 7 companies I have been involved with over the years in buying services (dating back to the days when Telstra was Telecom Australia)......and before you quickly point out that the common denominator was my personal attitudes (and you did think that didn't you?) I was a 'passive' observer/hearer of incidents in three of the seven companies.

On a positive note it allowed me to 'formally' review how happy we have been with Verizon over the years we have dealt with them not just in terms of 'product performance' but with virtually every other aspect of the relationship and in particular the competence and responsiveness of their account and more senior management whom we have always rated very highly - as either the best or 'equal best' that we have dealt with over the time we have been in business.

All business decisions, of necessity, have to be made along purely practical and pragmatic lines with a heavy emphasis on the financial and contractual aspects of the decision making process. However that process, especially in 'close decisions' can often be influenced by 'relationships' and, sometimes consciously but more often unconsciously, how 'helpful' you are in your pre-decision discussions with account managers you feel more friendly, perhaps the more accurate word to be used should be "sympathetic", towards. Verizon has always been very good in this regard having had three different account managers over almost five years and two different 'division managers'; Telstra over the years has been, without exception, absolutely and uniformly awful. Other suppliers have been up and down depending on their always changing personnel. 

As a long time 'salesman' I have no doubt that a good company sales representative makes quite a considerable difference to many customer's buying decisions.

I sometimes wonder why more companies don't understand that?

PS: Maybe I wasted my time as I received this a few minutes ago:

" Yesterday we sent you an invitation to participate in the 2009 Telstra Wholesale Customer Experience Survey.  Due to server problems with our online survey host, [company name deleted], you may have experienced some problems accessing the survey.   We are currently moving the survey to an alternative service provider and will email you once the issues are rectified. 

As the survey is conducted confidentiality it is not hosted by Telstra Wholesale and is the responsibility of [company name deleted].  We appreciate your patience and we look forward to your feedback once the situation is resolved."

Needless to say - I won't waste another 15 minutes of my life filling it out again.

John Linton

If the rumours that Leighton's will be selected to build whatever the 'NBN' turns out to be actually becomes fact you can only wonder what will happen to the current immutable status of Australia's communications industry. I know virtually nothing about Leighton's current and future abilities to provide communications services other than Exetel use them for Perth and Adelaide back hauls because they are very easy to deal with and provide a flawless service at the lowest price of all such providers - so a big tick in a minor way as far as that goes. As Leighton's have a long and successful history in terms of major construction builds around the country including running their own quite comprehensive communications network they don't sound like a company that wouldn't be able to build a very large communications network with the assistance of more than a few Federal Government billions.

The immediate effect has been on the Telstra share price which fell to an all time 12 year low of $A2.97 when the rumour became very strong late last week cementing El Sol's total failure and McGaughie's total stupidity in foisting such an inept CEO of one of Australia's most important companies and the 80% or so of Australain residential and business users that use Telstra's services. By all means blame the 'GFC' all you like but El Sol's principal task was to improve Telstra's share holder value not to destroy it. It seems likely that the today's Telstra share price will soon seem to be a high point if, as rumoured, Krudd announces early next month that the 'NBN' will be attempted and that Leighton's is the selected builder. I guess you couldn't ask for a more unbiased, and possibly more competent, builder of a new communications infrastructure than a construction company that has no retail telecommunications customers and one which has built communications infrastructures for several carriers in this country. A for innovation and AA+ for "bravery" as Sir Humphrey might have put it had he still been with us.

If Leightons does in fact get awarded the contract then you can expect Telstra's share price to again fall very sharply on the day such an announcement is made and then to fall further. If Telstra should  then obstruct the build of the 'NBN' (irrespective whether it eventually gets anywhere near its eventual 'targets' or not) it would seem inevitable that Telstra's share price will fall even further and keep falling as the institutional investors bail out of the stock as it will be seen as going nowhere but to a break up of the company. So that's what McGaughie/El Sol have delivered to Telstra's shareholders via their personal unbridled greed, crass stupidity and massive judgment errors. Well done - but what else would anyone seriously expect given the published track record of both persons? So Telstra will go from a very profitable company with a "sky's the limit" future on the day of El Sol's appointment to a company facing absolutely no future with a tanking share price before he bails out and carries his truckfull of money back to his next "major appointment". You almost have to admire the sheer depth and breadth of the mess he has caused in such a short time.

