Monday, March 16. 2009Life Is To Short To Waste It On InessentialsJohn Linton Over night I received an email that greatly saddened me. It was from a long term ex-colleague telling me that someone we had worked with, and had some of the best times of our early working and personal lives with, had taken his own life following the collapse of the business he and his two sons had built and run for the best part of the past 20 or so years. It had a marked affect on me and it took a while for me to be able to pick up the phone. I called him after I had absorbed the news and we spoke for some 30 minutes though I can't remember the last time we have spoken and it produced a confused mix of a flood of memories of much better and certainly far more irresponsible times as well as a deepening sense of something really bad. He had kept in touch with Ian over the years partly because they had lived in close proximity to each other for much of that time and partly because they occasionally did business with each other. He told me that Ian had given no indication of any serious business or personal problems over the last few months and their families had spent New Years Eve together where Ian seemed to be his usual high spirits. He knew no details of the company's collapse other than that a major bank had appointed a receiver in late February and that his elder son had been contacted by police after they had found his father dead of an overdose in an hotel room in another country on Saturday morning. After I put the phone down I thought how incredibly wasteful it is that so many really talented people (and I don't count myself as talented in any way) give so much of their lives to their 'careers' when they have so many different talents and capacities for making themselves and those around them happy. Ian was an OK salesman of 'big iron' and only ever an average manager within a multi-national corporation environment but as a small business manager he was exceptional and he became better and better as he continued to grow his business over the years. His business talents were quite limited but allied to his many positive aspects as a human being he combined them into a potent positive mix of sustained success. His sheer 'likeableness made it almost impossible to refuse him any request which perhaps is the greatest 'business' talent of all. He had that rare talent of being able to take over another company and almost instantly make the people there respect and like him and, at least it seemed from the results, work harder and more effectively under his stewardship than they had done for the previous owners - an almost unique situation from my observations over the years. His 'modus operandi' was to leave the management (and some times the previous owners) in place and then only very gently and over a considerable time, introduce his methods and processes into the taken over business. After a year or so the taken over business was doing far better than it ever had previously but still, largely, retained the previous employees. I don't know how large he had built his company to but, starting from nothing but a good idea and his passion it eventually sprawled over every major city in Australia and New Zealand and was operating in at least three countries in S E Asia that I know of with more than 1,000 employees. I have no idea of what could have gone wrong and have no desire to find out - my only interest was only ever with the person I had known for all but a small part of my working life and someone with whom I had shared some of the better times of my working life. Over the past 30 years I would only have seen Ian on far less a dozen occasions - most of them brief, chance meetings at some airport lounge or hotel around Australia and only on two or three occasions for a previously arranged lunch or dinner together with other mutual friends from our 'era'. Whenever we did run into each other he always had the ability to make me laugh simply by his uncontrollably infectious personal happiness and outrageous jokes as well as his capacity to make you think you were some very important part of his personal life - even for the few minutes of a chance encounter. He was a remarkable person. The world is certainly a poorer and less happy place today.
Sunday, March 15. 2009Telstra (et alia et ceteri) Delenda Est.........John Linton .......and Google may be the 'chosen instrument of the Lord' in accomplishing that. I think it's obvious to most people in the communications industry that VoIP has long passed the 'curiosity' stage for the 'technically adept' and has become a 'main stream' service that will now much more quickly wipe out the use of expensive and 'so 19th Century' telephone calls over 'wires'. Apart from Telstra and Optus it seems that most if not all Australian communications providers (except for the very small or the very technically inept companies) are offering their own VoIP services based on direct connections to one or more major carriers. Certainly a small company such as Exetel's 'take up' of "naked" ADSL2 is an indication of the general market place's acceptance of VoIP as a 'main stream' telephone service and many communication providers offer the transfer of a customers PSTN number to their VoIP service at less delay and pain than some year or so ago. Hopefully Exetel will be able to do that soon and when that is available we would expect to see an immediate increase in customers using our VoIP services. Similarly, as we near the completion of our VoIP over HSPA code development (which I have been successfully using in its basic form now for some 3 weeks) we would expect to see a major increase in our mobile customers using VoIP and making the huge savings available from that service. This will need the cost of HSPA hand sets to fall but that will happen over time as no-one will want a mobile phone that doesn't have a data capability. This article underlines why VoIP will very quickly replace wire line telephone numbers from now onwards: http://www.nytimes.com/2009/03/12/technology/personaltech/12pogue.html?_r=2 not just because of the cost savings but because of the quantum leap in functionality. Now, Google being the gigantic company that it is and with the vision and ability to not ony see the ten year future of communicaons but to have the will and the money to make no immediate pay back/very long term investments can afford to offer these services for 'free' and will therefore soon attract millions of users and then tens of millions of users and then.......well, they will likely wipe out 'conventional' telephone carriers before the end of the next decade. In our small way, and with a millionth of the boldness of vision (and a billionth of the money) Exetel saw the same future as Google (and, I assume, many others) and have been slowly developing our own 'unified communications' service and have put almost all of the 'building blocks' in place: Low cost IP, our own VoIP switches, Layer 2 HSPA/mobile connection services, FAX over VoIP, SMS over VoIP, low cost international calls over VoIP, a comprehensive, easy to use, back end user interface and several other processes currently being developed. Once we get the PSTN number porting in place we can offer exactly the same end user services that are described in the referenced article - with none of the 'gloss' but with virtually all of the functionality - we can always put the 'gloss' on later. I am not, for one moment, claiming that any of what we have done couldn't be duplicated in the proverbial 'blink of an eye' by any other company of our size and above - I have no doubt it could be and that it could probably be done better than we have done it........except for one thing.......the same thing that will prevent Telstra or Optus doing it in any meaningful time frame.......it isn't in their established revenue and infrastructure's investment's best interests to do it at all. We started this development program almost 4 years ago (shortly after a new Telstra CEO under lined the stupidity of basing a business on wholesale Telstra services by immediately removing the highly competent GM of Telstra Wholesale, down grading the position and describing Telstra Wholesale customers as "parasites". It was pretty obvious that products and services based on Telstra's infrastructure or exchange access had no long term future and we had better plan a future for Exetel that provided end user services by other means. So, as far as I can see, this latest Google initiative will not be of significant interest to any company that relies on its own wire line infrastructure, of any sort, for a significant portion of its revenues and profits - why spend a lot of money developing a service that obsoletes your current investments and produces less revenue and profit? Let alone having to compete with a company that has built a multi billion dollar company by providing 'free' services - it must be Telstra's worst nightmare. What it may well do, or what some four years ago we saw it doing, is to allow companies like Exetel to continue to build a service offering that relies on nothing other than our own programming and engineering skills and our abilities to continue to maintain and develop supplier relationships that we have largely put in place over the past few years with companies other than Telstra or any company that relies on Telstra and therefore on Telstra's bloated pricing policies and predatory marketing 'promotions'. My original thoughts when we began these developments was that they would work better in the EU than in Australia. However that may not still be true and in any case we have amost completed the 'product set' required to sensibly offer a 'better than Google' "unified messaging" system in Australia some time in the second half of 2009 - with a bit of luck and not too many things going wrong in these uncertain times. It will be an interesting few years in communications - not since Motorola's brilliantly and boldly conceived, but doomed, iridium project has such a sensible leap forward in personal communications capabilities been so completely articulated by a commercial company with the ability to actually deliver on it. Saturday, March 14. 