John Linton's Personal Musings

John Linton

....than offering undeliverable terabyte ADSL plans.....(personally I have never understood that simile/metaphor but it will do).

When we started Exetel we had no sales capability except for our web site. That remained the case for well over five years. While we certainly took 'sales enquiry calls' and replied to sales enquiry emails we only employed engineers in telephone support to carry out those functions. When we opened the Exetel operation in Colombo we changed that methodology and began to employ people specifically to answer residential sales telephone and email enquiries and gradually built up that function to the point that today we have nine people (spread over the three shifts) and will probably increase that number over the coming months as the current sales personnel each make a considerable number of sales each month with several selling over 100 connections this month.

Similarly, in Australia, we had only one 'corporate' sales person for the first five years of our existence plus the corporate section of the web site to 'tell our story'. Even when we were totally unknown (and we are still not very well known today) we managed to sell several 'business circuits' each month and in some good months the 'several' reached double figures. As with the Sri Lankan operation we changed that methodology in March 2009 when we began building a corporate sales force that was based on outbound selling methods using very bright graduates. That has been as successful in its different way as the Sri Lankan inbound residential sales program (though it hasn't developed as fast as I had hoped) and has now averaged above fifty new sales per month for the past 12 months including some surprisingly large sales to surprisingly large companies.

We also have a 'business section' of our web site that has ADSL1 and ADSL2 plans aimed specifically at business users (including in the price a range of hosting services) as well as some attractive business mobile plans and the SMS and FAX via IP services. With no promotional effort on our part these services are slowly growing in numbers each month with many of the buyers using the full range of services. It seems logical that we should make more effort in 'selling' to this small business market which accounts for such a large proportion of all Australian business (by number if not by turnover) as we now have a full range of fully integrated services for small businesses and, subject to review, each service is much better priced than any competitors and far better integrated with a really good 'back end control panel'.

As we already have a 'qualified' data base of some 20,000 companies that we have called and found to be too small for our 'corporate' services it seems logical to call them again and see if they would be interested in our 'small business' services. We have a logical source of sales people who have spent up to 18 months familiarising themselves with our residential services and it wouldn't take much to train them in the business specific services. All we need is a competent sales supervisor and we probably can build a small business customer base much faster than we are, currently, building the corporate customer base.

So we will 'go down this road' as it seems to me that it allows us to use many of the advantages we have created over the years we have been operating to better effect than we can in the purely residential marketplaces that have allowed us to build the capabilities we now have 'at our disposal'. From the little I've seen to date the suppliers of 'small business' communication services rip off that sector of the marketplace to the same extent they rip off the corporate markets - mega high pricing for not very much at all.The key to its success, as with everything else in business, will be the person who creates and manages the venture.

It will be an interesting and almost certainly exciting new initiative.

Copyright © Exetel Pty Ltd 2010
ABN 350 979 865 46

John Linton

........but perhaps only very large companies will benefit from these trends.

I have always liked the obvious pluses of wireless broadband from the moment it solved my issues in finding a suitable hotel in the wilds of the UK that had a usable internet service some five years ago. In 'those days' the connection in rural England and the wilds of Scotland and Wales was nothing like as good as it is today but you could always get some sort of signal somewhere along the road or in a town which was stable enough for long enough to receive and send mail and do the other look ups that running a small business while you were on holidays required.

In the succeeding five years wireless broadband has dramatically improved in coverage, speed and lower pricing in the UK and has done similarly in Australia although it tends to have a 12 to 18 month lag in this country. In the UK when we were there in June of this year the common price point was 12 pounds (pre-paid) for 5 gb and the average speed was around 10 mbps in the rural areas where we spent most of our time. In broad terms it was about 60% of the price and twice as fast as a commonly available service in Australia with wider coverage. I also noticed that, in central London (where you would expect to find the highest contention being a city of some 8 million people in a densely packed area) I could detect no contention whatsoever although the frequency usage must have been massive. (I have always been surprised at the idiots in Australia who maunder on about how "wireless broadband will never have enough spectrum" - how much spectrum do they think is used in cities like Los Angeles, New York and London?).

Even a casual reading of the US technology media will 'tell the same story' as does the English language German and Scandinavian media. Only the Australian communications media doesn't report on the developments in wireless broadband in the same positive ways - all you see are articles and opinions that "wireless will never replace wire line broadband" despite the evidence to the contrary in simple statistics like Telstra's reports on the growing number of residences that don't have any sort of telephone line moving above the ten per cent level and increasing at a rate of 2 - 3% a year......among many other indicators.

Personally, I don't give the metaphorical 'plugged nickel' about Krudd's insanity of attempting to ruin the Australian communications industry by spending an absurd amount of borrowed money attempting to build something no-one needs and certainly that Australia cannot afford. However it will never exist in my life time so I will never know whether I am right in my view of such crass stupidity. For a while I was, mildly, concerned that a political cover up, apart from further bankrupting the country I have chosen to live in, would slow down the deployment of wireless broadband but, if anything it has actually increased the roll outs by both Telstra and Optus and significant increases in both average speed and stability of signal.

http://www.itwire.com/business-it-news/networking/41496-telstras-42mbps-next-g-broadband-goes-live

While the unthinking and just plain stupid are 'excited' about the concept of Australia wide 1 gbps fibre connections (pretty much along the same lines as the stone age cargo cult dwellers in the jungles of New Guinea are excited about the next 'goods drop' from the strange coloured bird) there is an overwhelming and completely forgotten problem that is either unknown or ignored by the games players and thieves who download terabytes of illegal movies and TV shows. That is the 'aging' of Australia's population. People of 'mature age', or more sensibly, people of mature outlook don't actually steal other people's property nor do they play on line computer games or get a surrogate sex life from pornography. These sorts of people don't have any interest in terabyte broadband plans and speeds that can never make any difference to the applications they use. They certainly, for the most part, don't have large disposable incomes that they will be willing to allocate to expensive 'side shows' of their lives like broadband at $60.00 plus per month.

