John Linton's Personal Musings

John Linton

...you will eventually hear everything.

I have been lucky enough to have enjoyed almost perfect health in terms of never, with perhaps two exceptions, having had cause to visit a doctor in the whole of my life other than to get some sort of mandatory inoculations or vaccinations. However I did have a bout of nausea yesterday evening of a violent and unpleasant kind that I put down to reading an email that pointed something out to me that I found too incredible for, apparently, my mind/body to react to in any other way....or maybe it was the fourth piece of pizza which was particularly greasy?

The statement, and I am quoting exactly, was:

"Exetel charges so little for ADSL and makes no money out of providing the service that it doesn't care whether its good customers either stay or go because there is no financial benefit to Exetel in either case so I'm going to move to an ISP like Internode or Adam where they really value their customers because they make a lot of money out of them".

There was no elaboration as to what might have changed in his particular circumstances to generate this statement and when I checked his service history he had never raised a ticket with Exetel over the time we had been providing any service to him and looking at his usage records there were no aberrations in downloads over the previous 12 months which might indicate some sort of issue. I have a great deal of trouble in actually understanding why a customer who apparently has had a trouble free service for his time of usage would then suggest that the lack of profit Exetel makes in providing ADSL services means that he should go to another provider who charges much more.(Exetel chooses to make less than $A1.00 per month 'profit' from providing its ADSL services but that is our choice and has nothing to do with the quality of the service)

If there were more hours in the day I would have replied to his email seeking clarification but there aren't so I simply replied thanking him for his use of our services and wishing him more success with his next provider. I had never considered, up to that moment, that trying to reduce the end user price of providing any service to the lowest possible level was anything but something that was entirely in the very best interests of any customer. It seems impossible to me that people who operate a business on such a basis can be considered to "not care" about the best interests of the customer - surely, de facto, not charging more than covering costs with a minute amount for profit is acting in a deeply caring way about customers? Apparently charging the lowest amount possible can now be seen as an act of uncaring about customers?

(As an aside - I wonder what this about to be ex-customer thinks about Exetel providing services to its Pioneer Customers at a loss for as long as they stay customers? Is that, by his definition, an act of even greater uncaring?).

So, having slept on it, I came to the conclusion that he must mean that by charging so little Exetel have to skimp on providing some elements of the service that are essential to the correct functioning of the service....I could be quite wrong but that is as close to making sense of someone complaining about a price being too low that I can reach at the moment. Except that I can't, after being closely associated with the operation of ISPs for the past 15 or so years, see ANY element, that Exetel doesn't provide, and provide at least as well as any ISP in Australia - and provides many that are better. Having said that, which is obviously based on my personal understanding of what is required to deliver a complete ADSL service, I still can't, in any way, understand how trying to reduce the cost of a service to the lowest possible level can then be judged to be "uncaring". Is it a requirement of satisfactory service to make a large profit? Does that mean if your company has no interest in making a substantial profit that you shouldn't be in business?

As I have never, in the whole of my commercial life, seen such a view expressed before I think I must have misunderstood what was really meant. Perhaps all that was meant was that by charging so little it wasn't possible to include some element that was really required and that element was far more important than a lower cost of the overall service. Perhaps we need to poll our current customers to get their suggestions as to what Exetel need to do to add to the current service elements and what should be charged to provide them?

Personally I blame decades of poor English language education for producing an increasing number of Australians who can't clearly express themselves in written communications. (My own inability to communicate clearly in written form is entirely due to my own laziness).

John Linton

....because you outsource Australian jobs to illiterate monkeys in India who can't speak English". (direct quote from an email I received earlier this morning).

Far too much has been been made, in the Australian media, of the current nonsense in the Indian media about how unsafe Indian students are in Australia because Australians are racists - apparently this will cause a lot of Indian students to go to other countries to obtain their tertiary qualifications rather spending the money charged in Australia. Nothing like a media beat up to produce negative results for all and sundry. Having come to Australia as a migrant some years before the first fleet arrived I can state without equivocation that Australia, or the parts of it I have seen over the decades, was very definitely 'racist' in a variety of relatively benign ways but, in my opinion, has become less benignly racist as the overall proportion, and sources, of migrants to 'born in Australia' Australians has increased.

Now my pig ignorant correspondent of this morning tends to demonstrate the truth of this observation. Firstly Exetel don't "outsource" anything including jobs. We have invested a considerable sum of money (for us) in setting up a wholly owned subsidiary company in Colombo, Sri Lanka where we directly employ and train and manage our own staff, currently 45 but growing, to provide services to Australian residential customers. As noted that office is in Sri Lanka - not India. When we commenced this program in June 2008 Exetel employed around 30 people in Australia and today we employ 45 people in Australia and that number continues to grow at a rate of 2% to 4% per month and is planned to do so each month of 2010.

Exetel, like every sensible commercial or, for that matter, non-commercial enterprise constantly examines ways of keeping its costs at the lowest possible level. Our major costs are customer connectivity set by Australian based carriers (irrespective of their ownership) and we can do little about addressing those issues. Our second major cost is International bandwidth where, because there is more competition, we can do something about those costs - and we do by constant re-negotiation. Our third largest expense is personnel costs where we can control much of those costs by astute hiring of really good people and then creating an environment where we can encourage a higher quality on the job performance than that achieved by any of our competitors.

One major personnel  issue we never successfully addressed in the four years prior to establishing an office in Sri Lanka was to keep degree qualified engineers interested in providing residential customer support for more than around twelve months either as a CSR or in taking a supervisory/management career path in customer service. Not unnaturally university engineering graduates in Australia want to go on and become 'network engineers' or 'sys admins' rather than continuing to stay in what they see as 'entry level positions'. So, as a small but continually growing company we hired good engineers into CSR roles and then allowed them to move to 'more interesting' positions in other areas of Exetel. My observation over 20 years is that is a common issue in the various support centres I have been associated with. This meant and means that retaining knowledge and skill in customer support is a perpetual problem.

A, not very good, solution was to pay good, degree qualified, customer support engineers double what they could earn in any other 'more interesting' job and you could get two years out of them as a CSR but no more than that. The solution we came up with, a much better solution, was go to another country where we could pay good, degree qualified, engineers three to four times what they could earn in any 'more interesting' job and thus be able to retain their services as a highly competent CSR for 3 -4 years before they moved on. We have done that and if you look at the qualifications of the engineering, billing and provisioning personnel Exetel is lucky enough to employ in Sri Lanka you will see how successful this operation is:

http://www.exetel.com.au/staff-sl.php

in terms of hiring degree qualified people. You can't see from that listing how long the people hired on this basis stay with Exetel but the first two 'experimental' SL engineers we hired on a work from home basis almost four years ago are still with us - one as a shift supervisor the other as a team leader.