2009Despite The Strictures Of The Old Saying......John Linton ....can a leopard really change its spots? I read this article earlier this morning: http://www.itnews.com.au/News/98651,telstra-wholesale-goes-hunting-for-a-boss.aspx and apart from sighing at Telstra's transparent contempt towards its wholesale customers (evidenced in this instance by removing yet another GM of Wholesale without bothering to replace them) I was reminded of seeing Ms Mckenzie lunching at the next table with one of the Tudhopes (I can never remember which is which) at one of the CBDs beautiful food restaurants on Wednesday of the week before last (4th March?) and that restaurant is of the better type where the tables are set at sensible distances from each other so conversations cannot be overheard unless expressed at levels above that of politeness and consideration for other diners. From the bits and pieces of conversation that it was impossible not to overhear it was an interesting lunch. I didn't recognise the third person and, as I am not an impolite person (having a grandmother who declaimed that eavesdropping was the height of rudeness before going on to the practical aspect and saying eavesdroppers never heard anything good about themselves), I thought no more of it other than it was the head of a Telstra division having lunch with one of her largest and oldest customers - perhaps in this instance it was a 'personal goodbye and re-assurance of the future when I'm gone' lunch and I had misinterpreted the 'snippets' I couldn't help but over hear - perhaps not. So with Trujillo almost gone and his Denna Shiff replacement (a step down from Deena Shiff who in turn was a step down from her predecessor) now also gone by the end of the month I wonder what direction will now be set for Telstra Wholesale by the interregnum/caretaker management and what person will be chosen to replace Ms McKenzie? Will it be another step down in pecking order power within Telstra's middle management candidates signaling a further lowering of interest in wholesale customers (though on reflection that's hard to see how that would be possible) or is there going to be some brave new initiative 'win back' program along the lines of the pricing offered to iinet to retain the Westnet business on the Telstra network and the latest round of "would you like to sell our ADSL2 approaches apparently being made to some smaller ISPs? In the Labor Party world of "you're excluded forever from participating in the "NBN": http://www.abc.net.au/news/stories/2009/03/13/2515448.htm?section=justin maybe Telstra has 'discovered' a compelling reason to attempt to ensure the "NBN" never gets built and certainly one way of doing that (on top of their new found love affair with reviving their cable business and their increasing investments in faster HSPA) is to sign 'exclusive' contracts with some of the bigger 'independent' communications providers (such as Macquarie Telecoms) on deals that would make it hard for them to buy services from Optus/the NBN winner both now and in the unlikely event that the NBN ever does get built somewhere and in some form and in some time frame. Personally I have absolutely no first or even second hand knowledge of Telstra's current approaches to the larger Australian 'independent' communications providers and, as a company that doesn't fit within that category, I'm not sure whether anyone else within Exetel has had any recent contacts other than on the topic of Telstra's attempt to destroy Exetel's credit rating - which while they grudgingly removed the false references have yet to apologise for their unconscionable actions and we will now have to address that issue via other means. From what I have heard or seen there seems to be some sort of change in some of Telstra's ultra unhelpful and more belligerent attitudes but without a complete medical equivalent of a de-coke and re bore of the brains of their wholesale employees it would seem impossible that four years of "all wholesale customers are parasites" can be 'reversed' simply by a new edict to the people who have for so long treated wholesale communication providers with such a breath taking level of contempt. However I understand that Exetel is both too small and too 'unusual' in its business methods to get enough first hand information to make an informed judgment on whether or not that is the case. Perhaps I'll take a different view when McGaughie is forced to "resign now his mission has been accomplished" by the wimpy and clueless Telstra board and the Telstra board itself is fired by the share holders who continue to see their share value head South at an increasing rate courtesy of four years of stupidity lead by El Sol and his ridiculously unskilled and unknowledgable chairman whose every utterance seems to confirm the view that he can't even spell "ADSL" let alone understand what it does. No spot changing to see here - move along. Friday, March 13. 2009ADSL - In Its Sunset Phase?..........John Linton ..........after less than 10 years? Dial up still clings on at the fringes and it's been around for over 20 years now. I had a 'chat' with a long term industry acquaintance yesterday afternoon who keeps in touch with many of her 'old customers' and has always been a good source of information about what is 'going on' around Australia in the ISP marketplaces - though, as with all general discussions between long term 'acquaintances' the information sometimes is more gossip than hard facts. Nevertheless, she is always an enjoyable conversation maker and always has interesting things to say and appears to have far more access to 'industry information' than I do. One of the things she mentioned more than once was the slowing growth in ADSL that two of the larger companies were experiencing (iinet/Westnet and TPG) which her 'informants' told her had fallen well below 10%. (no idea how accurate this information was) but she also said that BigPond's growth was almost zero (based on modem shipment decreases progressively over the past six months) and I have heard from two different sources that Optus' retail and wholesale ADSL growth has slowed significantly (no percentage was given and as Optus wind back its ADSL1 customer base it will be difficult to replace). May well just be gossip and there is no way of knowing but the 'collateral' signs (press statements/advertising 'tone'/fora comments) all point to slower increases in ADSL usage around Australia - particularly ADSL1 usage which was always going to happen as more ADSL2 exchanges were activated and as HSPA speeds increased and prices dropped. So, gossip or not, ADSL is teetering on the edge of 'slow growth' inevitably leading to no growth and then, at some not too distant point in time, decline. Decline in terms of 4,000,000 plus users in any marketplace is never going to be an 'over night' thing and, as with dial up, it will takes years if not decades before the last ADSL modem's on light is permanently extinguished. However it is a 'straw in the wind' if in fact what was being stated was close to actuality. Telstra's announcement of increasing its cable speed to 100 mbps in Melbourne by the end of 2009 certainly won't assist ADSL continue its growth as, irrespective of how price gouging Telstra are inclined to be, they do need cable to become far more popular in the capital cities to destroy other ISPs ADSL2 user bases and, without any question or doubt, their marketing campaigns will target those ADSL2 user bases. Again, irrespective of the doubts that its competitors (are there really any true competitors to Telstra at this time?) will try and promote about the pitfalls of "shared technology", 100 mbps headline speeds and a whole lot of 'free' content will inevitably halt ADSL2 growth wherever Telstra cable is available and will then begin to 'churn' competitor's ADSL2 customers to faster and 'content richer' cable. There may be other scenarios but you would have to be a very unrealistically optimistic person, or someone with 'blinkered' views of the 'future' to really see it any differently. A putative NBN has no hope of competing with the Telstra cable in the major proportion of the residential data market places in the short term and neither does any other technology. It will only be, if that in fact is the case, Telstra's predilection for sky high pricing that will, at least at first, limit the damage to other ISP's ADSL user bases. So, certainly in the State capital cities cable will replace ADSL as the preferred data service for residential users just as it has everywhere else in the world where cable is available. Because its Telstra, and because of Telstra's 100% track record of over charging for as long as possible after they introduce anything 'new', it may take longer than in other countries but it will over time be the case. Perhaps, if the "NBN" actually does threaten to get built in some form or other, then Telstra will price more sensibly more quickly but one thing is sure - they will use their cable to destroy the viability of any competitive offering.....and who would do anything any different in their place? Certainly A 'non-shared' cable service is preferable to the current Telstra topology but, irrespective of what is said about "contention", all services are subject to the back haul restrictions that are largely responsible for slow transits and packet loss on the current ADSL networks including Telstra's and Optus. Perhaps the next set of ABS figures will show something different but I doubt it - it looks like ADSL has used up the dial up base as a rapid source of growth and HSPA has begun to 'nibble' away the low end of the ADSL customer base and that will only increase over the remainder of this year. Telstra will almost certainly 'crank' up the appeal of its current cable offerings in preparation for its more widespread 'assault' in 2009's Christmas season and the financial problems growing across Australia will do the rest to slow growth in most buyers desires and wants as well as, unfortunately, causing an increasing number of people to discontinue ADSL services because they can no longer afford them. Perhaps this will be the year that ADSL numbers slow, halt and then start to decline? Thursday, March 12. 