However another key thing these 'aging Australians' don't have is 'children' living at home whom they once indulged by paying for internet services that they do not need themselves and given a choice would stop doing that. They are going to be the ever growing percentage of Australians who are going to drive the percentage of residences that don't have any sort of wire line connection to their home. Not just for the cost saving but for the convenience of location within their home where they make and receive telephone calls and use the internet for the purposes they need and like.

My point, made more badly than I had hoped for, is that the actual market for wire line residential broadband is going to fall rather than increase. While I understand that no real analysis and certainly no credible costing has been done on Krudd's madness the simple fact is that the available market for wire line based broadband services in the future continues to be impossible to estimate. Perhaps someone with more than one brain cell in the Australian communications media will begin to actually report on the future of communications in Australia without sounding like a Sussex Street spin spiv?

That simple soul could start by doing a sensible analysis of why there is a growing number of residences that don't have any form of wire line connection?

Copyright © Exetel Pty Ltd 2010
ABN 350 979 865 46

John Linton

......at the risk of sounding 'sexist' I would have thought it was obvious.

I read this earlier this morning:

http://blogs.wsj.com/digits/2010/08/27/addressing-the-lack-of-women-leading-emerging-tech/?mod=rss_WSJBlog&mod=

and, yet again, wondered what sort of politically correct background such writers and the people they use as sources come from. I have very little knowledge of genetics but the little I have read has always portrayed the male of the human species as the more aggressive and 'adventurous' of the two genders throughout human history and that 'genetic' inheritance was then emphasised by the various societal arrangements that ensued and ensue up to the current day. This is obvious to the 'naked eye' in that males are usually taller with more muscle bulk and ar generally much stronger - as anyone can see by observing the next 50 people walking past them on any vantage point in the world.

Although two of Exetel's first five 'employees' were females (and indeed one was a founder) Exetel overwhelmingly employed males for the first five years of its existence (what could be considered the whole of its start up phase as a sort of technology company). Why was this? Pretty much because we were an engineering based company and engineers are predominantly male. Along the way we have had two brilliant female engineers but they didn't stay with us very long both leaving for the 'comfort' and much higher salaries of huge organisations. So, before we started to grow our corporate sales operations the only females Exetel employed were in accounts (just as engineering faculties have overwhelming levels of male students, accounting and finance faculties are overwhelmingly female.This is likely to be the case in any tech start up and therefore answers the spurious question of why are there relatively few female founders in start up tech companies - duh - because tech is not a female's primary choice of career direction.

Nowadays Exetel has around 30% female personnel in Australia and around 33% of the Sri Lankan personnel are female with both those ratios growing each six months. This 'sudden' change has been largely caused by our hirings for both corporate and residential sales operations over the past eighteen months but it is not very likely that our engineering and network operations will hire female engineers in any number in the future - simply based on the 'supply'. There aren't many female senior managers that I come across in our day to day business dealings with the odd exception every year or so so the 'established' tech start ups seem even less to provide senior/top management career paths for females than companies just starting up. If I was to look into the future I wouldn't be surprised if Exetel had more female managers than male managers in the future and its just as likely that a female will hold the top position in Exetel as it is for a male - depending on what choices the current females make about children and related issues - and how wealthy the people they choose to marry/partner with are. That is, for most of our female employees far enough in the future to be largely immaterial, generally speaking,

If I was to look further into the future, assuming that Exetel has a future in these uncertain times, I would think that we would have close to a greater number of female managers as male managers as time goes by - and almost certainly more female employees than male employees. This would be partly due to the fact that we predominantly hire females at the moment and that we hire them in to sales positions where they will progress more quickly to develop people management and risk taking skills than a person hired in to an engineering position would usually be expected to do. I would think there was an even better chance that the future very top management of Exetel would be more likely to be female as it would be male based on intellectual ability and people management skills. However, I would think the same circumstances would mitigate against that being the case for Exetel as it does for every other organisation around the world - the fact that all females have a career option of motherhood which, even the very brightest and career driven seem to most often prefer.

I am only surprised that any one is surprised that 500,000 years of genetic and societal conditioning could change in less than a century by some PC maunderings of dilettantes.

Copyright © Exetel Pty Ltd 2010
ABN 350 979 865 46

John Linton

I had the third meeting in three days with companies that want some sort of joint venture (or in two cases that was simply code for buying Exetel at a bargain price because we are obviously so stupid we would do that) yesterday which must be some sort of record for 'approaches' in a single week. I was trying to add up the number of approaches we have had over the years but my memory is not good enough - I could get to over 30 but of those I doubt that any were ever 'real' and none but 2 or 3 got further than the initial approach. Yesterday's meeting was little different to the average - lot's of multiples of EBITDAs thrown around together with 'creative' payment methods (read ways of non-payment) and offers of value based on future performance (read ways of non-payment) and the final 'killer' - no cash but shares. I suppose it was good to end the 'working week' with a good laugh but disappointing to see how many gilt edged creeps there are in the Australian communications industry.