The other crazy party to this fiasco, Krudd and his 'sound bite election winner' posing as a policy, will now have to face the music of what will actually be built with the tax payer's money - though given the fact that Krudd has already p***ed away over thirty billion in various pointless hand outs what does another five or ten billion matter? With that sort of money Leightons will be able to significantly extend their current national back haul network and presumably will, if they get the relevant access, be able to run the fibre to a fair percentage of end users in regional Australia leaving rural Australia to be connected back to it's interconnect points in 'difficult areas' via Optus HSPA or whatever. Don't hold your breath waiting for very much to be delivered any time soon.

What will Telstra be left with? In one way it will be left with what it always should have wanted  - domination to the point of monopoly to the profitable 80% of the market it always targeted PLUS it will be free of the mandated guarantees (USG) of servicing difficult and costly areas of Australia. It will retain so much dominance that it can still charge whatever prices it wishes to for quite a while. So, looked at dispassionately, it doesn't really lose anything in terms of losing its 'monopoly position' - but it will lose any residual regard even its most ardent supporters may have for it as its greed and bullying become ever more obvious in its obstruction to both the 'NBN' and everything peripherally associated with it......which can only lead to the final stupidity of the El Sol appointment.

 I, of course, have no real knowledge of what has already transpired in the shaping of the current iteration of the 'NBN' at this time other than to be pretty certain it won't be the final version. Any final, final version has to include the break up of a bully boy Telstra and the incorporation of the 'NBN' into the network part of Telstra under some new authority which will be carried out on the basis of the 'GFC' causing the government to 'act decisively' to 'protect Australia's national interests'. If that does eventually happen, probably not in my lifetime, it will be interesting to see what a properly deregulated communications industry delivers to Australia.

Anyone think I'm wrong?

John Linton

We continue to look at our ADSL1 and ADSL2 pricing parameters for the second quarter of this calendar year as more indications emerge of changes in attitudes among some of Exetel's suppliers and as the overall rate of growth in the communications industry, at least according to the ABS and some sensible industry analysts, continues to shrink at a slightly faster rate - currently estimated at close to 4% for the year ending on 30th June 2009 and likely to finish the year below that.

Exetel's revenue growth in the period 1/7/08 to 28/2/09 has been at a rate of a fraction under 24% (compared to the same 8 months from 1/7/07 to 28/2/08. In some ways it's nice to think your business is growing at a rate of 600% of the theoretical 'industry average' but our tiny size is, of course, a major factor in achieving this, largely meaningless, statistic. Another way of looking at it is that 24% is considerably slower than our 'historic growth' of over 30%. However, what we have noticed is that our revenue growth over the first 10 weeks of 2009 is back to the above 30% compared to the first ten weeks of 2008. Interesting in some ways but not truly meaningful in any way I can determine.

Our focus for 2009 remains in growing our business user base at a much faster rate and therefore our business sector revenue. The reason for that is that when we did the planning for 2009 we decided that the lack of growth in the ADSL market and Telstra's likely non-selection to build the 'NBN' would produce some 'seismic shifts' in the big carrier's "marketing promotions" to try and shore up their ADSL bases and make some sort of revenue contribution as their wire line revenues continue to decrease at a faster rate.

So we have two more weeks to decide what we do, if anything, with our residential pricing for ADSL and HSPA. We've been pretty happy with the overall results we have achieved over the past five years in staying alive as a company while pursuing a policy of offering the lowest priced broadband plans in Australia with an increasingly more comprehensive range of 'add ons/value adds' than any other broad band provider. Personally I think the 12 hour 'bonus' download period is of immense value to a broadband user and we have, over time, increased the 'free download allowance' from 20 gb to, currently, 54 gb. The other 'add ons' of free SMS's, free faxes, large amounts of free web space and large number of free email accounts and a free fixed IP are pretty comprehensive and are widely used by Exetel customers.

How the current offerings can be improved remains to be seen - there are a lot of pressures from a range of areas that need to be dealt with to just maintain the current levels of offering. What is somewhat intriguing are the indications that the major cost component of ADSL broadband (the monthly charge for the basic 'port' charge) which have been sky high since ADSL was introduced by Telstra some 8 years ago may reduce by some amount in the not too distant future. This is absolutely by no means certain but it is the only way that residential prices from Exetel can be meaningfully reduced. As I briefly discussed yesterday the likely fall of IP costs by something like 40% wont deliver much of a decrease because, from what we can see, the average usage of IP by end users is increasing by almost that amount - based on the trends of the past 12 or so months.