We have, of course, got a very long way to go in fully developing the potentialities that are now available to us but the issue of not being able to retain highly qualified people is a thing of the past. It is also a major bonus that Sri Lanka has a Buddhist culture and that cultural characteristic is a major, major plus for people who have to try and assist unhappy people - particularly too many 'Australians' whose "me before everyone else and that better be right now a***hole" has always been very difficult to deal with.

There are some very, very stupid people in Australia - the email I referred to previously indicates just how stupid people can be and also the reference to "monkeys" indicates how racist more 'Australians' than you might think are. (this word is used frequently by some particularly stupid Australians quite openly as can be seen from this moronic would be Exetel customer's public forum postings):

http://forum.exetel.com.au/viewtopic.php?f=288&t=35020

Running a residential customer support service in Australia would be as stupid as running the network to provide the internet connection by buying IP from Telstra rather than Verizon (a US company) or Optus (a Singapore company) - all that would happen is that the end user would be asked to pay more for their service which would mean Exetel would not exist at all and 45 Australians would lose their jobs.

While I still think Australia's 'racism' is usually more tribal loyalty than xenophobia there appear to be an increasing occurrence of the latter.

John Linton

.....So I'm going to damage my business as a protest....because I rival Krudd as a complete tosser.

The degree of unreality that has deluged Australia over the past two years as evidenced by the constant stream of almost lunatic public utterances of Labor politicians and the attendant media reproduction/mis-reporting of those utterances, and particularly those of the communications media, seem to have reached new lows in relating to any semblance of common sense recently. I am referring to the infantile and entirely nonsensical "web site blackout" of a tiny number of company web sites in Australia over the past few days or so and the mealy mouthed reporting of that pointless, entirely stupid and irrevocably useless 'self immolation' reporting of it in articles such as this:

http://www.itnews.com.au/News/165728,pipe-networks-blacks-out-as-internode-sees-red.aspx

For Heavens sake!

It is laughable that the Krazy Krudd embarked on his attempt at buying the Senate vote of a religious loony Senator by purporting to somehow address the problem of paedophilia by attempting to legislate some sort of "control" of internet access. (the impossibility of doing that is known to every 12 year old onwards in the world and needs no more words to point out how impossible it is). It is totally ludicrous for some allegedly technically aware internet providers to somehow give a loony politician some credibility by "protesting" against something that will never work and, in the event it's ever put in place, will collapse under the weight of its own silliness without any 'assistance' from the ever stupid morons who seem to have nothing better to do with their lives than make complete geese of themselves.

Krudd is just (as memorably declaimed in "The Remarkable Mrs Pritchard" by the lead character) "a duplicitous tosser" whose attempts at getting re-elected have reached a previously unheard of level of, well, duplicity. To dignify his 'censor the internet' by even commenting on it is stupid. However to comment on such stupidity by self harm seems even crazier.

I am sure the Bhuddist monks who used self immolation in Vietnam as a protest against whatever it was they were protesting against in the 1960s and 1970s made graphic pictures but ending their own harmless and useful lives produced a net negative and changed nothing at all.

If Exetel 'blacked out its web site' we would lose approximately 200 new customers each week day and seriously annoy a proportion of the 100,000 plus current customers who depend on information from the web site and, like the Vietnamese monks, accomplish absolutely nothing but damage ourselves - hardly an intelligent thing to do.

Having said that - what occurs to me is that the companies that have decided to shut down their web site (or perhaps just change the front page) aren't as totally dependent on web access to operate their business whereas Exetel is totally dependent on its web site for every aspect of its business? Perhaps obscuring iinet's web site is the equivalent of a self indulgent person having a medium fries instead of a large fries on World Starvation Day? Who knows? Certainly not me.

If these irredeemably stupid people who close their company web sites in some way want to make an effective protest against a government that does something they believe is wrong then there is only one effective way of doing that - don't vote for them at the upcoming election.

Then again; perhaps business isn't as tough as I am assuming it is and these people can afford to throw away a week's new revenue?

PS: The ongoing murder of spoken English coming from Labor politicians was recently raised to a new level by the current minister for overwhelming immigration who referred to the current bunch of morons occupying office not only as the "gubmant" but as the "comm'wulf gubmant". No wonder those American schoolchildren asked their teacher what language the screech owl was using when she visited their school.

John Linton

......at least they can if they are unbelievably smart old dogs.

I did think it odd back in mid 2009 when Sun Systems was 'put up for sale' and one of the main contenders to buy it was Oracle plus some interest from HP with only IBM as a late, but serious, contender. Eventually IBM withdrew for reasons that escape me now and Oracle continued to fight through the morass of EU regulation to complete the sale. I actually met Larry Ellison in 1979 when Oracle was in its very, very early stages and I was working for Fujitsu (Facom as it was then) heading up mainframe sales in Australia and New Zealand. He was a mesmerising man with ambitions that seemed to be ludicrous way back then (to sell database software at $US1 million price tags to the 1,000 biggest companies in the world).The major thing I remember him saying, perhaps that should be prophesying, to the head of Fujitsu's computer operations, was that mainframe hardware would continue to get cheaper to the point where its cost was irrelevant to larger companies (at the time the biggest mainframe sale I had made was a little over $A26 million) but database software would only grow in cost and importance to the world's largest companies. I also remember him saying that he had zero interest in computer hardware as it was a waste of time that should be devoted to developing software.

I was interested to see from this article:

http://online.wsj.com/article/SB10001424052748704905604575027602941385866.html?mod=WSJ_Tech_LEFTTopNews

that as recently as 2007 Larry Ellison was still of the same opinion but obviously, in the very recent past, he has done a 180 on that view of life. Of course Oracle has grown into a gigantic corporation since 1979 and a lot of things have changed dramatically though his prophecy that mainframes would die out and become of irrelevant cost didn't really happen other than in a predictable technology development way - however I don't think, at least in his heart of hearts, that even the super confident Mr Ellison would have envisaged himself as actually achieving what he said he would some 30 years ago and still be running Oracle today.

For someone who always eschewed anything to do with hardware it is an interesting 'late life change'. What will happen in the future with a pure hardware company controlled by a person with no affinity (of his own choosing) for anything to do with what makes hardware appealing is going to interesting to see. One thing is certain though; you don't get to be almost as wealthy as Bill Gates in the technology business (without operating a monopoly) unless you are the very best at what you do over a very long time. Clearly Mr Ellison is exactly that.....even if he is past the 'age of retirement'.

One of the first points in the article struck a chord with me - his statement that he was commencing hiring a new 2,000 person sales force. It made me think about the future we have vaguely planned for Exetel beyond whatever happens after the NBN2 nonsense resolves itself and the actuality of wireless broadband becomes clearer after the LTE trials later this year and then after LTE is more widely deployed. Even back in 2004 when we 'created' Exetel we have always known that there was no 'big company' future in wholesaling services provided by other parties much beyond 2013 (or thereabouts - our time frame was really ten years from where we were then) and that we needed to prepare for that time by building the things we would need to do something different than we did then, and largely, do now. In our limited way we knew that whatever it was it would almost certainly be software and network capacity and that it would almost certainly involve large businesses as customers....beyond that we hadn't got any ideas.