What was a common thread in the first and third of the 'approaches' was that they were based on fear and weakness - eroding customer bases and shrinking margins. Not an encouraging scenario for 'joint ventures' let alone comfort that ready cash could ever be forthcoming. What seemed to be equally apparent was that these companies had not only not seen this situation approaching but they had no ideas as to how they could now deal with it other than somehow reducing the costs of supplying residential ADSL services by having greater buying power achieved by something or other. Not one of the companies this week nor any I can remember over the past 18 months or so seemed to realise that the days of easy money from selling residential ADSL services at high margins were dead and buried. Perhaps the days of making ANY money from selling residential ADSL services is also getting to the 'dead and buried' period of its 'life time'...but that's a different matter.

I am not pretending for one moment that Exetel is swanning through the year without a care in the world - we very definitely aren't. But we actually planned to reduce our 'dependence' on residential ADSL services by actually planning month on mpnth reductions of ADSL customers and although that hasn't yet happened we definitely will not be 'caught unawares' if it happens in future months. Any company of our size would be very foolish not to factor in the 'price wars' that will be an ever growing influence on the residential ADSL marketplaces over the next 18 months. Personally, I'm only surprised that in the first two months of this financial year we have not yet seen a greater 'churn away' and have, surprisingly, seen an increase in new and churn in business - but it's only a moment in time and I don't expect us to remain this 'fortunate' throughout the remainder of this financial year......though maybe I'm being overly cautious.

The offer of TW ADSL2 has continued to surprise me in the number of people who have taken it up - both current customers (approaching 1,500) and churns from other ISPs (almost 200 in ten days). The churn ins don't mean much but the number of Exetel customers who have upgraded is very pleasing because, on limited evidence, those upgrades have coincided with a massive drop in the churn aways to Telstra which is presumably what they would have done if we hadn't offered an alternative. So that has been a good thing and will hopefully last until Telstra Retail launches the next phase of its 'welcome home' programs.

I am not a pessimistic person  by any stretch of the imagination (the few people who know me well enough would say my ability to ignore unpleasant reality is legendary) but my personal view is that no matter how tough any comms company is finding today's operating environment, come Christmas 2010, they will look back to today as 'the good old days' - a view I shared at two of the meetings with potential 'joint venturists' earlier in the week. In the mean time Exetel will continue to try and more rapidly increase the revenues it derives from business services and other non-ADSL services to protect itself against any erosion in residential customers/revenue which also provides the added protection that one dollar of non residential ADSL revenues provides 10 - 15 times more 'profit' and it would take an awful lot of residential customer base erosion before Exetel's financial capabilities were affected....at least that's the current plan.

Maybe I have it all wrong.

Copyright © Exetel Pty Ltd 2010
ABN 350 979 865 46

John Linton

......and it is so easy to not only lose touch with reality but to live in complete fantasy.

The year continues to speed by and 'it's almost Christmas' as Annette said in passing this morning. When your life is constrained by being heavily involved in playing a part in operating a business of Exetel's size it seems you never get a chance to do much else and there is so much to do that the year is almost over before it barely gets started. Annette's comment was because she had just booked the next review trip to Sri Lanka and having been caught up in the various activities for the family wedding last weekend having only recently returned from our annual holiday the last three months have disappeared without trace and by the time we get back from Sri Lanka in mid October the year, literally will almost be at an end.

As any historian knows/proclaims, events can only be understood after enough time has elapsed after they have occurred for the context and results to be properly seen. The events precipitated by Krudd's attempt at Presidential Government in Australia where he (an individual of very little knowledge and no experience attempted to make all decisions about Australia's future himself) and their effects on the lives of all Australians will only become clear as time passes. One 'presidential decision's' effects are already becoming clear - his silly cover up of his ridiculous 'NBN1' - you remember? - fibre broadband for 98% of all Australians within 18 months of being elected for a cost to the tax payer of $4.8 billion Aussie?

Well the 'back of the proverbial bus ticket' cover up for that major political nonsense has resulted in the destruction of the current Australian communications industry with no, current, sign that there will be any sensible replacement. I actually don't give a 'XXXX' about the morons who, with very little more knowledge than Krudd had, make comments about how feasible and beneficial such a ludicrous scheme would be  - they also have less than no idea what they are talking about. Governmental decisions about major expenditures of tax payers money are meant to be based on need/affordability/deliverability and a detailed assessment of whether, even if the first three criteria are met, whether the expenditure of money is in fact the first priority above everything else that is needed to be done. Which of these four criteria do you believe was met? The answer of course is none.

In the event that there was $A40 billion (or whatever the real amount actually is - it's a total joke that no-one actually knows what the cost will be) to be spent on major government funded infrastructure then can anyone think of what Australia's most pressing need is? Let me give you a hint:

It certainly isn't immigration, climate change, new military toys, more taxation, or any of the other nonsenses trotted out by Sussex Street.

The major threat to the future of Australia is.........water. I don't know how to get the over supply of water in Australia's North to the under supplied South but I think $A40 billion would at least make a start.

