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.