Over the past few years we have gradually built up a very competent data base and facilities programming team and have written a large amount, relatively, of code for many different applications. Today, after 6 years of intensive development, we still have a longer development list than the day we started coding. One of our reasons for opening facilities in Sri Lanka and developing close contacts with a university in Colombo was to ensure we could build a highly competent programming team there. We have reached the stage where our 'software' products are becoming more important to our customers and we need to more quickly develop the 'old' ones (SMS over DSL, FAX over DSL, VoIP In A Box and MoIP) and add the ability to more rapidly develop new ones. We also realised, hard not to really, that we needed to develop a highly competent corporate sales operation. When I look at the current plan the overwhelming majority of the additional money we are allocating is for software development and corporate sales and engineering support.

Maybe Exetel will actually become better known for its software services in a few years time than as a wholesaler of low end communications services - though I very much doubt that we can obtain Larry Ellison's 'million dollars per sale' levels.

John Linton

....(apologies to Admiral Farragut).

I completed the review of the Exetel FY2010 business plan between a very pleasant Australia Day family lunch and the Murray/Nadal match. I ended up making no changes although I believe that the Australian economy will not be particularly strong over the next six months and all of the signs that I can vaguely understand mean that Australian exports will not continue to boom with the PRC running out of infrastructure to build and their recently announced credit controls signaling a change in money supply policy which combined with the ongoing problems in the USA mean that there will more likely be a widespread recession than not. In other words I really have no clue as to the future changes to anything and how they may or may not effect the Australian communications industry.

I am basing the various decisions of not really changing anything on a number of different factors that are also individually influenced by the fact that we have already had not only the best January we have ever had but also the best month we have ever had by a fair distance in terms of new customers and larger volumes of usage of some of the ancillary services. It's also necessary to consider that we have also had the highest expenditure month in our 'history' due to the continued rapid growth in personnel and the continued growth in network bandwidth and facilities.....and that is a cause for double and triple checking.

I haven't changed my mind that the ADSL market is saturated and the coming 'price wars' between the larger ADSL suppliers will continue to make negative impacts on the profitability and rate of growth (or should that be the rate of decline?) of current ADSL customer bases but I think that Exetel has reduced its own ADSL prices to points that even the bravest of large suppliers (and I seriously doubt there are many/any) will have a lot of trouble reaching so we have been able to see the 'hit' that involves in current ADSL profitability - and that is for a company that operates on the slimmest of margins. It isn't a pretty sight but better to get used to working with even slimmer margins than in the past than suffer the consequences of not doing that.

Similarly, I continue to believe that wireless broadband will continue to grow at the expense of low end ADSL as well as being used in every laptop/notebook and an ever larger percentage of mobile phones. While the profits to be made from wireless broadband (at least for companies like Exetel) will continue to be zero or negative I think that can be turned around as the months go by. As part of a 'complete' suite of communication services it has to be made a non-money losing offering some time in 2010 - just how that is to be done I don't really know right now.

In the same way our VoIP business has continued to grow at a progressively faster rate each month and we are now seeing much more interest from corporates in our VoIP offerings - though sales so far have only been to the 'braver' commercial entities. I expect our residential VoIP business to grow much faster in 2010 than it did in 2009 as the take up curve steepened appreciably in the last half of 2009. Personally I use VoIP on my mobile and from our office and my home land line and I can't see why any sensibly competent person wouldn't do the same. It amazes me that so many sensible people I know in business still use PSTN/ISDN and still pay, no matter what 'great deal' they claim to have, so much money each month and, more stupidly, do without all the benefits that VoIP provides that conventional telephony simply can't do.

Our corporate business continues to grow very quickly and by the end of February we would expect to have twelve fully operational corporate sales reps bringing in over 100 new corporate customers per month and if we do in fact make that happen we will aim to grow the corporate sales force to 24 by the end of June. Our overall aim is to be bringing in around 400 new corporate customers a month  by early 2011 and although that sounds very, very ambitious we are basing it on the levels of development we achieved in 2009 in taking a 'concept' to a deliverable reality. We are reaching the ability to provide a "total communication services solution" with our 6 'add on' services and we will make more effort to use that advantage over the next few months as I don't see any other communications service company being able to deliver the complete range of services that Exetel has gradually put in place over the past three years - perhaps that's because I don't look hard enough.

So - an aggressive approach to a tough year - hopefully based on a sensible understanding of the realities of what may happen over the coming few months. I guess we also put our money where our mouth is over the last 48 hours and decided to invest more money in Exetel by buying additional floor space to accommodate the personnel growth we need to make the 2010 business plan a reality.

John Linton

......because it seems that every time I read something in the Australian media I get the uneasy feeling that it is sort of right but doesn't exactly fit my understanding of the actual facts of the subject/topic. It's almost a 'deja vu' feeling except that you don't think you've been there before but you almost think you understand what is being said but it somehow doesn't seem right. I got this feeling in reading this yesterday:

http://www.computerworld.com.au/article/333716/iia_funding_needed_isps_crack-down_unruly_spammers/

It can't just be me but this clap trap organisation and its figurehead spokesperson appear to be something out of a Hollywood horror movie franchise where Coroneos is their version of Freddie who comes lurching out of the gloom movie after movie to perpetrate some new frightfulness on the the latest batch of scantily clad co-eds and their sterotype male companions. Now, I understand that the IIA is just a Telstra puppet to promote whatever view of communications Telstra currently believes to be in their best interests but this latest crass stupidity really trumps even their "it would be ruinously expensive to comply with sending copyright infringement notices to thieves" wanking before and during the iinet trial.

Firstly I find it very funny that (Coroneos/Telstra) is now all for treating theft via the internet (spam in this case) as a serious issue that should be dealt with by ISPs in stark contrast to his view on copyright theft over the internet where he regarded that as 'unproven' - yes, I know he is a total tosser but the effrontery to present two such opposing views within months of each other is just plain stupefying. Either an ISP is responsible for the actions of their customers (to the limit of denying them access or they aren't - Coroneos can't cherry pick) and make up his personal understanding of legality as it suits Telstra's view of money making.

But what really astounded me was his casual references to "the government would need to fund the processes for an ISP complying with the requirements to stop spamming!!!!!!!!" Have I suddenly been transported, without my knowledge, to some ultra socialist State where the "government" is responsible for the running of everything? Is Coroneos just a cheap shill for some Ministry of Truth that now controls all aspects of communications in whatever this strange State is? Give me a break!

The IIA/Telstra argued against ISPs being responsible for copyright theft.

Why is it now arguing for ISPs being responsible for SPAM theft?

Why is it suggesting that the 'government' pays for this?