However what Exetel does isn't relevant (except to Exetel customers of course).

What almost certainly will happen is that Telstra will 'be forced' to reduce its incredibly high residential "list" prices for ADSL2 and will have to deal with how that affects their incredibly high ADSL1 "list" prices. They have, of course, already done this for over two years via their string of "special offers" which have effectively meant that they have been offering broadband services at below wholesale costs to an increasing percentage of their user base. While this is 'legally' defensible because of various factors the end result is that they have almost run out of the ability to sell to even the dumbest users at their "list" prices and have achieved most of their 'competitive' objectives (restraining take up of competitor ADSL2 offerings) and milking dry the ADSL1 marketplace.

What Telstra actually does is completely unknown to me but if Telstra lowers its 'umbrella' pricing then every other high priced ISP will be force to lower their pricing irrespective of whether their own operating costs are reduced - which unless Telstra changes their port charges - they wont. So the 'new' Telstra 'marketing' policies are likely to be based on lowering their ADSL2 charges to end users (using whatever subterfuge they select) which will force all of their competitors to reduce their end user prices (and their profits - for those of their competitors that make any). The net result, for broadband end users, will be lower ADSL and HSPA prices over the balance of 2009.

Of course, this is pure speculation on my part but it is the scenario we are basing our own, irrelevant in any broader sense, future pricing considerations on. The problem is to find a way to remain the lowest cost provider in the Australian marketplace in the face of significant new 'special offers' from an increasingly desperate Telstra.

Tough problem. We will continue to look for ways to use HSPA to enhance the ADSL
'attractiveness' but there are many barriers to doing that. Hopefully we
will find some way of overcoming the underlying problem of the price of
data but if we can't do that we will have to find a completely new set
of parameters. The same applies in attempting to use mobile plans in
that mix.

Only one solution has come to mind so far.

John Linton

We are going to trial a new IP provider's service in the near future to see whether the large carriers 'insider's club' pricing is actually going to be 'broken' by the equivalent of an 'Exetel' in this area of the ISP business. In a previous rambling I briefly referred to the pricing concepts that Telstra thinks are appropriate for a 2.4 gbps IP feed and I also alluded to the larger ISPs (with the exception of TPG) pricing ADSL services just below Telstra's sky high pricing 'umbrella' as the norm in Australia. Effectively, all broad band pricing in Australia is locked in to the highest levels because of the sheer wastefullness of the two largest carriers and their inability to operate in a sensible financial manner.

I don't know whether the 'Exetel like' SX reseller will in fact be able to deliver what they promise or if their 'final price' will turn out to be as good as we need it to be. However their 'indicative' pricing demonstrates what SX bandwidth should be priced at by a company not burdened with too many operational overheads - and clearly they dont buy in the infinitely larger volumes of the three SX owners and other major carriers.

Exetel needs to buy IP bandwidth at higher volumes than at any time in the past five years. This is, mainly, because our residential broad band base (ADSL and wireless) has continued to grow each month for the past five years and our business user base is now expanding at a faster rate and - if everything works out - will grow at a far faster rate than at any time in the past.

So we currently deliver around 3.5 gbps at peak usage time to our broadband customers (2.6 gbps of 'pure' IP and another 900 mbps of cached/Pipe/WAIX sourced IP) and we expect that to grow that by around 1 gbps of 'pure' IP over the coming year to provide for the needs of residential users. If our planned business user growth is achieved then we could quite easily need another 2 - 3 gbps of 'pure' IP over the coming 12 months on top of the residential requirements.

So we have asked various carriers (and one 'Exetel like company') for quotes for 2.4 gbps to replace the current Sydney located 1.9 gbps link) and a further 1 gbps for the WA, SA, VIC, ACT and QLD PoPs with a further 1.8 gbps to be taken up over the coming 12 months should our business user plans work out positively.

So while we make no promises of what we will actually take up in excess of the 3.2 gbps of 'known requirements' we have asked for pricing, in a separate bid for 5 gbps and 10 gbps. No-one seems able, or perhaps willing, to provide pricing at that level so it may turn out that we will have to buy direct from Southern Cross in the not too distant future - but, after buying the new floor space we would need to take a very, very deep breath before making that financial commitment right now. 