Pissing away $A40 billion trying to build a network that no-one wants or needs DEFINITELY isn't going to make the top 100 investments Australia needs either now or in the future. Yet there is now the unedifying scenario where one or two people, who are even stupider and less knowledgeable than Krudd 'in charge' of making this decision - I refer of course to the Hayseed Mafia masquerading as the 'voice of Australia'. Has the whole world gone totally insane? Three country bumpkins whose claim to fame is they know how to pork barrel are now going to make a decision on Australia's available 'spending money'?

I didn't think it would ever be possible to have a more stupid and vain glorious idiot than Krudd make key decisions about Australia's future. I was wrong. Much as I loathe and despise Krudd for his vapid proclamations and fourth rate mind I think Katter, Oakshott and Windsor and co make Krudd look like Einstein. I love country Australia but those three cynical wide boys are a disgrace to their origins.

And what's worse - that apology for a woman - the screech owl - is so desperate  not to become the shortest serving prime minister in the history of Federation she is agreeing to every crazy demand they make in exchange for their Judas support.

It's time I called it quits.

Copyright © Exetel Pty Ltd 2010
ABN 350 979 865 46

John Linton

I had an interesting meeting yesterday with two smaller ISPs than Exetel is who both viewed the future of their businesses with some serious doubts. They had previously had discussions between themselves and had reached a conclusion that they would struggle to survive the coming year after being in the communications business for more than ten years in one case and around eight years in the other. They had approached Exetel because we are one of the few medium sized ISPs left in the Australian market (their words) and they had approached two other ISPs larger than us but had not got anywhere.

Their proposal, which has no chance of success as far as we are concerned, was to somehow combine the 'buying power' of several small ISPs so that they could get enough price reductions to help their rapidly shrinking bottom lines (which they were quite open in disclosing 'real' figures). This obviously wouldn't work which is why, I assume, they had not got anywhere with the previous companies they had approached. What was surprising in the discussions was the relative inefficiencies they had in their operations in terms of personnel numbers and lack of automation within the various sectors of their businesses - considering how long they had been in their various businesses.

The other aspect they shared that surprised me was the relatively high prices they were paying for base services such as IP and back haul which seemed way too much even considering their lesser volumes. However both of the companies had managed to steadily grow their businesses until around 12 months ago at end user pricing that was considerably higher than Exetel's. It has only been since Telstra Retail started discounting ADSL2 end user services even more steeply over the past 18 months that they have seen their customer base start to shrink to the point that they have lost around 10% of their customers since January this year....a very worrying decline in itself but even more worrying because they both have cut their prices twice in the past few months without arresting the decline.

I wasn't able to offer any information about the current and immediate future that they were not already aware of. I explained that Exetel wasn't planning any real growth in our ADSL customer base and was more than happy if we could keep it at only a slow monthly reduction. I advised them that our objective was to replace any loss in low margin residential business (around 3% profit) with relatively high profit corporate and VoIP business (around 30%) and if we could actually accomplish that we would have a good year but that it was much too early to say that strategy was working out as we planned it to do because in the first seven weeks of the current financial year we actually had a slight increase in customer numbers in residential ADSL and didn't do as well as expected in new business sales.

We had a friendly enough chat as they were both sensible people who appeared to be genuine in their views and what they could offer to a plan to reduce buying prices. The problem, if that's the right word, is that people who have spent a considerable time building their own business, by definition, have a personality type and career background that doesn't make it easy, if possible at all, to cede 'control' to other people. Even with the significant pressures of 'staying alive' in today's communications markets the discussions we had showed how practically impossible it would be to set up the sort of 'co-operative' they had in mind. It was not a cheerful meeting and as it reached its end I made the point that technologies always reached this point and the only thing any company could do, big or small, was to move on before the financial problems always associated with the 'end of life' of any technology caused them irreparable harm. I outlined the most obvious of the steps that Exetel was taking but they didn't seem to find those of any interest.

As I drove home I considered what had been said and what had been proposed and found myself 'lost' in the problems of looking for solutions to problems beyond your direct 'control'. Perhaps it's my personality trait - rooted in the far past genetics of my Celtic/British forefathers but I have never seen how working with other companies with whom you compete (however lightly) can ever work for very long. It may well be simply my personality and background; perhaps other people can realistically work with 'competitors' or 'partners' but I always seem to see self interest overwhelming mutual interest in such scenarios - how could it be otherwise?

I have another such meeting later this morning. I doubt it will be any different to the previous ones I have attended over the years but you never know - which I suppose is why I continue to attend them.

Copyright © Exetel Pty Ltd 2010
ABN 350 979 865 46

John Linton

......the future for mobile voice services enters a new period of uncertainty after delivering mega profits almost since their inception.

Another day - another major problem in the Australian communications industry.....it seems to be becoming a mantra. While this brief article does little more than skim the surface it does remind the casual observer of the trend that has been evident for many years - most evident in the destruction of Telstra's PSTN revenues:

http://www.smh.com.au/business/4g-to-kill-mobile-voice-market-20100824-13qhh.html

You may or may not agree with the 'logic' of this article but what is very definitely happening in mobile voice usage is that the use of VoIP is beginning to erode the 'standard' mobile call usage. Despite the 'caps' that promise 4,000,000 calls for three and a half cents a month (or whatever the latest claim is) it is becoming obvious that the use of MoIP is increasing and it is likely that at some future point the drop in call revenue will begin to hurt the 'construction' of voice call based mobile plans just as VoIP has begun to decimate the PSTN call revenue.