The reality is that responsible ISPs (like Exetel) have, since very, very early in their existence ALWAYS dealt with SPAMMERS in the same way we have dealt with copyright thieves - except at the behest of a different 'authority/authorities' (and to avoid different punishments). If we receive a notice that some IP on our network is spamming we immediately shut down that IP and email the owner of the IP and give them access to a block page only that allows them to either stop spamming if they are the perpetrator or disinfect their PC(s) if they have picked up a virus they haven't noticed.

As with copyright infringement notices the cost to Exetel is zero - a couple of hundred lines of code and some server power and storage space. What is it that a 'government' needs to fund? Why is there a need for 'legislation' or, worse, some directive from Telstra, telling an ISP what they must do? Where the f*** does the 'government', or any other half arsed entity come in to consideration in telling anyone what they must do to run their business?

Strange that the IIA/Telstra et alia have always taken action on alleged spamming (because they got summarily punished if they didn't) yet argued against taking action on alleged copyright theft because there was no way they could be immediately punished. Talk about double standards....or is it a parallel universe?

PS: If you don't think the 'gubmant' and the media deliberately lie to you:

http://www.smh.com.au/opinion/politics/avatars-earthlings-not-nearly-as-monstrous-as-bush-20100125-mugw.html

John Linton

....or just the worst journalism?

I raise that question simply because whenever I read any 'article' that relates to the Australian communications industry all I see is total nonsense invariably with some screaming headline that, apart from being hysterical, seldom relates to the actual words subsequently written. Annette read me a really good (or should that be bad?) example of such articles yesterday over breakfast. Now admittedly it was from a NSW Sunday tabloid 'newspaper' which itself is only loosely associated with what any other country in the world would think is related to journalism overall but doubtless the people who actually 'read' it take some notice of what it says - I haven't read it for over twenty years and then only for the sports section - I have no idea why Annette reads it but assume that she can't kick the habit of reading something while having breakfast.

In any event the article also appears in the on line SMH site here:

http://www.smh.com.au/technology/technology-news/consumers-being-abused-by-text-message-price-rort-20100123-mroo.html

The article makes the following claim:

Last financial year, total mobile telecommunications revenue increased
by 10 per cent from $10.8 billion to $12 billion, while mobile phone
subscriptions increased to 24 million.

which I find surprising because I very much doubt that last year's figures are available yet - it's far too early - and I don't see the relevance of a gross revenue figure or even a growth figure as having any relevance to anything. The table at the bottom of the article denies the head line as it simply shows that the 'retail' cost of an SMS is the same as that charged in the UK and the USA. Charges for SMS in SE Asian countries are as relevant as comparing the cost of any other service in Australia to the costs of countries where the base income differentials are so different.

However, even that is irrelevant when other quotes in the article point out that the majority of Australian mobile users buy their service using "capped plans" which means the actual prices of SMS (and calls) can't be represented by picking one 'retail' charge for part of a service and then have some cub journalist write a "we're all being ripped off by some dreadful companies" piece of garbage like the cited article. I am not, for one moment, denying that a rate of 25 cents per SMS isn't price gouging of the most disgraceful type - simply that no-one I know would be paying such ludicrously high prices....and I assume no-one who uses a lot of SMS would either.

I am pretty sure that building and maintaining a mobile network costs quite a bit of money and I'm equally sure that the people who put up the money for those networks require a realistic commercial return on their investment. For some prat of a 'professor' to make a ludicrous statement like "the cost of carrying an SMS is either free or of miniscule cost" and to have it printed just beggars the imagination - only some twit who has never had a real job in his life can make a claim that a $A4billion+ network can deliver anything for "free". While the cost, depending on the rigour you apply to the calculations, can be very low for sending an SMS, the point is that it is simply a part of an overall pricing matrix that includes giving away hardware (and therefore recovering the cost of that hardware) and, literally, dozens of other call types and service provisions.

Now, its quite possible to buy SMS services that allow even a company of Exetel's size to provide a residential user to send an SMS for far less than ten cents a message as a 'stand alone' service (not cross subsidising voice call rates or free hardware etc). In fact Exetel, like several other companies supplies business SMS services at less than 5 cents a message and both the supplier to Exetel and Exetel itself makes a profit on such services... but those customers use tens of thousands or hundreds of thousands of SMS a month.

Ever since Krudd launched his first raft of lies ("I will deliver 12 mbps of data service to every child in Australia by the end of 2009 or some other speed by some other date....") the Australian press has printed possibly millions of words on just what is happening and will happen in Australian communications and I have serious doubts that not one sentence in all of those millions of words has been either true or has demonstrated any understanding by the writer of the subject he/she tried to address....certainly none of the articles I have read has had a clue.

The article cited is appallingly incorrect. The tsunami of words written about Krudd's lies is equally incorrect. It seems to me that Australia's fourth estate is as much use in conveying anything resembling 'truth' in 2010 as the then equivalent of Der Spiegel was in the first half of the 1940s.

I think that Australian journalism far outstrips the Australian communications industry for the title of "worst in the world".

John Linton

by merging Exetel with a similar sized company.

Over the past 12 months Exetel's directors have considered various ways of operating the company simply because that is a sensible thing for any growing company to do. Over the years we have had a few, very improbable, approaches from totally 'cr**' companies offering to "buy" Exetel which we haven't given more than a moments consideration to due to the sort of people who run those companies neither having the money nor, on the odd occasion they may have had the money, the basic human decencies that would allow any vaguely ethical person to do any sort of business with them. So we haven't really ever seen (certainly have never sought) an opportunity to sell Exetel for the past five years.

Some months ago I had an approach from a reputable 'middle man' acting on behalf of a communications company that, from what I can tell, is a little bigger than Exetel who wished to explore possible "joint operating possibilities". Having briefly checked with Steve and Annette I advised the company that we didn't think there were any ways we could do business with a competitor even though we didn't, as far as we knew, come across them in the marketplaces we operated in very often. I received a follow up call just before Christmas asking whether we had changed our views on the original 'parameters' to which I responded in the negative. So I was surprised to receive a call yesterday from one of the owners of the business (I really must check how my mobile number comes into the possession of so many people I have never met) who apologised for calling with no introduction but as he found himself in Sydney unexpectedly this weekend wondered whether we could meet. I explained that, unfortunately, that wasn't possible but we could discuss anything equally sensibly over the telephone.

We had, I think, a useful chat for close to an hour covering our mutual interests in the communications business and general economic outlook for the coming months and how we, differently, viewed the current and near future situations in wireless broadband and business mid range Ethernet and fibre services. He knew a lot more about my views than I did about his because he apparently reads this blog on occasions so he got to do a lot more talking that I did. The purpose of his call (after we quickly established that his company didn't have anything like the financial access to buy Exetel and we certainly didn't have the money to buy his company) was to explore the 'merger' of the two companies plus a third, smaller, communications company via an IPO that his company had been working on for some time and had reached the stage where the underwriter had advised them that the 'float' would be much more successful if the 'entity' was much bigger.

