John Linton ...for Exetel with some interesting trends and a new 'quiet revolution' in business data speeds/costs spelling the end of an era for a number of comms companies - and a particular type of comms company employee?
As Exetel, even after five plus years of operation, is still a very, very small company it is easy for us to achieve 'record months' every month in almost every respect while it is much, much harder for a very large company to do that. So July 2009 was our 65th unbroken consecutive record month in terms of revenue and numbers of customers in each of our product/service areas and we probably made a little bit of profit too (but we wont know that until we get the management accounts in a few days time). Our main growth continues to be in business customers across our five major service types and, for the first time, it has become obvious that our business services are growing significantly faster (on average) than our residential services. That is a very good thing because our business plan for the current financial year is based on a very rapid growth in business data services with a planned 300% growth over FY2009.
I had lunch with the new GM of one of our larger suppliers earlier in the week over which, among other things, we discussed the newer developments in delivering Ethernet over 'grouped pairs'. This isn't a new technology by any stretch of the imagination but it continues to develop and shortly there will be a four or five fold increase in its capacities per pair delivered which will make for a very interesting scenario.....even lower costs and certainly signalling the earlier than expected demise of SHDSL....and not before time. I think Steve and I installed some of the earliest SHDSL services over ten years ago when a 2 mbps circuit was a very big deal in the days when Telstra's ISDN 128 kbps was the largest circuit most companies could afford to link their remote offices or deliver internet services to their employees.
So Ethernet over aggregated pairs will provide up to 100 mbps in an increasing number of exchanges that are equipped with the requisite hardware and back hauls and will make it easier, and much cheaper, for small businesses to get really fast network connections at far less than SHDSL prices - something like three times the bandwidth for one third of the price that the dinosaurs of the data suppliers/systems integrators currently offer. It isn't often that you get a 'quiet revolution' of such significant end user gain in both speeds and costs. It does raise an interesting question though....what are all these systems integrators and small data service providers (and some much larger ones) going to do to make up the revenue shortfall between what they are charging now for a 2 mbps SHDSL service and what they COULD (if they did the right thing by their customers) charge for a 10 mbps Ethernet circuit?
During July we saw what might be one significant trend. An increasing number of systems integrators and data suppliers to businesses are signing up with Exetel to take advantage of our suppliers/our very low priced Ethernet circuits with Exetel's very, very low back end internet connectivity. While this particular trend isn't definitive (too short a time frame/only a few actually signed up so far) it is quite marked and because the difference is just so obvious it is undoubtedly going to accelerate. But back to an interesting point in this scenario...what are those small data circuit providers going to do now that they are stuck with their high overheads based on the huge margins that used to be available from providing 'business data services' but now the price of such a circuit has not only fallen by 75% in terms of revenue but the monthly profit from supplying the circuit has fallen by more than that - often by 90%?
I don't know how I would deal with a future where all the customers I had will 'deliver' one tenth of the profit I've depended on for many years - I'm glad I don't have that problem which will certainly occur as more end users find out how much 'business data circuit prices' have decreased over the past twelve months.
So - looking forward to a time when/if some sort of 'NBN2' begins to be put in place you can play around with the numbers being proposed as cited in the following article and start to see what is clouding the thinking of even the largest Australian comms providers:
http://www.businessspectator.com.au/bs.nsf/Article/The-myth-of-NBN-profits-pd20090731-UG4FD?OpenDocument