2009Well.....I Guess It Was The Full Six - And We Do Feel Lucky.....John Linton In a perverse sort of way the "GFC" seems to be 'not happening' for Exetel. While I, personally, remain extremely cautious about what will really happen when the problems around the world begin to seriously affect Australia combined with a Federal Government that has run out of ways to 'print money' we are certainly, as a company, acing as if times were booming. For an exceptionally conservatively run company I look at the decisions we have made recently and find it a little strange that we are making decision after decision to more aggressively operate the core businesses. Perhaps working too many hours a day for too many days for too many years has made me lose touch with reality lately but it isn't for lack of understanding that the economy of the USA may well have fundamentally changed and with it the economies of much of the rest of the world. The financial press this morning was universally gloomy around the world and the unemployment figures due to be released in Australia later this morning will not improve that view. Notwithstanding those obvious and very serious situations our business has had very strong start to the calendar year with January and February both registering record months and March starting with an impetus I haven't seen for quite a while. Yesterday we made an offer on buying our own floor in a building 100 or so meters from our current office. While that isn't an Earth shattering' magnitude investment it will cost us close to $A2 million by the time all of the set up and moving costs are actually added up and a sensibly specified data centre is built there. If our calculations are correct we will, having spent a great deal of money up front, have reduced our rental monthly costs by close to 33% courtesy of the current very low interest rates (fixed for five years) and the sharp falls in commercial property prices in business areas of Sydney. Of course our offer may well be rejected but it tends to demonstrate that this particular "ill wind" can be good for some people (and entities). I also have little doubt that commercial property prices will continue to fall so it isn't all upside by any means. So if our offer is accepted we will move into our own owned premises which have about 25% more space than we have now and, if everything goes to plan, better facilities for our technical development work as well as the opportunity of reducing our co-lo costs over the coming year. Steve and I mulled over our options regarding IP bandwidth yesterday and the necessity of now transforming our GigE based network to an increasing number of 10gb connections as we will now replace the current direct IP carrier transits to capacities in excess of 2.4 gbps in Sydney and moving to 10 gbps in the not so distant future (if current plans come to fruition). We have built the current network on Cisco only equipment plus some Foundry switches and are reluctant to move to a third manufacture for the Layer 3 switches we now require to terminate 10 gbps IP feeds from the selected IP provider but 'financial considerations' may make that necessary. Black Diamonds or 10 gbps Cisco line cards plus two additional Cisco 6500s aren't the cheapest 'boxes' to procure but to reduce our current IP costs we will need to spend that sort of money just to terminate the larger capacity links. While this will please our network engineers who love new boxes to play with it does give us another "got to speculate to accumulate" scenario - and that isn't something you would normally do in such uncertain times. Some time this month our total employee numbers will increase to 50 with two more people currently being hired in Sri Lanka which represents an increase of 66% to our personnel 'establishment' in a little under nine months. While still a tiny number of people compared to any other ISP of our customer size and service complexity it is a very significant increase for Exetel; though in salary dollars to revenue, because of the way we have gone about it, it is actually a reduction giving us a slightly greater level of efficiency than in past years in that metric. Our total monthly salary cost (including all taxes and levies) will remain at about the same level it was a year ago. One reason is that our working directors are paid far less than any other even 'middle management' in other companies of our sort of size and the disparity between SL and Australian remuneration for skilled people. We continue to significantly increase our investments in automation and software development with our spending on these activities now approaching 18% of our total monthly salary costs. This is another area of company expenditure that is almost always an early 'candidate' for decrease in recessionary times; but we have almost doubled our investment in automation over the last two years. We have built the company's ability to be and remain the lowest cost operator in our chosen markets and services by eliminating as much cost as possible from the provision of services and, without knowing details of how any other provider operates in Australia, believe the past 5 years of constant development (and re-development) has given us a very significant cost advantage over any current or likely future competitor. There are so many financial and operational benefits from these investments we would be crazy not to continue them no matter how tough the recession eventually turns out to be. So, in some ways, Exetel is adopting the 'classical' counter cyclical view of dealing with tough times of increasing our investments in our tiny company, taking more risks than the people we compete with and predicting faster revenue growth than in the boom' years. It will be interesting to see how it all turns out. Hopefully, we are correct in counting all six. Wednesday, March 11. 2009Seismic Changes In Broad Band Demographics?John Linton Well it took a week or so longer than I expected but the 'offer' of a $15.00 a month phone line (with very low cost call charges) plus the reintroduction of the Powertel/AAPT SSS service has dramatically increased Exetel's ADSL2 sales to a point where they are sometimes running at three times the number of daily ADSL1 sales. Up until this time ADSL1 has been around 50% of total broad band sales but now, including HSPA orders, it is sitting around 20%. The recent trend is so marked that it can't be confused with collateral issues - but then again it is so recent that it is hard to actually determine what's behind it. If I was a braver/more confident person I would say that the "GFC" is beginning to 'bite' and low cost service providers like Exetel are beginning to benefit from that scenario. But that can't be true...can it? This turnaround over 2 - 3 weeks has been remarkable as I was almost 'in despair' at what could be done to make ADSL2 more attractive than it apparently was to new customers (I have given up trying to make it more attractive to our current ADSL1 customers). So yesterday we had a record broad band order day (counting HSPA orders) and by 8 am this morning we had received as many new broad band orders as we usually do by 11 am - so something has changed in either how Exetel is being perceived or, possibly, how one or more other ISPs is being perceived. Such distinct changes are worrying in themselves because, as the responsible person within Exetel, you assume that you know what is going on in the marketplaces you are meant to understand and 'manipulate'. I am not so foolish as to take one days figures and extrapolate a trend from them - my observation is based on what has been happening since the beginning of the new year and particularly since we changed the pricing 'presentation' of ADSL2 services on our web pages. Of course, it may not continue as such a very strong trend and it is also partly because more ISPs have signed up with Telstra to sell Telstra's ADSL2 in areas where ADSL2 was previously only available from Telstra - this has certainly had a negative effect on new ADSL1 sales in those areas (as it has on churn aways from Exetel in those areas). While we factored in the decline of ADSL1 new and churn orders based on Telstra's widening of their ADSL2 distribution channel, we didn't expect this rapid decline in ADSL1 orders. We certainly didn't expect such an increase in ADSL2 orders. It's a pity that the 'NBN' fiasco has, as Telstra manipulated it to do, ended Optus' roll out of new ADSL2 exchanges and while 400 exchanges does cover a large proportion of the broad band buying demographic they continually run out of ports on some of the more 'popular' exchanges and in this 'NBN' hiatus seem reluctant to invest money in adding ports quickly enough to meet demand in those areas. I don't know whether this is true for the other larger DSLAM deployers but the 'NBN' and now Telstra's three pronged "Death Star" of 100 mbps fibre, wholesale ADSL2 and very high speed HSPA would make it harder to invest in a technology that has some doubts over its longevity. Perhaps ADSL2 is going to reach its end of life long before we expected it to So what does it all mean? I don't have a clue. I see strange 'announcements' from Internode that: 1) They thought it worthy of announcement that they had signed a wholesale agreement with Opticomm to sell broad band services over fibre into the housing estates where Opticomm has installed fibre. While that's very good news for a few thousand people who may take up the service over the next year or so it's hardly "news". 