Coming back to the pricing of SX bandwidth - all of the carriers we have used in the past have sold us SX IP bandwidth and all of them have adopted the same pricing policy of tell us what you want to pay and we'll see if we can provide it - something we refuse to do because "back street bazaar" pricing attitudes really offend me. I really hate the 'used car salesman' approach of "let's take the sucker for everything we can" adopted by more than a few suppliers in the communications industry. It's insulting and makes my skin crawl.

These types of "sales people" seem to think we are really stupid and haven't got the sense to actually research our possible purchases which should indicate to someone with an IQ larger than their shoe size that not only would we know the cost of buying direct from SX we would also know the costs of buying direct from other cable owners. We have actually made these statements to some suppliers and have pointed out that we expect pricing that gives them a realistic profit on a service they do nothing very much to supply and to which they add no value and which is available from several other sources.

We need to make a decision over the next ten days as, if we are forced to buy direct from SX ,it will take several months to implement that link. Whatever happens we would expect to pay 40% less than we pay today for 'pure' IP bandwidth. This emphasises the point that too much of the costs of providing broadband services in Australia is 'wasted' in paying a few carriers exhorbitant sums of money for simple services that are overcharged 'because they can be".

I don't know what will happen to SX IP pricing when/if Pipe finally gets its cable operating but I can only hope that Pipe use cost plus a sensible margin pricing rather than expecting to get away with Telstra/SX Carrier pricing minus a margin.

In the mean time we would expect to reduce the costs of our broad band plans by mid 2009 but not by as much as would have once been possible. This is because IP is no longer a major cost in providing broadband services for Exetel (almost a third of IP used by Exetel's customers is cache/peering generated and that percentage continues to increase and the overwheming cost is the carrier's port charge). However we will see what becomes possible when we know what we are going to do.

John Linton

.......that doesn't "get" the Commerce For The Under Fives (101) principle of retail + wholesale = more revenue and more profit?

What is it about the El Sol/McGaughie reign that has made Telstra pursue a policy of making every attempt possible to destroy it's wholesale customers rather than gratefully accept that they make even more money out of their monopoly by simply subtracting from their retail prices the costs a wholesaler eliminates from their cost of sale?

What am I missing in my, acknowledged less than comprehensive understanding of commerce in Australia in the 21st century, that drives Telstra to make every effort to "increase its market share" of every aspect of communications via its unbelievably expensive retail processes rather than simply subtract its retail costs and allow its wholesale customers to do all that work and incur all that expense on its behalf?

Now I know the simple answer is that "the government of the day" didn't enforce that scenario by selling off Telecom Australia in two 'tranches' (the base network separated from the sales and support functions) but that doesn't actually change anything. There are costs of selling to, and then supporting in their use, end customers that any bunny with basic Excel skills can easily determine and there is no doubt that Telstra knows those costs as well as any other commercial enterprise. So why add floors full of lawyers, the most expensive advertising budget in Australian communications and foreign cities full of call centres that deliver nothing but needless expense and do ABSOLUTELY NOTHING TO ADD A DOLLAR TO THE BOTTOM LINE?

My simplistic understanding of wholesale pricing is you take the 'manufactured cost' of the base product/service, add the desired margin and then 'sell' it to either your retail or wholesale 'partners' at the same price and let them add their operating costs and profit margins and any 'value adds' they might wish to include to provide the service at an end user cost. This seems to work for every other commercial enterprise in the world, including all the monopolies, but it seems beyond Telstra's current management's abilities to grasp.

What possible value is there to their shareholders, or Telstra itself, to carry the cost of the lawyers and law firms they have put in place if they ever had any intention of doing business lawfully? What possible value is there to their shareholders in spending hundreds of millions on advertising services that people will buy any way? What possible value to their shareholders is there in employing tens of thousands of call centre and accounting personnel when wholesale customers can do that at far lower costs?

As far as I can see there is absolutely no value to anyone (shareholders, end users, Telstra itself) in continuing to pursue their current practices....but I must be wrong because Telstra is not only continuing to pursue their current practices but appears to be entrenching them further in every aspect of their operations). So maybe its me that just doesn't "get it"?

Why does Telstra Wholesale charge Exetel 300% more each month for an ADSL1 8 mbps circuit than we buy an ADSL2 circuit for from any one of three other providers (who have to pay Telstra for exchange rental and line termination charges included in their price to us)? The only answer is - because if we want an ADSL1 circuit then they can, and do, charge whatever they like.