This is obviously known to major mobile carriers and is by no means particularly bad news in the medium/long term but it will make for quite a considerable turmoil in the short term. People like me (low volume users of mobile telephone calls) have only used MoIP for getting on for 2 years now. As I pay cash for my hand sets, I don't get sucked in to paying a large amount of money each month to make the few mobile calls I make and I still have a mobile service that mobile phone addicts can call me on. My 40 - 50 mobile calls cost me $A4 or $A5 each month and my SMS messages cost me 5 cents each - I use three or four at the most in a month. So, apart from the 'depreciation' on the handset (which I keep until it breaks - around five years per handset) I seldom spend more that $A5.00 to use a mobile phone. I realise I am not 'typical' but then I also realise that most mobile usage is now falling in to the 'addiction' category that is basically useless and totally unnecessary and, one day, will be seen as that by a growing percentage of the addicts that adopt it.

In the mean time the concept of a 'voice call' being any different to 'a data transit' will more quickly fade away and 'pure' data phone services will become the norm rather than an add on to a telephone service. By early 2011 most mobile carriers are predicting that 'data' revenue will exceed 'telephone call' revenue on their services and that has happened in around three years. There is only one way that particular graph is heading and that is a point where data is 100% of mobile handset usage. This will happen irrespective of whether the mobile carriers 'endorse' a MoIP facility on the handsets or not. Again, this is not bad news for the mobile carriers - it's just a pricing issue - and in many ways its good - the future doesn't look too good for Skype et alia.

We have been looking at ways of improving our wireless broad band offerings for many months now and haven't come up with anything at all and have watched as the various carriers 'adjust' their pricing continually downwards (as is always inevitable). It may well be the case that, after trying so hard for almost two years, we cease looking for ways of providing a sensible wireless broadband services in larger numbers and simply continue to provide services to our own users of other services as a 'single bill' convenience. That would be a great shame as it is a really useful service and we should have been able to make a success of it by now. However it appears to be a bridge too far for a company of our size and we have only persisted with it because if we ended that part of our relationship with Optus we would have to re-examine our overall strategy in terms of the future directions we might take - if only because other carriers would want more than just our wireless business to give us the sorts of rates we need.

Sometimes I regret blundering in to the Australian IT industry in the days before there was such a thing and then being too lazy to find some other career direction for the past 45+ years.

Copyright © Exetel Pty Ltd 2010
ABN 350 979 865 46

John Linton

..........is finding 'leaders'......this is an especially difficult situation is the 'technology industry' for start up companies that largely employ mainly very young engineers whose roles in new technology companies are very technology oriented and involve interaction mainly with lines of code on screens. This is better summed up in this article:

http://online.wsj.com/article/SB10001424052748704548604575097531072898668.html?mod=WSJ_Tech_RIGHTTopCarousel_1

Exetel is, of course, a tiny company but it has around 100 employees and is in its seventh year of operation. Over the time we have been in business we have built a 'platform' of processes and operations in two different countries that allow us to do far more than we do today and the imperatives for doing different things than we do today keep increasing as the government intervention in the Australian communications markets becomes more profound. There is little doubt that, because of our operational efficiency and flexibility (we have no real infrastructure investments that demand that we continue to pursue any particular 'paths') we could remain doing what we do today and that may prove to be the best scenario.

However, there is little attraction in operating in the sunset phases of any technology and even less in any upheaval in distribution of any product or service - too many changes occur as the 'dinosaurs' have to make changes to their own operations and their 'thrashings around' cause too much damage to all and sundry while they attempt to escape their fate. So now would be a perfect time for new initiatives and, in some ways, we have been putting those in place as we were not so stupid that we didn't see all this coming - almost from the moment of the 'announcement' of the previous, now discredited, Labor government's face saving announcement of the 'NBN2'.We will continue to move the emphasis of our operations from residential ADSL services to higher speed fibre based business data services and the associated VoIP and ancillary services associated with operating a business in the 21st century.....and that is a major change for a company of our size.

What would be really good is to use the network we have built and the capabilities that support it to grow Exetel more rapidly than we are doing at the moment - not to make more money or because there is anything intrinsically good about 'growth for growth's sake' but because it would be prudent to use the capabilities we have and the greater foresight we appear to have used to make improve the 'safety' of our future. To do that we need people of both 'vision' and  the people management skills to bring such 'ventures' to reality - a difficult set of tasks when the average age of the people in the company is less than 26. Nevertheless it is a time and place when I think it's going to be essential to put more effort into building new businesses within Exetel's current businesses.

Which comes back to the start of this piece of writing - making the very subjective judgment calls on what should be pursued and by whom. Then there is the really difficult issue of ensuring that these immensely difficult tasks are made to happen and the people charged with them overcome the incredible number of problems, and the personal despair that almost always accompanies them. The issues we now need to address are those of more rapidly developing the 'raw talent' we have always set our hiring criteria to acquire into 'leaders' who can pursue their own paths to business success while continuing to develop Exetel's capabilities of delivering on our founding principles.

I doubt that we will find this key objective any easier to achieve than any previous objective.