2) They had signed with Seven/TIVO to provide expensive movies via a set top box to those potential customers for such a service. Interesting in a '30 second' way but hardly mainstream communications strategy - and for it to be described as "Internode's Video Strategy" seems more than a touch excessive. More an indication, perhaps, that Internode's ADSL business has "flattened" as their CEO remarked last year. It will be interesting to see the next set of ABS figures to understand whether the trend away from ADSL has continued and, if so, by what magnitude. It will also be interesting to see whether, and if so by how much, the number of "ISPs" has declined over the last six months of 2008. As the dial up user base continues to disappear the amount of ADSL increase slows in direct proportion based on previous ABS reports. I would think that HSPA would now take an increasing amount of the remaining dial up users of which a high proportion would most likely be in areas where there is no ADSL. We are still waiting for the test units of the Yagi aerials and the 'magic' box to attach it to to see if the combination will prove to be a viable rural/country HSPA offering and I regret the endless delays in moving this project forward. Telstra continues to power ahead with its HSPA network improvements and, now price reductions, which will pose a very real challenge to Optus and Vodafone in this key area of data service provision. From what I see and hear - neither company has any real desire to lit their investment in this area of their operations - but I don't have any real knowledge of their plans. So looked at one way it appears that Telstra's three pronged approach, irrespective of whether it kills off the 'NBN' of itself without Telstra court action, has significantly changed the residential data communications marketplaces very significantly and will continue to change them over the coming 12 - 24 months. I wish I understood more about today's broad band market places and future directions but I am increasingly glad we never had the courage to invest in ADSL2 DSLAMs.
Tuesday, March 10. 2009I Feel A Strange Disturbance In The Force....John Linton .....its as if millions of financial controllers suddenly cried out "no more risky business" and then fell silent. (with sincere apologies to George Lucas) There are some signs of new attitudes in various aspects of pricing relating to the provision of internet services in Australia which seem to be contradicting each other - at least in some ways. I have never really understood the ways the carriers go about their business dealings in Australia and my association with Telstra goes back for almost three decades and with Optus for the best part of fifteen years. I was one of the earliest AAPT customers when they were the first to provide low cost international calls via 'over ride' in 1990 and even my dealings with Vodafone are approaching their tenth anniversary. So I have some sort of perspective,obviously limited to my own experiences, on all of these carrier's changing 'attitudes' over quite a long time. More lately we have dealt with what is now Verizon and I've also had a series of discussions over the past three years with major communications services wholesalers in the UK and Germany. We have also had some quite serious discussions with the major telecommunications hardware suppliers and contractors when we were looking at the possibilities of investing in our own small ADSL2 DSLAM network. Apart from the very large operators in Australia we have dealt with a number of smaller organisations and have bought services from companies such as Pipe and NextGen, hardware from Netcomm for the last 7 years as well as companies smaller than those - some very small. So, it seems strange to me that I have to say that I haven't got a clue what is going on at the various suppliers with whom we deal at the moment. Maybe I never did and it never mattered because our buying volumes were, and remain, so small that we never pushed very hard for a 'better deal' recognising that we had no 'bargaining power'. However we have usually been able to understand where pricing for various products and services 'stood' at different times over the past decade or so and have sometimes been able to get better pricing than we expected for some elements of our services. Of course, we have never been able to get anything but the worst possible pricing from Telstra and, in hindsight, should never have continued to buy from Telstra after the McGaughie and subsequently the Trujillo appointments made dealing with that company even more impossible - too late now to realise that we should have cut our losses 4 years ago and had a much happier life. Just for forms sake we asked for an IP quote from them as we do each March when we decide on an IP supplier for the coming year and, just as every year we got a quote roughly twice as expensive as we were expecting/hoping for and some 15% more than we are already paying. So nothing has changed for a small/tiny company dealing with Telstra - the only unchanging constant in an otherwise continually changing industry. Apart from IP we are looking to buy a number of other services from various supliers at the moment; some we already buy and two new services we think we would like to offer if we get the 'mix' right. The responses from people we currently do business with are, with one exception, quite strange. Two suppliers whom we thought would be interested in these new opportunities (for us - not for them) or at least would go through some polite motions simply effectively told us to 'go away' - expressed differently to those words but with the same unequivocally clear meaning. We are also looking at increasing the levels of business we are doing quite considerably in two of our current services and have demonstrated that our volumes are increasing quite sharply over the past few months. Again there was no interest in looking at any way of 'promoting' the services and, almost the reverse reaction, it seemed to us that we were being told that we shouldn't bother them with our views and plans. Fortunately, at least for us, there are alternative sources. I've formed the conclusion that just as our small/tiny amount of business has always been totally irrelevent to Telstra it is now becoming as irrelevent to other larger suppliers and we are much better off dealing with other smaller suppliers that not only are interested in our size of buying but provide services and products more inexpensively. I am beginning to think, with one exception, that is what is happening or perhaps has already happened. Or maybe we just need to progressively offer different services over the next 12 - 18 months? Perhaps I'm mistaking a lot of 'internal pressure' within some of our suppliers with a sudden lack of interest in doing more business with Exetel? Maybe its too many wholesale customers not paying their bills? Maybe.......but what's the point? For whatever reason something has changed and it's time to move on. Monday, March 9. 2009If Not An End To Capitalism Then A 'Left' Turn?.........John Linton .......though didn't that already reach its own catastrophic end in the USSR and the PRC et alia some twenty years ago? But now some commentators are suggesting that the 'West' is going to swap political ideologies with the communists and regulate the world to another form of collapse. The thought of Krudd running a bank is terrifying - ignoring his inevitable desire to use it as an additional source of pork barrelling now he's p***ed the budget surplus away. I don't know if too many people remember the catchily captioned "tech wreck" of the first years of this millennium but it was the end of the first dot com hyper investment bubble followed by a wipe out of a lot of people's money in stupid gambling that every new huckster's dream of being the next Google was only a few mill of gullible investor's money away. It was largely confined to the USA in terms of major money losses but even in Australia it had its minor echo with, among other more obvious examples, even James Packer and Lachlan Murdoch losing many hundreds of millions of their respective father's money in madness gone insane called One.Tel. Of course there were many others but I don't remember them now. At that time even unbelievably rock solid companies like IBM had their shares trashed in the general 'tarring with the same brush' approach investors/gamblers had to getting rid of shares listed on the NASDAQ and all sorts of probably viable tech start up companies were halted in their promising tracks with most disappearing before the retail stores started their Christmas promotions in 2002 - a horrible two year period for the more innovative part of the overall business economies of many countries that has reduced investment in really good ideas right up until today and will still have a negative influence for years to come. If you weren't involved in the 'tech' industries at that time then you probably weren't affected and therefore have no experience of what happens when a particular industry that was a boom employer for ten or so years suddenly lost 80% of its size in less than a year. I hadn't thought about that time for a while until I read this article today: I have never really been able to get my head around what a "trillion" of anything really means but I'm pretty comfortable with percentages and wiping out 83% of the value of the financial companies in the USA puts in very clear perspective the depth of the problems the world now faces. I remember that really brilliant sysadmins and programmers couldn't find another job in 2001/2002 (despite being right at the top of their skill set) and having to take all sorts of non-skilled jobs just to keep food on the table (their nice apartments and houses disappeared along with their jobs as did their wives and girl friends in more than a few instances). Some of those really brilliant people were so scarred by their experiences of being, effectively, destitute that they never came back to the industry at all. One person I knew chose to end his life. I don't know whether the people who have lost their jobs from the various financial institutions around the world over the past 12 months or so are any better placed to continue with their lives than the tech firees of 7-8 years ago and I wouldn't be able to hazard a guess but, unlike the 'tech wreck', the current financial sector melt down has brought down almost every other industry sector with it and unlike the 'tech wreck' this has caused significant job loss outside their industry sector and is likely to cause more. This of course makes finding another job, of any sort, even more difficult with, as far as I have read, only Australia's leading supermarket saying it will employ more staff over the coming months (an 'ex-master of the universe' as a check out chick? - doesn't seem likely). I still see no signs of Exetel's very small business being affected by the financial difficulties currently being experienced with new orders in the first week of March continuing the upward trend sustained through January and February in the majority of our ten service offerings. I have been looking in detail for any sign of weakening in our tiny part of the industry but, at least so far, I don't see anything - though perhaps this is a sign of what is to come: http://www.smh.com.au/national/greed-is-a-spent-force-say-researchers-20090308-8sh3.html Maybe people in Australia will, now its probably too late, become more sensible about how much they spend and what they spend it on? If that actually happens then the amount of money spent on communications will inevitably shrink and that is not going to do anything positive for the industry generally. Perhaps 'low cost' providers are being 'sheltered' from the first signs of a down turn in communications which is why I still can't detect anything indicating a slow down? Of course our very small size protects us from 'major trends' as we don't have the volumes to make trends immediately discernible and we are still so small we react to any slight change immediately which again tends to blur 'early warning' signs of trends. About the only signs of trends we see is the largely down beat half year reporting of the large publicly listed companies and, in the communications sector, the almost deathly silence in "new initiatives and success" announcements from the usual industry loudmouths. Perhaps this is the period in Australia of the 'phoney financial crisis' with the equivalent of the 'blitz' (major company collapses)and the 'invasion of Denmark and Norway' (haphazard government nationalisation) about to blast all of us out of our complacency? Now, where did I put that gas mask? Sunday, March 8. 2009Oligopolies Arent Much Different To Monopolies......John Linton ....when all is said and done - they are more than happy to maintain the highest possble levels of of end user pricing, legally and without collusion, by not really competing with each other. Why else are all mobile carrier's SMS prices the same, absurdly high price? Don't tell me - its a uniformly high inter-carrier charge? A lot of Exetel customers use our 5 cent SMS function and a steadily increasing number of businesses (from Leagues Clubs to car dealers and medical practices) use it for advising their customers and clients of 'events'. Exetel uses it for a wide variety of purposes within our own business operations. We have been providing this service for 18 months and it has been both a popular 'value add' for our residential users and a slight profit contributor to our monthly bottom line. All in all a good thing for a wide variety of customers and for us. In broad terms there are, at least currently, two types of SMS messaging wholesale arrangements. The first, and overwhelmingly most popular type, and the type Exetel currently uses, is based in an 'overseas' country and uses an 'overseas' carrier's sms service that has a reciprocal arrangement with dozens of other mobile carrier around the world including the Australian mobile carriers. The second, and far more expensive, type is an 'authorised' Australian SMS wholesaler that has a direct gateway to one of the Australian mobile carriers (which in turn have reciprocal arrangements with other mobile carriers around the world) and is 3 to 4 times more expensive - because the oligopoly 'inter-Australian carrier' rate is set ten times higher than the Australian carrier - International carrier" rate. Why is this? Telstra (gratefuly followed by Optus and Vodafone) make it so. The gigantic mark ups the Australian mobile carriers make from SMS is by far the highest in the world (so much for the value of competition). I may have mentioned getting on for two years ago that I met with a UK/EU SMS wholesaler whose pricing for wholesale SMS STARTED at approximately 1 cent per SMS at a volume of 5 million a month and was discounted from there. So, unsurprisingly, as the number of SMS messages being sent via wholesale 'overseas' mobile carriers has continued to increase there has been, obviously, some reduction in the SMS revenue being generated by Telstra who has now started to move to prevent this happening which will, in the not far distant future, result in very low cost SMS messages becoming unavailable - at least fom Exetel. Personally, I can fully understand why any company would do everything possible to protect its revenue and profit streams - I have no problem with Telstra's reported actions. I also fully understand that all end user pricing is based on a mix of many elements and it's a complex balancing act that needs constant attention. Having said that, and realising that wire line revenue and profit falls are being balanced in Telstra (and other full service carriers) by the huge profits they make on mobile services, it still appears to me that marking up an element of mobile services by over 2,000% seems like price gouging. Oh well, this is Australia and there really isn't any real competition in telecommunications. Perhaps the ACCC should look at how Telstra manipulate SMS rates in Australia but 'gives away' the service to an international carrier - I'd be interested in seeing how that would be justified. So, we will grudgingly have to find a new wholesale provider if we wish to continue to offer sensibly low cost SMS services as we have already had to raise our general offer prices but have kept the free SMS allowance for the current broadband plans. Our early enquiries to 'authorised' Australian gateway wholesalers don't encourage me to think we can continue with the SMS offer for much longer but then we haven't yet put any real effort in to addressing the issue. Exetel's problem, like the small wholesalers that supply to us, is that we are too tiny to really be able to sensibly operate in the Australian communications business. We have got as far as we have (not very far) by being incredibly efficient and by having a small number of highly dedicated people working very long hours to eliminate the dead weight of a management infrastructure and also a ruthless attitude to expenses and troublesome customers. While that has been OK to date we are still a long way away from generating the buying power that will allow us to provide the lowest cost services in Australia and cope with the silly personnel and operating expenses of advertising and marketing and HR and etc, etc that a company large enough to generate the volumes to buy at sensible discounts needs. We have had to overcome the high prices we have to pay with blood, sweat and tears personal sacrifices to date with no end in sight to that method of operating. It has never been any different and I'm not 'complaining', it is something we are going to have to find a solution to - and in the very near future. If we don't then the current SMS scenario will continue to be repeated across the whole current product/service range. Saturday, March 7. 