It's an interesting idea and the general concept has some initial appeal but, at least for me, the practicalities are insurmountable because both the business philosophies of Exetel's owners and the operational methods of Exetel generally are so far away from those of the company approaching us (and the overwhelming majority of other sensible commercial entities in Australia) that there is virtually no point of contact. We discussed this for a few minutes and quickly came to an agreement that while a superficial fit was clearly possible it would never work in practice. Essentially, their shareholders  are sensible commercial investors who want to pay themselves, sensibly, as much money as possible by making as much money as possible. Exetel's shareholders are content to pay themselves very little and sell services at the lowest prices possible. Not really a meeting of the minds.

We concluded our conversation amiably and I agreed to discuss the bare bones concept with Steve and Annette and I did reiterate that in theory the concept had a great deal of appeal but doubted that the 'logistical' problems could ever be sensibly overcome. I then went back to contemplating changes to the Exetel 2010 business plan - particularly it's ambitious growth targets and the rapidly growing operational costs and salary costs that are required to achieve that sort of growth. I am not ashamed to say (as opposed to "I make no apology") that the steep increases in costs to grow Exetel to double its current size do concern me and they concern me quite considerably. A 'merger' would be a whole lot better way to get to double the size - and it only requires some documentation and signatures - so the phone call completely destroyed my ability to concentrate on mundane rows and columns of figures. That is if you ignore all the issues that come after the signatures and champagne.

Perhaps the real reason is that I, personally, could never contemplate working for someone else ever again.

John Linton

......and the likelihood of a recession in Australia in 2010 are now being signalled?

I suppose that is the sort of problem you confront when you have a 'Ken Doll' like Krudd as the 'leader' (now that's a laugh) of your country. In case you hadn't noticed the "world leader" that Krudd models himself on, the equally useless over spender Obama, precipitated a fall in world share markets of over 5% over the past few days with his version of Krudd's NBN2 bankruptcy plan - although that fruit loop having spent a trillion or so dollars he wasn't lucky enough to have in the piggy bank courtesy of his previous administrations - he is going to "do something about the banks".

Like Krudd's NBN2 cover up lies it doesn't matter whether or not he actually does what his speech writers/spin spivs have him speak but the fact that he make such a lunatic statement continues to expose him in the same way that Krudd is now fully exposed. Obama and Krudd can only do two things:

1) The can both make promises endlessly without EVER delivering on a single one of them

2) They can both spend more money than the presses can print faster than any previous person in the history of politics

They both do these country destroying things because neither of them has the slightest knowledge or experience required to hold their current positions, but they both love talking endlessly as if they do. ANY factual analysis of either of these poseurs promises versus delivery starkly shows a track record of zero correlation between the two.

I am the first person to admit that my personal knowledge of international or national economics is slight bordering on vestigial but I read widely and I have been reading widely over a long enough period of time to be able to distinguish the polemicists and hacks from the people who actually know what they are talking about based on the simple assessment method of letting time prove or not prove the accuracy of what they predict and say.

So it is with great uneasiness that I approach this weekend's review of Exetel's 2010 calendar year business plan and, although I can't remember how I felt last year at this time when Krudd was maundering on about the 'GFC' and the tough times that would beset Australia I never took that very seriously because I saw zero indications of any negativity in Exetel's or anyone else's business then so, apart from being slightly more cautious on some of the more 'daring' aspects of the plan, I actually made no changes to the expansion we had planned for 2009 which, now the year is over, came out just as planned with us investing another almost $A2 million in to Exetel and almost doubling the number of people we employ as well as making the predicted profit for the year - so much for Krudd and co's doom and gloom scenarios throughout 2009.

It's a completely different story now. From Telstra on down all I see is true doom and gloom in terms of (in Telstra's case) public statements that their business in not only down on previous forecasts but is possibly down so far it is in danger of being less than the previous year in terms of revenue and in the case of other companies with which we compete I see constant signs of pricing 'adjustments' and personnel decreases which only mean they are not meeting the financial targets they started the FY 2010 year with. While Exetel has already achieved a record January with over a week to go I also realise that our sudden sales growth across 4, maybe 5, products/services is entirely due to other suppliers customers looking to save money which, perversely you may think, means that any upturn in our business is because people are looking to reduce their expenditure as they too see the immediate future in a more pessimistic light (I don't think its because 70% more people have suddenly realised that Exetel is much better as a supplier than they thought we were).

So, while it may seem strange, we will approach this review having had by far the best seven months of our, short, business life, far more pessimistically than at any Australia Day weekend of the past six years. I haven't got a clue what the future will bring Australia financially over the coming twelve months but every indication is that it won't be as good as 2009. Doubtless Krudd will continue to spend even more money (12 submarines that will never see a single useful minute's deployment, billions of dollars for fighter planes that will never fire a shot in anger and, let's not forget the 'NBN2') while Australia runs out of water and edges towards Keating's famous prediction.

Maybe I'll just open a few bottles and watch the tennis on TV - it seems a more useful thing to do.

John Linton

A recurring issue in managing a business of Exetel's current size along a development path that is based on steady but constant growth is making decisions on just what developments should be pursued with the constant evaluations of how best to pursue the constantly changing opportunities that are available to you - and how to deal with the acquisition and development of personnel and processes and the logistics of simply 'housing' the increasing numbers of people involved with the company to cater for that growth. Sometime when I haven't been paying attention Exetel has 'suddenly' grown from being the 'small company' I always thought of it as to something bigger than that (I do realise that in terms of Australian data communication companies it remains a minute company).

There is no rationale, that I'm aware of, in commercial life that requires a company to continually grow but it seems to be a general methodology for the majority of 'start ups' as they all have some sort of ambitions that require/desire the involvement of more than the founders of the business working in their back rooms/garages to provide some sort of product or service. Although I am, and have always been, heavily involved in the planning functions at Exetel there have been few times (perhaps none) when I have had any real idea of what might or might not be possible for Exetel to achieve. We have always stayed on the very cautious 'side' in making growth decisions and this has certainly meant that we haven't grown as much as we perhaps could have. Our approaches of making very little money and only paying cash for anything we need has also slowed our possible growth.

Sometime over the past 12 to 18 months, Exetel has grown from less than 50 people to something very close to 100 people with more 'demands' coming every day to grow even faster than we currently plan to do. Apart from the 'frightening' nature of these commitments we are also faced with fact that despite the move to our own purchased floor space in North Sydney in June 2009 and  increasing our rented space in Colombo by around 40% in August last year we need more space and facilities in both locations in the very near future to cope with the additional personnel we are contemplating hiring.