Copyright © Exetel Pty Ltd 2010
ABN 350 979 865 46

John Linton

I wrote it, thought I saved it correctly but apparently I did something that deleted all of the text.

I didn't have the time or energy to re-write it.

John Linton

The overwhelmingly important event of the day was, of course, the marriage of my eldest son to the girl of his dreams and the subsequent celebrations. The ceremony itself was very beautiful and the beautiful weather, one of Sydney's finest Winter offerings, was an added bonus. The bride and bridesmaids all looked quite stunning and the food and wine at the reception was better than I have ever had at a 'catered event'. It was really good to see our overseas relatives and some good friends from other parts of Australia as well as getting to know our new extended family members a little better. A wonderful day.

The other event was the federal election that buried Krudd and the screech owl and the travesty of government they have presided over during the past three years. It also made it a little clearer that some Australians are sick of the current 'snout in the trough' attitude that has become Australian politics and would prefer at least some semblance of honesty and ethics in the running of the country....that isn't going to happen any time soon. What happens from here on is anyone's guess and, personally, I have no interest in whether the three ex Country Party independents sell their souls to support a rejected Labor party or screw some deal out of the Liberal Party - Australia is now faced with government by a political party that will have neither a majority in either the lower or upper house - whichever one persuades the GG they can see out a three year term - which will, in all probability, end over the coming six months. So we switched channels at midnight and eventually went to bed after watching the first half of the Arsenal game.

I suppose the only business related issue (for Exetel) the current election result raises is what will happen to Labor's 'NBN2'? Given the fact that the Greens and all three of the long term independents are so stupid they actually think it's financially viable a 'betting man' would have to put money on it proceeding whatever happens - for at least the short time until a new election is called. Whether the coalition would try and call it quits in the event they get to form an unholy alliance with the Country Party renegades is, at least, somewhat doubtful. If the politically appointed GG will find a way to keep Labor as the government, probably the more likely of the two scenarios, then you would have to assume that the 'NBN2' will proceed until/if the minority government collapses. If the coalition then wins the subsequent election (and it's less than a year from today's election) the 'NBN2' will still be cancelled if it hasn't progressed so far (unlikely) that it will not waste too much money cancelling it at that stage.

So, as far as the Australian communications industry is concerned, no uncertainty has really been resolved and though it's not as certain as it would have been if Labor had been retained in it's own right as the government of Australia it also isn't as clear cut as if they had been, as they so thoroughly deserved to be, kicked out for their massive list of broken promises and chronic ineptitude in every aspect of governing a small country. It all now depends on what Telstra does with their 'Heads Of Agreement". Do they really have any intention of going through with it? It appears to me that they could just as easily 'engineer' a share holder rejection should it suit them to do that and the current election result could be seen as a good enough reason to do exactly that.

So, in my personal opinion, the uncertainly over the future/non-future of the NBN will continue to influence, negatively, the Australian communications industry for another year which is not a particular problem for Exetel but it is going to be for many of the big suppliers. So the blood bath will continue and new idiocies will be perpetrated and life will remain more interesting than is comfortable.

Time to forget about such foolishnesses and enjoy this near perfect day.

Copyright © Exetel Pty Ltd 2010
ABN 350 979 865 46

John Linton

....not a cloud in the sky which itself is that gorgeous pale blue so often seen in Winter and never in Summer and we have a family wedding to go to.

Weddings in our family are few and far between as we seem to conform to the Anglo Saxon character traits of being undemonstratively private people who don't consider our personal activities of any interest to others. Having said that most of the remaining members of the older generation of our scattered family have arrived from the UK and the USA as well as Melbourne, Maitland and points North. The female members of the household have, finally, found the right dresses and shoes and other essential accessories that are apparently so important on these occasions and I managed to find time for an undue haircut and got a suit that didn't need it dry cleaned and bought a new tie - something I haven't done for as long as I can remember (that function in my life having been taken care of by Annette for over thirty years - and more recently by my youngest daughter whose taste and sense in all things sartorial is infinitely superior to mine).

The bridegroom to be returned to the house of his childhood and subsequent upbringing for reasons I am not entirely clear about overnight and will make whatever preparations he, his brother and his best man deem appropriate over the hours between now and the time he leaves for the big ceremony....with the other members of the household trailing behind. I didn't notice that he was actually there apart from his polite greeting when he arrived as he disappeared to his old room to write his speech (nothing like being well prepared for a major event) and hadn't re-surfaced before I went to bed having prepared for today's excitement by watching Geelong put in the minimal effort required to beat Carlton and then make some feeble attempts to trace the origins of our family name (I can't actually believe there were lime trees in the wilds of Scotland in the 11th century as one site suggested there would have to have been) while Annette finished off some of the endless preparations for providing afternoon tea to our overseas relatives between the wedding ceremony and the reception.

The wedding ceremony itself is to be at the Shore School chapel which I find a little odd. Both James and his younger brother went to Shore from prep school onwards I don't recall either of them, particularly James, ever regarding their time there with any great affection - more the reverse. We are not a 'Christian' family and I don't think James has ever been to church in his life. I guess it is a traditional location and, if pushed, I would have to agree that a church seems a better place to hold a marriage ceremony than anywhere else - the concept of marriage celebrants (for white wedding dress marriages) never has appealed to me much - perhaps like so much else in modern life I suppose.