They then offer the same 8 mbps circuit to a retail customer at less than they charge Exetel for it based on some 'special promotion'. This means they make LESS money from the identical service AND they incur the selling, administration and support costs on top of lower price they get for the service? Now, I defy ANYONE to make sense of that simple set of numbers.

Even on the simple transaction of buying IP a different version of the same illogic applies. IP transit can be done out of Australia ia very few cables; the most heavily used being the Southern Cross cable owned by a consortium of three carriers of which Telstra isn't one - but Telstra is the largest buyer of SX bandwidth at the moment. So Telstra would buy this 'third party' product at a better price than anyone else and incurs no 'value added costs' if the want to re-sell a tiny part of what they buy to another party - such as Exetel.

So you would assume that Telstra would dominate today's IP third party market just as they did from 1994 to around 2006. However that is no longer the case because the larger IP buyers have stopped buying from Telstra (some did this a decade or so ago) because it is so much cheaper to buy from, literally, ANY other carrier or even carrier reseller than it is from Telstra. So what is it that, even with a third party buy in/add no value/sell at a large profit product that Telstra (which has the lowest buy price either on either SX or on its own cable) feels compelled to sell this third party product (to which they add no value) at a minimum of 40% more than most other 'respectable' IP suppliers?

There can be no possibility of saying it's a superior product - it simply is the same third party product offered by every other carrier/carrier reseller. It can only be the floors full of lawyers and the corporate sponsorships and the multitudes of overpaid managers etc, etc that add so much overhead to their asking price of even the simplest product that incurs none of these overheads.

It's obvious to me, using the IP pricing disparity as an example that Australia will never have sensibly priced communications services for as long as Telstra has any monopoly on their provision - but then why have I wasted 20 minutes of my life stating the bleeding obvious?

....and why have you bothered to read it?

John Linton

I read this article yesterday:

http://www.itnews.com.au/News/98962,cashedup-primus-on-isp-purchase-path.aspx

but didn't think any more about it at the time other than I noted the excellent profits the Australian company stated it made - $A130 million seems a handsome return in an industry more noted for making losses than profits. It seems to make iPrimus the third largest communications company in Australia in terms of profits made - something I hadn't realised before. Given the difficulties of starting up a foreign owned operation in Australia it is even more remarkable though, for those who remember iPrimus origins in this country they did get away to a 'free gift' start at the expense of one of NSW's stupider utility companies if I remember correctly.

I re-read the article earlier this morning when someone emailed me to ask me who I thought the 'target ISPs' were mentioned in the article which I had no idea about:

"Bhatia said that it would use its freed up cash position to recommence negotiations with several ISPs, particularly those in some financial trouble."

and:

"We're talking to a couple of ISPs with 20 to 25,000 plus customers...."

I didn't know there were any ISPs in Australia with 20 - 25,000 customers. I wouldn't have thought that an ISP as small as 25,000 customers would have the 'buying power' required to operate effectively in today's ISP markets but that would entirely depend on their customer demographics and the scope of any 'sweet heart' deals they may have managed to negotiate with their suppliers. My memory of having 25,000 customers was that it was very, very tough to be able to compete with the various 'special offers' that abound in this industry while being able to cope with need to stay financially solvent - it seemed to me from what I remember of that time that it was one of the more difficult sizes to run an ISP business and we only got through it because we had diversified our income streams into additional services.

Obviously there must be ISPs of that size; but what I found even stranger was that the sub text of the statements clearly implied that at least one of the "two" were based in Queensland. My knowledge, which I've already said is clearly deficient, would make the only possible Queensland 'target' iSeek which is a sort of semi Optus wholesaler to small ISPs rather than being an ISP itself. I could be totally wrong - it wouldn't be the first time. Optus have had some success with such multi-wholesale models over the years, at least for a time, but I have trouble conceptualizing how iPrimus would buy out a  wholesaler 'broker' of Optus ADSL services and make any commercial sense out of such a transaction in either the short or long term.

So it remained a puzzle to me and I passed on my comment that I didn't have a clue who iPrimus could be considering buying out. However it did occur to me that with the demise of PeopleTelecom (bought out in the usual 'smoke and mirrors' methodology by the dumping ground of failed businesses known as M2) that there are few ISPs of any 'medium' size left in Australia to be targets for acquisition - irrespective of whether they are in "financial trouble" or not. Based on the published claims (and it's noticeable that such claims are few and far between over the past year) the ten largest ISPs in my guessed order of size are:

Telstra, Optus, TPG, iinet, AAPT, iPrimus, Internode, Dodo, Adam Internet, M2

- but I'm really guessing after the first four names as there is almost no published information that I have seen. I have even less idea of what the situation is with any other of the smaller communications companies though occasionally you see nonsensical (and often self contradictory) statements made by one or other of them. As I have seen no credible information about the non-public companies in that ten list I would have less than no idea about their financial status apart from looking at M2's balance sheet and P and L for the 2008 year which seems to indicate a significant hand to mouth operating environment.