Annette and I ponied up the almost $A2 million that was required to purchase the North Sydney floor space and fit it out which, while we were happy enough to do, came at a time when we didn't think we would still need to be investing, for us, big chunks of money in Exetel. We are now faced with the situation where, if we continue our 'rental money is a waste of money', attitude we need to find a further half million for a six month or so 'stop gap' solution to the Australian floor space needs and around a further million to buy somewhere suitable in Colombo; if such space could be found which appears to be problematical. We can solve both those problems by renting of course which is not something that we are particularly keen to do.

However, leaving aside those 'minor' issues, the real issues are the logistics of of managing a more rapidly growing business and one that is growing in two locations some 8,000 kilometers apart. The equally real issues are deciding the product/service directions which in turn are complicated by the unknown status of the Australian communications market after the coming election......... the result of which now seems less certain than at any time in the last two and a bit years - particularly in terms of Krudd's insanity regarding his meddling so stupidly in something he knows nothing about.

We will review the current Exetel business plan over the Australia Day 'week end' and will have to make some fairly decisions over those few days. After 6 years of steady growth in directions we were pretty sure about and in markets that despite their various 'palpitations' didn't really change that much year on year nothing now is very certain at all other than it will be very different in 2011 than it is today. Perhaps it's the further largish (for us) financial investment that is concerning me more than it would normally do because of the Krudd induced uncertainty? I really don't know. I think my real concern is how 'dangerous' it is to pursue the doubling in size of a 'small' company in uncertain times given the enormous changes that are involved in doing that.

There is no need for Exetel to 'grow' for the sake of just becoming bigger with the possible exception of generating better 'purchasing power'. That would be useful but I am thinking that the really big advantage that Exetel currently has is its operating efficiency which will become less if the company grows too 'big' too quickly. Sometimes, and more often than at any time in the past that I can remember, I wonder whether the effort to operate a company of Exetel's size is worth the effort it takes.

Then I think about the many good things that can be achieved by doing such a thing and I get on with doing something more useful.

John Linton

I was sent this summary of one persons view of yesterday's 'NBNCo Industry Consultation". While I broadly agree with the views expressed (with the exception that I don't think it will ever be built in any meaningful way), they are actually the views of someone unknown to me. (I apologise about the formatting but transferring documents and getting rid of the, literally, pages and pages of formatting has always defeated me):

"Spent the afternoon at the NBNCo Industry consultation.

NBNCo panel consisted of:

Mike Quigley CEO: highly intelligent, quite aggressive but with a deep engineering knowledge;

Christy Boyce, NBNCo No 2 employee, Head of Industry Liaison, ex McKinsey Partner: very poor presenter
and completely out of depth in anything to do with telecoms;

Matthew Lobb, NBNCo GM Wholesale Products - reporting to Christy - quiet, good presenter.

Jamie Chard NBNCo Architect, poor presenter - technically incredibly weak.

The highlights in my opinion were:

NBNCo model will enable any Retail Service Provider RSP – with or without backhaul – to connect to an NBN POI. No POI can have only Telstra backhaul.

NBN provides transit backhaul to aggregate traffic from POIs that have contested backhaul. Telstra will not be allowed to use its unique backhaul assets for direct connection but must use and pay for NBN’s transit. Huh huh.

In the best case NBN may agree to rent/purchase backhaul from Telstra but certainly NBN largely eliminates or at least greatly reduces Telstra’s advantage in backhaul; Premise Optical Terminating Unit OTN will have multiple ports allowing a premise to have multiple retail service providers.

This will be for RSPs an absolute race to the bottom. If the wholesale cost per FTTP is $100/month/connection then RSPs won’t be able to charge more than a few tens of dollars per premise / month and with multiple RSPs per premise would mean that no margin whatsoever is left for RSPs. This is really a race/dive to the bottom;

Each premise OTN will have a single ATA to covert analogue phone calls to SIP and it may be that the
Government will have to allow a customer just to pay for the ATA to meet USO?


NBNCo has no path to Multi Dwelling Unit MDUs and FOXTEL has told NBNCo not to touch any of their equipment and basically bugger off from apartment buildings as far as possible;

The story about the remaining 10% via satellite is very murky. Quigley became quite agitated when somebody in the audience asked whether Telstra’s NextG already covering 99% of the population at up to 42 Mbit/s could be considered to meet the 12 Mbit/s for
the remaining 10%? At the end Quigley said that no decision was as of yet made on satellites and that the solution might end up being wireless for the remaining 10%

Quigley became very agitated - really rattled -  about any wireless broadband competition capabilities. Quigley’s answers knocking down wireless were very unconvincing and IMO downright rubbish;

I asked and Quigley thanked me for good questions {but without giving any answers I have to say} on: “NBN’s view of having to compete with the CAN as well as HFC. Would Telstra and/or Optus be allowed to shut down their networks if it made commercial sense and what about the stranded equipment in exchanges?

Also, what would NBNCo’s position be if a carrier were to cherry pick the most profitable 20-30% of densest population by building their own FTTP at a fractional cost {Quigley’s response was that he’d raise that with the Government and would offer the Government options how to deal with cherry picking}


OK what does this all mean to Telstra, the other carriers and the consumer:

Telstra’s share price will no doubt plummet if there will be no deal with NBNCo;

NBNCo cannot offer full commercial pricing for Telstra’s assets and traffic unless backed by legislation allowing Telstra to turn-off the CAN segment by segment. This would be objected by ACCC unless legislated;

Running NBN in competition with CAN and HFC would be commercial suicide in particular with the
additional wireless competition;

ISPs will be completely wiped out by NBN. Tier-2 AAPT, Primus, TPG and iinet
will be wiped out, too. Optus will revert to a pure mobile + satellite carrier;

Telstra will lose over the next ten years all of its fixed line retail margin. A loss of $1b pa in profit at the end of the ten years. This could be partially offset by reduced OPEX, no further CAPEX in the CAN, business-to-business point-to-point fibre networks by Telstra Wholesale – this being beyond the scope of the simple NBNCo

GPON mass market premise model. Also, Telstra fixed line losses will be offset by further massive staff redundancies and extra wireless revenue. It could bethat after ten years Telstra’s revenue base will be reduced by a third but profit by very little.

All the competing carriers will be screwed by NBNCo and everybody will long for the good old days when they as the so called “competition” could have a free lunch at Telstra’s expense with generous assistance spoon fed by ACCC;

We the consumers will becompletely screwed because we will be paying two-to-three times more for fixed broadband especially if the take-up will be less than 60% as Paul Broad of AAPT so wisely warned.

These are just my thoughts. "

I would provide the acknowledgment to the person who wrote the above comments but they were sent to be by a third party so I can't do that for the moment.