2009That Was The WeekJohn Linton It has been quite an interesting week in many ways (if you ignore what you read in the financial press) starting with a phone call late Monday afternoon from one of the 'investment consultants' we briefly talked with last year about an interest he had received from an undisclosed party who was interested in buying Exetel. We had very little interest but did provide him with some figures and then never heard from him again which is pretty much par for the course for such approaches. So I was surprised to receive the call (I seldom answer my mobile phone as I regard it as a tool for me to make calls on when I don't have ready access to a phone on my desk or wherever I'm located) and have a conversation as if we had only spoken a day or so ago. He not too gently 'berated' me for not returning the messages he had left for me and I told him that I never look at messages on my mobile phone or indeed any other phone I use - saying that I only use email as I distrust the 'spoken word' and my, and other people's inability to actually listen and then understand what is actually said. After a meaningless minute or so being told the error of my thinking I asked him why he was calling me and how could I help him. After another few minutes of obfuscation he got to the point which was if we were 'still' interested in a "meaningful discussion" the company that had expressed interest in acquiring Exetel was still interested in doing that. I reminded him that we had provided the figures he had originally requested so that the 'interested party' coud state on what basis they would value the company and, if the figures once audited proved to be correct, what they would offer to buy Exetel. Then followed several minutes of disclaimers about how that wasn't possible (I didn't remind him that the figures provided were as he stated they should be) and the 'interested party' needed to send 'some people' to spend several days looking at the operation of the business both here and in Sri Lanka before they would be able to suggest a basis for valuing the company. Yeah...right! What is it about Exetel that makes people think we are complete f***ing idiots? Clearly we must give off signals of crass stupidity and total gullibility. So I said I'd discuss it wth the other directors but personally could see no way we would give any ISP a detailed look at our operations and methods of doing business beyond the actual figures relating to the size of the company and its operating results for the past five years. That didn't include the names and positions and responsibilities of our personnel nor any other aspect of how the business was operated or how it achieved the resuts it did. On Tuesday and Wednesday I had meetings with two of our larger suppliers which were interesting in themselves and in settling some views on what may or not be possible to achieve in some aspects of our business over the balance of the year. While not 'hearing what I wanted to hear' from one supplier it was OK because at least it meant that we woudn't waste any more time and money pursuing a path that was leading to a dead end. Another value of the meeting was the coalescing of a completely different idea that we had never seriously considered before but might be more valuable than any of the ideas that were closed off in the meeting. Also the 'collateral gossip' provided some insights into some issues with some competitors that was, if it was true, of real interest to me and to Exetel. The second meeting was not very helpful either in terms of achieving anything immediately useful but, again, negative results are useful in themselves in terms of preventing more effort being put in to flogging 'deceased equines'. However the following lunch at probably my favorite restaurant was very enjoyable. So two meetings closed off two possible 'avenues of endeavour' in less than twenty four hours but opened up a completely different oppportunity that might turn out to be more valuable than both the other ideas combined. On Thursday it seems we might have found the 'magic box' we need to make the HSPA rural broadband offer a reality (wifi/sim socket/2 ATA ports) and it will be interesting to see what the 'commercials' turn out to be - and the physical enginering standards of course. It would be really good if after a long 'search' we could actually get exactly what is required and at a realistic price. The week finished on a high with two of the three sales trainees allocated to XDSL services getting their first sales for SHDSL business connections after only three weeks with Exetel. An impressive start for both ladies who three weeks ago had never heard of SHDSL or Ethernet. Obviously there is a long way to go with this dificult and very expensive program but it has got off to a very good start. It was a week full of interesting developments. Friday, March 6. 2009Is Now A Good Time?John Linton I skim read the financial press this morning as usual and then started again and read it in a little more detail as the 'wall to wall' reporting of corporate disasters seemed even bleaker than usual. When the shares in the largest bank in the world fall to below $US1.00 there has to be time made for reflection: http://online.wsj.com/article/SB123625477682739223.html The Wall Street close of down another 4% seemed almost incidental to the disaster stories about Citibank, GM, IAG, GE and endless others. The fact that the two remaining 'strong' banks in the US were now reported to be in 'trouble' just rounded off the most dismal financial reporting day I can remember. I didn't bother with the tech media after spending so much time on the financial press as money and investment futures are very much on my mind at the moment. As with most bad things and bad times there is usually an up side and one of the up sides is that as property prices fall buying properties, if you are able to, becomes progressively more attractive. At least that has been the case in the last few recessions in Australia - the best example I know is that we bought our current house at the depths of the recession that lasted from 1989 to the end of 1992 when we paid something less than 60% of the original asking price. As I have made reference to previously in these meanderings we were looking to buy our own office (or rather a floor in a commercial building) in late 2007/early 2008 but decided against it because although prices had fallen quite sharply at that time it seemed to me they were going to continue to fall. That is pretty much what has happened and we are now, again sorely tempted to buy our own floor space to the point there is a sale contract sitting on my desk waiting to be signed as I write these words. While the sale price for a floor in North Sydney is almost 50% of the original floor in the CBD we very nearly committed to some 15 months ago I am almost certain that, 'bargain' that it is, prices of commercial real estate will continue to fall over the remainder of 2009. I fully understand that my knowledge of finance and global economics is as close to zero as makes no difference but I, like any other adult, have to continue to make decisions that affect themselves, their family and in my case playing a part in the decisions that affect a small business that has employees, suppliers and customers who would be negatively affected by my input into decisions if they are more incorrect than usual. If I could find some positives in what I read daily, I would be overjoyed to do that. I don't seem to be able to find anything positive today or for quite a while. The more I read sensible people's opinions the more I'm inclined to accept that we aren't just experiencing the failure of some 'overseas' financial systems but the failures of many other systems too. In fact it wouldn't be that extreme to accept that we may well be seeing the failure of 'democracy' in the ways we have perverted that description of our electoral and governmental processes. Now such a statement would be truly stupid until you remember that 'communism' spectacularly 'failed' and then totally fell apart only two decades ago and that showed that just because something has been in existence for a few decades or more doesn't mean its right or even that it has that much longevity. Such doubts/views aren't very helpful when you are thinking of committing nearly $A2 million of your personal money to buying a commercial 'home' for Exetel. While it is undoubtedly a good idea in that it reduces the rent we are currently paying and gives us the opportunity of installing a commercial grade server room to, over time, reduce the co-lo costs we currently incur (by moving out of one of the to co-los we currently use). We can also provide a more useful work space layout than the current space that we have evolved by taking over three additional tenancies on the same floor as we grew. There are, prima face, many advantages in moving to our own owned premises...... .......except the current economic outlook, sensibly viewed with no hysteria nor unfounded optimism, is not good and it really is a case of just how bad is it going to be. We have already taken the huge risks involved in moving much of our back end processes to Sri Lanka and while the economics of that 'brave' decision are undoubtedly there and the results to date are very positive the concomitant risks and disadvantages are equally there 'hovering in the wings'. We have also committed to several directional changes to the fundamental business we have run for the past five years and while, again, they are sensible and clear cut in terms of sensibly looking in to the future they are taking a great deal of money and effort of which we have very limited amounts. Our alternative is to stay where we are and the landlord has agreed to let us have the remaining floor space by re-locating two smaller tenants and allowing us to put in additional air conditioning to allow us to move our back up equipment from the current Powertel colo to a properly constructed server room in our current rented space. However, as Annette pointed out, it makes very little sense to invest $A150,000 in a modest server room in rented premises that will only do 'half the job'. So while my inclination is that incurring a major personal debt and then the hassle of a move is just more problems than we need right now there is at least one compelling reason to move. So - some very tough decisions to be made over the next few days - just for a change. Thursday, March 5. 