2008's departures of Westnet, Soul and PeopleTelecom and the constant fall in the number of ISPs (often tiny and actually VISPs rather than ISPs) reported by the ABS do indicate that providing internet services isn't a very profitable business to be in for all but a handful of operators. A recessionary financial environment (if not a recession) currently being experienced in Australia is not going to help companies who are already 'struggling'. All of which indicates that iPrimus, and quite possibly both Optus and iinet may well buy up some of the remaining operators during 2009 and 'natural attrition' will see the quite probably unpublished end of several more along with the continued 'erosion' of the very low end operators.

All of which will almost certainly result in higher prices for internet services for both residential and business customers over the coming 6 - 9 months as, of the 'top ten', only TPG makes any attempt to offer affordable internet services. All the others are more than content to 'shelter under the umbrella' of Telstra's sky high pricing which continues to damage the operations of any business in Australia and punitively 'taxes' every residential user. However that's the way it is in this country and it won't change any time soon.

John Linton

....I closed my eyes, I held my nose, I took a drink...(apologies to The Searchers from the magical summer of 1964) and we bought a floor of a building in North Sydney to cater for Exetel's Australian needs for the next year or so. 33% more space than we currently have at an estimated monthly cost saving of 20% on our current rental costs plus the opportunity of, over time, reducing the cost of one of our Sydney co-locations saving us around another, net, $A6,000 a month.

So a sensible cost reduction decision, even allowing for the significant costs of moving from premises we will have been based in for the whole of Exetel's commercial life to date - and a major (for a tiny company like Exetel) investment in the future and our confidence, that despite these troubled financial times, in Exetel having a long term future. No borrowings for Exetel (the shareholders invested their personal money) so no debt - just lower rental and more space - and a sensibly sized 'data centre' in the not so distant future. 

So, definitely a counter-intuitive decision moving against the guide lines for dealing with recession (which would urge maintaining as much cash reserve as possible and to reduce all investment spending to zero) but one that takes the view that the current significant falls in the prices of commercial real estate values represent an opportunity to buy at significantly lower prices than were previously being asked. While it's quite likely that commercial real estate prices will fall further we have a need to make a decision on either entering another long term lease in the premises we currently occupy or move to our own premises.

If we stayed in rental premises we couldn't justify making the not inconsiderable investments required to build a data centre as whatever we spent would be money that would have to be written off as we would almost certainly have to move within the next 3 years. So it was a combination of circumstances that lead to the decision yesterday and it was not easy to make. I'm not 100% sure it is the right decision but I added my 'yes vote' on the basis it was probably better than continuing to rent and not be able to reduce our operating costs. Risking so much money in uncertain times is not something I have ever done before so this was a very difficult decision for me to participate in.

I was influenced by the continuing strong growth in most of Exetel's service and product offerings in January and February and the very strong results in the first half of March. While I remain very, very cautious of financial conditions over the next nine months:

http://online.wsj.com/public/resources/documents/LAYOFFS0903.html

I am slowly beginning to think that Exetel's "lowest pricing in Australia" services will provide more protection from any serious slowing in overall demand than I first thought - it is far too early to be sure but all indications are that may very well be the case. (I understand that I may well regret making that statement in the not too distant future). We have yet to put in place the 'promotions' of the HSPA service due to the usual delays in sourcing all of the required components plus a carrier provisioning issue that took months to remedy. We have also yet to fully implement the other four 'programs' we believe will make significant contributions to Exetel's growth in calendar 2009 so our growth so far this year has been from offerings that are already in place and it is heartening to see those services continue to grow as strongly as they have. However that growth, welcome as it is, will not be enough for us to meet our 2009 targets and the new programs will need to be implemented, and will need to be successful, without further 'slippage' for that to have any chance of being achieved.