Perhaps the technical media will provide their various views on this briefing later today? The only one I've seen so far said absolutely nothing:

http://www.theaustralian.com.au/business/national-broadband-roadshow-outlines-products/story-e6frg8zx-1225821803318

John Linton

We are still no closer to finding sensible ways to generate more wireless business that we have achieved to date - our recent changes of a few weeks ago have increased daily orders by around one third which was a start but only that. I would like to see the new ABS figures before making any 'irrevocable' decisions but that may be becoming an excuse not to do anything.My major concern is not the one trotted out about "never be enough spectrum" to actually provide a widespread fast and meaningful service - it's the exact opposite - that we won't be able to generate enough wireless business to get the sort of prices we need to be able to offer a meaningful wireless service. I have been around long enough to have been an early user of an Optus mobile telephone in the early 1990s and I understand that developing a 'use anywhere at the highest quality' roll out is only a matter of time with some issues along the way so the ability of the service is of no concern to us strategically and the newcomers will eventually shut up about their personal issues - it won't lessen anyone's personal problems it just isn't indicative of what is happening and will happen.

The latest move by both Verizon and ATT in the USA more clearly indicates the current and coming issue - increasing the number of wireless subscribers more rapidly:

http://online.wsj.com/article/SB10001424052748703657604575004670249993004.html?mod=WSJ_Tech_LEFTTopNews

From my experience in the communications industry you don't cut your prices by 30% because you are meeting your targets and when you are in a market with one other main competitor you don't cut your prices by 30% without the full expectation that your competitor will do the same/very similar. You also don't cut your prices by 30% without expecting to be able to deliver the additional services such a move will generate nor do you expect to lose money by reducing your established revenue stream from that type of customer you already have. So why would two major companies make such a move?

I can only think of two reasons, perhaps more accurately, two inter-related reasons. To actually provide the services you think will generate the required volume to be able to sell at those prices you need to grow the volume - almost certainly the reason. Alternatively you think your progress in reaching the volume you need to make it possible to sell at the volume you need is being impeded by the prices you are currently charging. So it's an interesting insight that the two largest mobile telephony/data providers in the USA believe that unlimited voice calling and unlimited data usage plans are profitable at $US70.00 (less than $A80.00) while Australian carriers, at this exact current time, think so differently. No point in trotting out any nonsense about market size/population density etc. Why? Because prior to a few months ago the Australian mobile carriers voice plans were almost indistinguishable to those of Verizon and AT&T in the USA. The data plans were certainly different but, based on voice charges, that was/is just 'early adopter price gouging' on an 'immature' network.

Now, I obviously don't know what percentage of their user bases buy those companies high end/unlimited plans - perhaps its only a very small number. Therefore this could be just a brave move to stimulate interest in the other offerings below $US70.00 a month. However what is being said is that there is now a 'ceiling' on the price of mobile usage and its 30% below what it was yesterday (you can't include more than "unlimited" in a service price). Therefore all other plan prices will move downwards - at least you would think so. What percentage of Australian mobile users would take up an $A80.00 unlimited call/data usage plan? Presumably quite a large number. So it seems to me that the Australian carriers will eventually catch up with the US carriers and offer something similar as their roll outs become closer to 'maturity'........or they become more 'desperate' for market share......it doesn't look like they will go in the other direction any time soon.

It is the clearest indicator yet that mobile data pricing has a long way to fall in Australia and that it is almost certainly going to fall sooner rather than later.....even the recent Telstra pricing is an indication of that. At the moment the mobile carriers retail plans are around an apparent $A10.00 gb (give or take the marketing flim flam) whereas the US pricing is at less than half that (I'm assuming that unlimited results in a reality of around $A5.00 per gb in actual usage over the whole plan user base).

I think that's good news, possibly really good news, for Australian users but I don't think it helps Exetel at all. I can only take perverse comfort in thinking that its much worse for a number of other companies.

John Linton

......in somewhat strange ways....but nevertheless......movement....and positive movement.

I was attracted by the headline on this article as I keep spending time trying to work out a realistic residential and business wireless broadband strategy and keep getting absolutely nowhere:

http://apcmag.com/telstra-unveils-19-for-1gb-next-g-broadband-prices.htm

$A19.00 for 1 gb seems to be a dramatic cut for Telstra and even after digesting the 'conditions' it still seems reasonable for a business user. However the big changes are in the higher usage plans which all provide data for around $A10.00 per gb (if you use the full allowance) and throw in a free modem on a 24 month contract (though fewer and fewer business users will need that as they almost certainly have an HSPA chip set built in to their laptop/notebook or a wireless modem purchased previously). The per gb rate drops to $5.00 per gb if a single business user seriously contemplates using 120 gb per month but I would have thought that was a rarity.....nevertheless a 5 cent per mb excess is now being offered for the first time to a business user which is a significant milestone for Telstra.

The quibblers will point out the lock in of a 24 month contract but for the sorts of businesses that deal with Telstra they are used to that and often sign longer contracts. Similarly the lack of a fixed Ip is not going to trouble them as they almost certainly wouldn't think it was something they could get and, as far as I know, Exetel is the only company to offer it as a standard feature for a business user. The other negative is the horrendously high excess usage charge which at $A250.00 per gb is truly excessive but, again, businesses that deal with Telstra will not notice and the simple remedy is to buy a higher plan if the user thinks they will reach the plan limit.

So all in all a leap forward for Telstra wireless pricing. Why would Telstra have cut prices? Usually only one reason - they are losing to Optus and Vodafone in this particular market and they have to be more competitive. The other, unlikely, reason would be that they have achieved a new economy of scale as they continue to rapidly add new wireless users. Looked at outside Australia Telstra's new business pricing is still two or three times higher than is available to small businesses in the EU and in the US. So, more likely, it is just one more shot fired in the 'wireless wars' and new offerings from Optus and Vodafone won't be very far away.

It isn't helpful for Exetel in trying to come up with a better wireless strategy but it adds some emphasis to the fact that wireless continues to get closer and closer to replacing ADSL at the 5 gb user level and with Telstra experimenting with 5 cents per GB pricing it is looking like wireless will become lower cost than ADSL at the 10/12 gb monthly usage range in the not too distant future which, as far as I can tell, covers more than 70% of current ADSL users. Telstra seems to be becoming more confident in the higher average speeds being achieved across wider demographics and that is something that will only continue to improve. Compared to 18 months ago a wireless user is getting two or three times the speed at half to a third of the price which changes end user buyer potential very considerably.

Despite the 'nay sayers' (all of whom seem to have same deeply vested interest in wishing wireless broadband would go away) claiming that "there isn't enough spectrum for wireless to ever be considered an ADSL replacement" the reality is that countries in the EU (and the larger States in the USA) have more wireless broadband users than Australia has wire line broadband users and although all of those locations have had 'hiccups' in their wireless capacity roll outs they provide more than adequate spectrum in cities such as London, Los Angeles, Paris, Frankfurt and Tokyo where there are almost as many users as there are in the whole of Australia. Doubtless, just as with the introduction of mobile telephony in Australia in the early 1990s, there will continue to be coverage and congestion issues, however the continued roll out and tower upgrading will produce the same results for wireless broadband as it did for wireless telephony....at least there is no current reason to believe that won't be the case....if you're over 15.