2009Exetel's "NBN" Get's A Little Closer.......John Linton .......and I means weeks/months - not years/decades. Since the sound bite policy of building an "NBN" was first mooted I have been saying that a fast HSPA service would be easier, far cheaper and far quicker to implement than any of the crazy options currently being considered. As this article clearly illustrates: http://online.wsj.com/article/SB123612370867623587.html providing fibre to rural areas is always going to cost far more than anyone ever thinks it will. I understand that only Telstra has made a serious commitment to actually dimensioning their HSPA service well enough at this time I am assuming that Optus/Vodafone will eventually get around to fixing their 'careful' deployment attitudes as they both did on their voice mobile network - for those of us old enough to remember the early phases of Optus and Vodafone mobile networks. Over the past few months several of Exetel's country agents have been installing HSPA services on rural properties using Yagi antennae to address the distance from base station issues (up to 30 kilometers in several cases) with considerable success. The current drawbacks are the cost of the antennae and the lack of a full functionality 'magic box' that has a sim slot (rather than a USB port) and a built in ATA with two lines to take the customers current telephone hand set. Exetel has been trying to source a suitable Yagi from the PRC over the past two months to reduce the antenna price from something over $A130.00 to something under $A50.00 (including the patch leads) and also sourcing the 'magic' box for something like $A150.00 to give a one off install hardware cost of sub $200.00 plus whatever an agent wanted to add as a hardware margin plus whatever the agent wanted to add for installation. In this way the end user gets a much lower cost installation than they would be able to get from any other carrier/agent but the agent will be able to make more money because Exetel has 'procured' much lower cost hardware. This concept would allow some 700 'rural' agents (no we don't have that many at the moment - less than 10% of that number) to provide something in excess of a 1.5 mbps broadband service (at the moment) to between 20,000 and 50,000 rural users whose only options currently are dial up or satellite at less cost than a satellite service with much higher speeds. As the HSPA speeds increase over the next 12 to 18 months a rural HSPA user may well be able to get speeds of up to 8 mbps on a 14.4 HSPA service and at prices well below Telstra's current 8 mbps ADSL1 services. By also being able to use VoIP the customer's call costs can be greatly reduced and the ability of being able to send and receive SMS and FAX from the 'magic box' will be another cost saving and operational bonus. By using VoIP's 10 cent per national call the customer can afford to keep the wire line for emergencies. A 'bundled' mobile service could be included but only as an option. The mobile service would have very low cost per second calls. If we are successful in procuring the required hardware at our target prices and/or can convince an HSPA carrier to subsidise the hardware on a 24 month HSPA contract then it will be a compelling 'all in one' communications solution that far surpasses everything else that is currently available or, as far as I know, currently being 'planned' for rural users. An all in one VoIP, Broadband, SMS, FAX solution for less than $40.00 a month is goingto be very attractive for anyone within 25 - 30 kms of a mobile base station. We need to rapidly build up our country/especially rural agent base which we have plans to do over the next two months to ensure we can offer the service Australia wide. We will put together a 'service package' supported by sensible advertising that will provide significant activation margins for the rural agent (hardware at the indicated prices and perhaps a carrier subsidy on that hardware for a 24 month contract) plus a low enough cost 2, 5 and 10 gb plan to allow the agent to add a 'monthly support charge' to give a very real financial incentive without impairing the customer's value for money. If we are successful in pulling these many threads together we have a realistic chance of providing some 20,000+ rural users with broadband services long before the end of the first Telstra court case let alone the first "spade turning the first sod". The bundle would be: "Magic Box", Yagi Antenna, Sim - $A250.00 delivered to agent Agents margin on the hardware - $75.00 Agents install costs - around $150.00 2gb HSPA at $32.50 (agent's margin = $10.00) VoIP calls at 10 cents per call Faxes at 3 cents per fax SMS at 5 cents per message [maybe bundled mobile telephone plan at very low per call rates] 'Local' agent support All we need to do now is to convince another 649 rural agents of the benefits of participating in this promotion and becoming an Exetel agent. Wednesday, March 4. 2009Customer Feedback - The Most Valuable Source Of Company Improvement?John Linton Based on a suggestion from our Exetel Forum ‘Supervisor’ we implemented a ‘suggestion box’ in the User Facilities on Monday. Previously, for over five years, we had relied on a section of our Forum to ask for suggestions as to how we could improve our services and that has been very successful in getting direct customer feedback which has resulted in us implementing over 500 user suggestions that have made every aspect of Exetel’s processes and services better. Over the past 18 months I have also used this blog as a source of new ideas and suggestions and that input has made Exetel a better and stronger company. Virtually the whole of our User Facilities has been developed over the years from customer suggestions and we have even used customer provided code to provide a key function. 'Company Suggestion Boxes' are hardly a new concept - they've been around since I first entered the work force (just after the fall of Rome) and obviously were around for a long time before that. Along with employee suggestion programs they have been of immense value to a huge number of commercial and other enterprises probably since the dawn of human communication. There is only one proviso for the success of such a mechanism as far as I can see and that is that the suggestion has to reach a person who has the authority to 'make it happen' quickly and that the suggestor must receive fast feedback on the result of their suggestion. In the less than 48 hours since we have instituted the ‘suggestion box’ we have received over 50 'suggestions', 7 of which we have already implemented or put into the process of implementing. There were some suggestions that we couldn't implement and we advised the suggestors by email of our inability to do that very quickly. Using the forum and this blog we have been averaging two - three implementable suggestions a week that we could actually implement in the short term so, even allowing for the 'novelty factor', perhaps Gillian's suggestion box idea will accelerate the development/refinement of Exetel more quickly than in the past. The suggestions, at least currently, go directly,and only, to Exetel's directors who either pass on the suggestion to the appropriate person within Exetel to implement or respond to the 'suggestor' explaining why it can't be implemented. Currenty our directors continue to work 'at the coal face' of our business and are completely involved in the minutiae of the operations of the company so are able to immediately determine if the suggestion can be implemented or not and can act with the authority that is required to get it implemented in the fastest possible time. So I look forward to an increased rate of improvements to every aspect of Exetel's operations flowing from an increase in suggestions from customers. One thing that struck me when I reflected on the suggestions I had approved and actioned since midday on Monday was why I hadn't thought of the many very sensible ideas that were being presented or why I had failed to spot the weaknesses, or more obviously errors, that were being pointed out. I have no answer for that question but I found it more than a little worrying that I hadn't been aware of things that needed attention. I then cheered up and was very thankful that the recommendation to set up a customer suggestion box had been made and that a 'gap' in our management processes had been 'plugged'. There is a problem though. Annette commented as I was replying to a suggestion quite late last night: "and how long do you think you will be able to spend the time reading and replying to these suggestions?" It does take time which is a very scarce commodity in our very busy days and it does take some thinking about. We'll see how it goes but, from my direct observation on two past occasions, I've seen the value of employee suggestion programs destroyed by long delays in processing and acknowledging suggestions and the lack of involvement of the company's key management in reviewing and acting on the suggestions. Having said that, I do recognise that if the volume of suggestions settles down to a significant daily number it will need to be addressed. I suppose that just means the Directors of Exetel will need to manage their time more productively. Tuesday, March 3. 2009Telstra Forced To Slash Its HSPA Pricing?.........John Linton .....in the mealy mouthed way now common to Telstra...