So far so good. It is always an enormous 'plus' to achieve your commercial targets in the March quarter (in many ways the most difficult quarter of the year - though, of course, they all have their particular challenges). Perhaps my current 'moment of bravery/foolishness' will come back to haunt me as the next few months unfold but no business can be run without having to make continual decisions and some decisions, as Sir Humphrey constantly reminded Jim, are very brave. One thing is for sure it will more intensely focus the mind on making Exetel more financially robust in terms of the other risks associated with the current business.

We now have to plan the move to the new location which, from previous experience, will be a logistical and practical nightmare and I'm very definitely not looking forward to the personal and business interruptions (I was going to use the word 'chaos') that are always an inevitability in these events. However it will be over sooner rather than later and maybe I'll just go fishing for the duration on a communicationless island in the middle of the Indian Ocean.

John Linton

...but one major benefit is seldom used by more than a tiny percentage of commercial enterprises.

There are very few really important people associated with the communications industry but this brief article reminds us that the inventor of hte internet (no, not Al Gore) is one of them:

http://www.pcworld.idg.com.au/article/280233/hurrah_berners-lee_web_celebrates_20th_anniversary?fp=16&fpid=1

As someone involved in the communications industry for a very long time and who is now part of a communications company whose every service is internet based I have a somewhat distorted view of just how important the internet is in terms of operating a business in 2009 - less than 20 years since the 'first internet message' was sent. Exetel, of course, couldn't even exist without the internet and a web site that effectively runs every aspect of our business from initial contact through on line provisioning, payment, support, service change through to finalising the contract.

Apart from those multitudes of commercial 'miracles' wrought by the internet (some of the usual suspects are referred to in the referenced brief summary) one the most commonly overlooked benefits to our industry is the ability of the internet to provide instant and constant customer feed back on every aspect of the 'products' a company provides and every aspect of the services associated with that product and how they are provided.

Since we first put them up on our web site in January 2004 our customer forums have provided Exetel with almost 70% of the suggestions for changes we have made to the ways we operate Exetel and for additions to current services and suggestions for new services. Even when we come up with a new idea or a new service the constant feedback we get via the Exetel User forum always improves our base idea and continues to make it more useful. I have used this blog in the same way and Exetel is a better business today because of the suggestions made by readers over the past 21 months

Our newest customer feedback initiative (the 'suggestion box in the Exetel User Facilities) has been more successful than anything else we have done so far to generate improvements to the ways we operate with more than 150 suggestions being received in its first two weeks of operation over 30 of which have already been implemented and another 20 or so have been added to the 'to do' lists of different areas of Exetel for implementation in the near future.

50 ideas in two weeks that will improve many different aspects of how Exetel operates is an incredibly valuable source of 'free consulting advice' and while a cynic might say that it is just an indication of how badly Exetel is operated (which may be true) the fact remains that Exetel is being improved every day by suggestions that are being made by its customers and acted on by Exetel's management via its various software developers and other process builders in various areas of Exetel's operations. 

Perhaps the 'novelty' will wear off and the number of suggestions will fall after this first flush of 'enthusiasm'. That may very well be the case but it hasn't been our experience with either this blog or the far longer running User Forum "suggestion threads" for support and sales which have, to date, been the main drivers for change and improvement within the company. Exetel's management very clearly understands that improvement suggestions that aren't acknowledged and then acted upon as quickly as possible are counter productive and we have been punctilious over the whole of our five years of having suggestion methods in place to acknowledge that we have received and will act on them (if we can) and then put them in place.

Our company is 'fortunate' in that our customers (partially because of the way we operate the business) visit our web site far more frequently than customers of, say, Ford or GM and of course we have a 'service' business that is infinitely easier to make changes to than an automobile that has a multi year development cycle. Irrespective of that 'immediacy' there remains the capability for any company to use its web site as an immediate feed back source for customers and prospective customers on every aspect of the way they operate their businesses yet very few that I visit seem to avail themselves of this incredibly valuable free consulting service. I have sometimes wondered why this is?

My suggestion, based on five years of first hand experiences, to any business that has a web site is to put in a 'customer forum' and a 'suggestion box' mechanism and have the forum moderated constantly and have the suggestions go to someone with the authority to action them. Exetel has built a $A50 million a year business almost solely based on its web site and the web site itself and all of the on line processes associated with it has constantly been improved via taking notice of customer suggestions.

I can't how any company's business wouldn't be constantly and immediately improved by implementing these extremely low cost suggestions - maybe the businesses that don't use constant customer feedback do everything perfectly?