John Linton

I spent some fruitless time yesterday trying to come up with some inspiration to improve our wireless broadband offerings for residential users - something I have been doing on and off for the past 3 - 4 weeks. I had looked at the new Telstra wireless plans earlier in the week to attempt to work out what Telstra thought was happening in the wireless market but I couldn't detect much other than their switch from very expensive 'excess' charges to 64kbps once a user reached their limit must mean something as Telstra is not known for removing huge revenue rip offs from its dumber users. The only thing I could come up with for Telstra forgoing that huge revenue source is that they must 'sense' that there is a noticeable switch of their lower end ADSL users to wireless - but it's a guess with nothing to support it. The only thing that is certain is that for Telstra to reduce any price means that they aren't doing as well as they need to do with that particular service.

Our wireless sales are up around 300% from the same period in January 2009 (when we had only begun offering the service) and around 30% over the same time in December which means the small changes we have made to date have had some effect but not nearly enough. One thing that remains puzzling to us is that we use the Optus 3G network yet, since we began, delivering wireless services (via Layer 2 direct connection not just re-selling the retail service) in October 2008 the speeds on our Optus service are consistently much faster than the speeds on Optus own service by a quite considerable margin. We tested this out with the Optus Product manager on two occasions over the past year and he agreed that he duplicated the results and mumbled something about 'firewalls'. I also have an Internode/Optus service (I purchased late in 2009) which is, as far as I know using Optus Layer 2, and that service whenever I test it over the past three months is far slower than the Exetel/Optus Layer 2 service in identical locations (strangely it almost looks as though Internode are just using the Optus retail service based on the speeds being nearly identical - but that can't be so based on Internode's public statements) - I have no idea what this means but I do know two acquaintances that use all three services and say that it's a consistent result. It would be nice to find a way to use that anomaly but if, in fact there is a way, it continues to elude me.

So the reality is that with the 'wars' between the carriers resulting in explosive growth the only result is, as would be expected, round after round of  price 'adjustments' on their various retail offerings which ensure that they generate enough new user traffic to ensure their tower upgrade/back haul plans are only just keeping up with their new usage volumes. This is a really good thing in many ways as it ensures that wireless is more heavily promoted than it would be otherwise and that pricing for variations of the service are at the lowest possible points. Finding ways of effectively competing in that environment become very hard and show no signs of becoming easier as 2010 progresses - at least not as far as I can see. When you consider why Telstra gave up the revenue it earned from excess usage charges it becomes a little clearer that it was aimed at trying to cut off the profitable part of the other carrier's 5gb type plans rather than to offer its own customers a better deal. So with no excess charges to 'balance' the gambles on setting download inclusions Telstra has made "shaping" a benefit to the end user (until they try using wireless at 64kbps) that only benefits them. Looking at the rest of their plans and their data/cost equations they are very, very unremarkable.

We will work on trying to come up with something today and tomorrow but if that produces no great new ideas we will have to give up on any further promotions in the residential marketplace and just tough it out until we can find a new way of approaching the residential marketplaces. We can't take too many risks as we make only a few cents per service with the current pricing which means we have to re-jig the pricing bases to make any impact(unlikely at the moment) - or just gamble with our future which I'm not inclined to do.

I am not hopeful.

John Linton

Although figures concerning performance over short periods of time aren't particularly meaningful they do illustrate some aspects of where markets are at and what competitive pressures exist in some ways. A long term customer sent me a screen shot of Exetel's April 2004 ADSL1 pricing yesterday which starkly showed how prices had changed over the past almost 6 years. The only plan that would have begun to approach the needs of the most of today's family users was the 1500/C plan which gave you 18 gbytes (with $A4.00 per gb excess) for $A95.00 per month at 1500/256 speeds. Before laughing out loud you need to remember that plan was the best on the market, by a very long way, in terms of both included downloads, monthly access price and affordable excess charges.....and at a zero transfer cost.

Back in late 2008 when we decided to grow our corporate business to become larger than our residential business we did so in the expectation that our ADSL broadband business would reach a high point in 2009 and then decline at an unknown rate as wireless ate in to it at the bottom end and there was no more growth at the top end due to saturation and the price wars between Telstra and their bigger competitors. The stagnation/saturation certainly seems to have occurred over 2009 according to the ABS figures and the various company reports over that year. Wireless certainly grew dramatically though the full year's figures are not yet available. Exetel's ADSL growth certainly slowed over the first 9 months of 2009 but the growth since then has been very high with 70% being achieved for the first 16 days of January 2010.

Checking on the year end 2009 targets and fiddling with the revised planning figures for 2010 I noticed the stark contrast between our business sales in the first half of this month compared to January 2009 and realised that those sales were running at 600% more than January last year. One of our key decisions for the 2009 calendar year plan was to build a direct corporate sales force based on some fairly unusual characteristics and premises which we commenced in late February when we hired the first of the graduate trainees we were going to base the personnel for this program on. Since then, and counting the latest trainee who joined us last week we have 11 corporate sales people who, on average, have been with Exetel for less than 5 months. So if you do some elementary maths and aren't too fussed about statistical theory this 600% growth has been achieved at a direct ratio of 'add a person' and within five months they become 100% productive compared to what the accumulated experience and 'productivity' of the one person in corporate sales achieved up in the five years up to January 2009.

Ignoring the Gonzo maths, the issue is whether this pretty linear growth can be maintained, and preferably increased, over the coming year or is there some sort of 'saturation point' along the way and, if there is, where will that occur. The other issue is that Exetel's corporate sales are very small at the moment peaking at 70 or so in November (before the 'Christmas slowdown' made it difficult to set new records) but eventually the companies from whom our young sales force is taking customers will eventually notice and our free run of selling Ethernet services at less than half their bloated prices will be slowed as they try and counter act what will eventually become noticeable losses.

My view is that our ambitious targets are so small, relative to the market, that Exetel will remain un-noticed in any real sense for the next twelve months, at least, which will give us time to complete the first phase of this project (the basic training of a 48 person corporate sales force) which will fully 'equip' them to deal with subsequent 'competitor strategies'. The target is to get to around 400 corporate sales per month based on an estimate that there are around 400,000 customers for Ethernet products between 4 and 1,000  mbps excluding the 1,000 largest corporate/government customers of data services. The simple math is that if you can select, train and keep a sales force of ten that sells 100 new connections per month it can't be that much harder than do the same for 30 more and reach the monthly sales target of 400 a month if the target market place is 400,000 and it's only marginally more difficult if the target market place is only 200,000.

So, is 2010 going to be the year of the corporate Ethernet sale for Exetel? Will corporate sales deliver close to the residential ADSL revenue by the end of the year? Can Exetel grow a solid corporate business that exists now in to something much more formidable over the coming year while other companies put more and more effort in to 'rescuing' their residential ADSL market shares?

One more thing to worry about.