So at least Annette and I are up but there is no sign of the imminent bridegroom nor his younger brother though the resident younger sister made a brief appearance to eat her morning banana a short while ago. We will go and cast our meaningless vote in a few minutes and then return to 'finalise' the preparation of the house to receive the 'clansmen and women' (Annette and Catherine) and I will busy myself with whatever assigned tasks I can't avoid. I would have written more but the constant chivvying to 'hurry up' (though it's barely past 8 am) has overwhelmed my 'creative' resolve and has therefore spared you from reading any more of this nonsense.

Copyright © Exetel Pty Ltd 2010
ABN 350 979 865 46

John Linton

.....and were replaced by a dictatorship of thuggery and vested interests of the lowest common denominator since that time.

There must have been a few more boring events in my lengthening life span than the current federal election but its hard to remember one off hand. Perhaps stripping a century or so's accumulated multiple paintings and general dirt accumulation off ten cedar doors when we bought our first old ruin of a house and decided we would renovate it ourselves is the only thing that springs to mind (that seemingly never ending task took most of the weekends of one summer long ago). I'm sure there are others but I just can't bring them to mind. As I was driving yesterday afternoon there was one of those 'listener call in sessions' on 702 so beloved of idea bereft radio people on the subject of why is this election so boring so clearly it isn't just me.

The few callers I heard before reaching my destination were not very helpful in defining the reason(s) and offered the usual ill educated and immature/stupid comments you expect from someone who calls a radio station to make a 30 second peroration. It's quite obvious why the current election, and indeed most of its predecessors, is utterly boring. The people who 'stand for parliament' believe in nothing other than aggrandising themselves by attempting to get the snout in the trough of the federal tax gravy train and the bribes that go with it and don't give a toss about actually representing their electorates or making Australia a slightly better place.

Federal Elections are not helped in this country by our puerile media who seem to think an election is some sort of football grand final (notice how they constantly say federal elections aren't called in September because they would clash with the other football grand finals?) and all they report on are the polls and the activities of the "leaders" as if it is some sort of beauty contest cum grand final. Nowhere can you see any future planning for the betterment of Australia generally or any specific part of it in particular - all you see are the attempts at appealing to the prejudices of the voters in 'marginal seats' and therefore the indistinguishable from each other's "policies" or more correctly  - extravagant promises.

Why is this so? It's obvious. The ONLY "policy" either of the major parties has is to get themselves elected so they can personally benefit financially and dole out benefits to  the people who bankrolled their election campaign. Sussex Street controls every aspect of the Labour campaign on the single basis of getting its hands on the inflow of taxes so it can divert as much of them as possible to themselves and their 'mates' and I have little doubt that the Liberal HQ personnel are fuelled by the same level of personal and collective avarice. There is absolutely NO indication that either major political party in this country exists for any other purpose.

This election is so boring it has even come to the attention of the ABC's day time radio session presiders simply because the need to "win" the marginal seats has become so paramount that THERE IS ABSOLUTELY NO DIFFERENCE in what either party says....it is derived from the two parties head quarters polling of the different marginal electorates and then serving up the answers which by definition have to be so similar they may as well be the same.

Elections in this country have moved so far from the 'democratic' principles they were allegedly based on that they are completely meaningless and therefore boring. All Australian's future's will be based on appeasing the venal desires of a minority of people who live in 'marginal' electorates. Screw the vast majority of Australians whose votes, courtesy of the demographics of their electorates, are valueless and aren't worth the five minute stroll to the voting booth as they will mean nothing in terms of how our country will be governed over the coming years.

I suppose it doesn't really matter - few if any Australians give any thought to the future of other people let alone the country as a whole. If they did how could they have elected a piece of egotistical nonsense like Rudd to preside over the country for the past three years?

Copyright © Exetel Pty Ltd 2010
ABN 350 979 865 46

John Linton

....if in fact the olfactory sense can be stimulated by reading words on a screen.

After three full 'normal' days of making Telstra ADSL2 plans available and seeing the results (obviously small because we are not a large company) of the number of current customers who have applied to change to the just released Telstra connected ADSL2 plans I can better understand the 'panic' that seems evident in the various statements and actions of some larger ISPs. I am not 'getting carried away' with the numbers (mainly in regional areas but a surprising amount in what I would call metropolitan areas) of our own customers who are moving from ADSL1 to the new Telstra based ADSL2 services. However the numbers are surprisingly high and the more pleasing aspect is the churn away to Telstra Retail numbers have dropped incrementally on each of the three days indicating that the new plans have stopped that particular problem that we have been experiencing for some two years.....at least temporarily.

We need to see what happens over a full month to determine more clearly what will happen at this stage of Telstra's 'win back' campaign bearing in mind that if the current offers don't produce the results wanted by Telstra's board then the 'inducements will be racked up another notch and if that doesn't work then more notches will be racked up until it does produce the market shares demanded by Telstra's new initiatives. As a correspondent noted yesterday about iinet's ludicrous announcement of their 500/500 gb plan:

I alluded to the return of wholesale to the communications marketplace in what I wrote yesterday but didn't have 'space' to actually make it clear what I meant. At the risk of boring the people who did get the point I will make it clearer. The current crop of self proclaimed "major players" in the residential data market all got to where they are today courtesy of buying services from Telstra and relying on Telstra's sky high pricing to be able to make fat margins themselves by simply re-selling Telstra's services. They relied on taking customers away from Telstra by simply offering a Telstra service at a slightly lower price and, as they grew, by buying out smaller ISPs that had run out of money or interest in continuing in the business. When they grew to a certain size they decided that they were 'a player' and made the move to implement their own partial networks relying on an incredibly low access price to Telstra's "last mile" copper connections to residential dwellings.