(long contract with "half price for first N months) aimed at the dumber buyers. I seldom watch commercial television so I seldom see any current ads let alone Telco ads (has iinet stopped using that insulting Irish moron yet?) but saw an ad last night for what seemed to be a Telstra offer of unlimited HSPA for "half price" ($49.95) for 12 months (it may have been 10 gb.......I was only half listening at the beginning). Three things crossed my mind: 1) Telstra's HSPA sales must have "hit the wall" 2) A really unlimited HSPA plan at $50.00 a month can't be that far off 3) The 'early adopter' phase of HSPA may have ended Now I realise that no Telstra broad band offering will be "unlimited" (just as no sensible provider will ever offer an unlimited plan) but I wasn't paying attention to the ad until it was too late to register the real detail but it doesn't matter as the salient point was the desperation apparent in any offer that involves cutting an apparently previously obtainable price so drastically - even if it was only a 'pretend cut' specifically designed to mislead the stupider buyer. However, Telstra has obviously got a much larger HSPA share than everyone else put together and also has far higher prices than every one else. Based on what I see and know about the UK HSPA markets and cost prices and the volumes of users, Australia's combined HSPA usrs are less than one fifth of those in the UK and the market there is more mature and more competitive. There are no, as far as I can see, "unlimited plans" in the UK but the 'average' HSPA plan is around half the cost of the realistic Vodafone and Optus plans. So clearly there is a lot of scope for Telstra to reduce its HSPA pricing, if it has to, and still make its huge margins. We have hesitated in 're-looking' at how we would market HSPA from March 1st onwards and actually pushed back the original decision to more 'aggressively' push the HSPA service while waiting for the new initiatives from the carriers which, until last night, I haven't seen yet unless I'm looking in all the wrong places (there was a very old game that used that tag line I seem to remember). I doubt that Telstra's new initiative will 'change the landscape' in any significant way (personally I think it's a recognition by Telstra that they can't charge $100.00 a month for HSPA any more) and I think that $A50.00 is not, at the moment, going to address a large percentage of the (non-Telstra) HSPA buyers in Australia. However that price point might be useful to Exetel as we don't have ambitions to sell the volumes the carriers are aiming at and we do want to address the two markets we believe we can provide the best solutions to. So the key question is how do we use our 'mad money' most effectively to promote a $A50.00 a month HSPA service (realising that the 'sweet spot' for an HSPA broadband service is $A40.00 a month)? Or is that just a waste of incredibly scarce time and money? We have been considering different ideas for a while now and nothing really useful comes to mind given the constraints of our current costs. It seems boring, and deceitful, to make these "half price" offers becoming so beloved by both Telstra and Optus or their convoluted "six months free" or "every month with a public holiday in it free" or whatever lunacy the next "special offer" will include. Perhaps Exetel has to become a "modern marketer" and prey on the stupid/gullible/innumerate but I doubt whether I could ever bring myself to treat the more intellectually challenged of the Australian population with that level of contempt. We have to make a decision this week and our options are currently limited. One of our original ideas, and my personal favourite, of offering rural users a 'free' Yagi aerial and cable kit has been blown out of the water by delays in sourcing the required hardware. I suppose we could still go with that sourcing aerials at their ridiculous local prices but the economics are very iffy. That particular idea appealed to me because I am very 'fond' of rural Australia and it seemed to me to be the most truly effective use of a promotion - to help people who really needed help and to assist Exetel's rural agents in a very tangible way. Maybe I've run out of the required 'creativity' to deliver true innovations - it had to happen some time. The best I can come up with is two new plans:
and A 10 gb plan at $57.50 per month to add to the current 5 gb plan at $37.50 per month. I would like to be more imaginative but I seem to have lost that 'touch'. Monday, March 2. 2009I Have A Cunning Plan My Lord......John Linton .......to obtain huge amounts of International IP bandwidth for no charge. (apologies to the Black Adder script writers - Ben Elton and Stephen Fry?). Exetel is again considering buying IP bandwidth direct from Southern Cross when our current IP bandwidth contracts expire in a few months time. Each year at this time for the past three years we have looked at the available options, and costs, of obtaining the international IP bandwidth we are likely to need for the coming 12 months and two years ago we semi-seriously considered buying directly from Southern Cross and last year we very seriously considered it. We very nearly did make the decision to go direct last year but there were already signs of difficult economic circumstances looming on the 'horizon' in February 2008 and we decided the risks were too great. So, it may sound strange that now the "looming" difficult financial conditions have become a reality, we should again consider a $A30 million plus investment over ten years but, of course, the economics of any major financial investment change over time and the conditions vary enormously over even a short space of time such as 12 months. A year ago the Australian dollar was heading towards parity with the US and Southern Cross had yet to complete its full upgrade to the trans Pacific cable. One circumstance has now dramatically increased the price and the other more dramatically decreased the price. Also there was the Telstra decision to build its own dedicated cable which had ramifications in terms of Telstra not taking up its expected 'share' of the increased capacity from the late 2008 upgrade and, presumably, eventually reducing what it currently uses. That may have lead to the 'special limited offer' by Southern Cross late last year of attractive incentives for new customers to buy direct. Exetel currently buys over 2.6 gbps of international IP plus generates up to 700 mbps of 'international' IP via its PeerApp caching with another up to 5 - 600 mbps via its Akamai and Pipe peering at different peak times delivering a maximum to date of 3.5 gbps at the busiest time of the late evening and then again at midnight. Our lowest price for 'pure' IP is around $A150 per mbps and we would expect that to drop to around $A130 or lower in the current round of asking for quotations. Although one provider has said the drop of the Australian dollar will make it hard to reduce their current prices I have simply pointed out that their own US dollar prices have been cut by more than 70% for the additional cable capacity and if they really want to give the impression that they think we're really dumb then such statements will certainly do it. (we may very well be dumb but we don't like being told we are). While we could easily fill one 2.4 gbps dedicated link buying direct from Southern Cross what is also possible, if Steve had his way, is that we could buy a 10 gbps link for very little, relatively, extra money and go into the IP wholesale business with around 5 - 6 gbps to sell at much lower prices than are available today and are likely to be offered by anyone in the near future. If we sold the 'spare capacity we could always commit to buying another 10 gbps link and open up a whole new business for Exetel in Australia - the lowest cost IP connections (by a factor of at least 50% (more probably 80%) than is currently being paid by Australia's larger companies. There is a problem with that scenario which is we would have to sell the bandwidth to ISPs smaller than ourselves and that's not such a good idea - based on the track record of ISPs smaller than Exetel tending to go out of business with monotonous regularity. However, and this may 'swing the deal', there are also major opportunities to sell large IP connections to major corporates in Sydney which means, if that were possible, we could turn a major current cost of around $A500,000 a month to a profit (not revenue) of something like the same amount! We don't have precise numbers but believe there are several hundred companies in Sydney alone that use over 100 mbps IP services (excluding ISPs) and it would be a logical next step for Exetel to go beyond the current 100 mbps services which is the most we can offer at the moment. As we put a lot more effort in to corporate sales such a 'product' would be a major 'door opener' and perfectly leverages the huge efforts we have made to grow a solid residential business that allows us to use the established volumes of purchases to make our business services even more competitive than they are today. It, obviously, also provides scope for decreasing the prices of residential plans because we remove the majority of the IP cost component. Currently there is something like an $8.00 IP cost in a mid range ADSL2 plan and obviously more on the higher plans so there would be some 'discount' available if we went this way. Sounds good? Sure does - now where do we find the $A30 million or so up front investment required to do that and do we believe we will survive the next ten years of massive financial and societal change that is being foreshadowed by a quite considerable number of people? Well, I think that things are going to get very much worse in Australia over the coming six months and then stay that way for quite a while after that. Having said that I'm almost convinced that Exetel has the 'perfect' business model for such circumstances and will actually become a more attractive supplier of services than those companies currently charging a premium for little/no added value. I've been wrong before but I'm actually more relaxed now than I have been for many months about how the "GFC" will affect Exetel. We need to go back to New Zealand to have some serious discussions with Southern Cross and also have even more serious discussions with our banks as to how we could sensibly structure such a deal. The alternative is to find a business partner to better underwrite the project but I am very, very reluctant having put in this much work over five years to now have to consider another party's view of any future decision we took. Any way - a nice possibility to start the new week with. |
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