Rational thinking - as far as it went but only rational for the short term - there never was any medium let alone long term benefit in this approach.

Consider what the under pinning of this thinking really is:

1) Telstra will be content to let you take its retail customers based on pricing by Telstra that makes this easy to do.

2) Telstra will be content to let you take its wholesale customers (by buying them out) because it lets you earn so much money by providing you with the ability to earn it because of Telstra's high pricing.

3) Telstra will just 'sit there' and let you do this until Telstra has no customers

4) Telstra has no ability to stop this happening

The proverbial 'blind Freddy' could see that this just wasn't going to happen...."and so it came to pass that after enduring the discomfort of the peasant's sword's pinprick irritations for long enough the mighty dragon bestirred himself and in with one blast of his fiery breath reduced the annoying pygmies to ashes, turned over with all annoyance gone and resumed his slumber" ....I haven't read fairy stories to my children for a very long time so I have undoubtedly misquoted it. I am far from a fan of large companies ways of dealing with competition but I am not dumb enough to assume that if an incumbent loses market share it will just do nothing until it goes out of business. 

What do these companies that have based their whole business 'strategies' of gaining market share by simply pricing and selling slightly below it reaping absurdly high margins think Telstra is going to do now? Well - perhaps its now occurring to them that two things have already happened that will make life 'different' from this point onwards. The first thing is that the market they have depended on for the growth they have promised their shareholders has no more 'easy' growth in it (maybe even a steepening decline?) and by buying up many of the medium sized suppliers they have nowhere to find quick market share improvement. They must now rely on keeping the customers they have (under increasing pressure from Telstra and others reacting to Telstra) and then taking more customers away from the fewer suppliers left in the market than any time in the past - and that is now going to be made very much more difficult by the chief source of that type of growth not only protecting its remaining customer base much more effectively but by attacking their own customer bases incredibly more fiercely.

I have over simplified the situation because I don't have the time and I'm sure you don't either to examine the scenario in the detail it requires but perhaps you get the picture that shareholders in companies like iinet and TPG may well see that 2010 was the high water mark for the achievements of companies that compete with Telstra and that it's all 'down hill' from here.

Maybe I'm completely wrong.

Copyright © Exetel Pty Ltd 2010
ABN 350 979 865 46

John Linton

After two 'normal' days I remain surprised at the number of current Exetel customers who are transferring to the just released ADSL2 plans on the Telstra infrastructure - more than 500 in two full days plus the weekend. I am also surprised at the level of applications from new/churn users which has added 25% to the order level over the 4 days the plans have been available. Of course much of this could be explained away as the normal 'release date surge' but then we only really 'advertised' the plans on our forum and won't formally announce them to our customers until the September newsletter which only goes to around 20% of total customers - maybe we should send an 'announcement' to all ADSL1 customers?

One of the reasons for my surprise is that, although we did the very best we could with the pricing, we were 'hamstrung' by the extremely high buy costs -  Telstra Retail's end user prices, providing you bundle other services, are much lower than what we could come up with. As several carping posters have pointed out our 50gb/120gb plan is $15.00 a month more expensive than the 50 gb Telstra Retail plan and, of course, we do not offer the $200.00 or so "cash back" credits that Telstra do. ( I don't know why they wouldn't think we hadn't checked the prices other providers offered before coming up with our own best efforts). So, given that our wholesale supplier is offering the same services at lower ongoing prices and much lower 'once off' prices than we can - why are so many more people than we expected buying the identical service for more money from us? In fact why does ANY customer buy a Telstra ADSL2 service from us? That has been my position until now.....it may very well remain my position.

At this very early stage, based on tiny numbers, I am assuming that there is a section of the market that just doesn't want to bundle in their wire line and one mobile service - for whatever reason(s). Maybe there are other reasons (24 month contract?) but until some sort of trend can be established that's all I can come up with. I don't know what Telstra plans to do between now and Christmas but I am assuming that they will 'improve' their offerings well before December and that makes me wonder what other providers, particularly Optus, will do. I suppose what is much more important is what effect Telstra's new pricing and marketing policies will have on the number of customers they 'win back' from other ISPs. As I mentioned yesterday - every 'win' for Telstra is a 'loss' for someone else and up to now other ISPs have been very happy to again sit just below Telstra's retail price points.

More importantly is that ever dollar other ISPs are forced to reduce their current prices by is a reduction in their profit. When the 'history' of broadband supply in Australia is written it may well be the case that a combination of federal government interference ('NBN1' and 'NBN2' and quite possibly 'NBN3') will be seen together with the effects of that interference on Telstra as being a turning point, perhaps even the turning point, in the way that the Australian communication industry operates.....and, quite possibly, not for the better from anyone's point of view.

In the mean time it will be interesting to see what happens in Exetel's 'world' in terms of how the Telstra 're-invigoration of interest in wholesale customers turns out - now that there is beginning to be a real wholesale market again in terms of the communications industry....

....or did you miss that more obvious scenario amidst all the current tub thumping and sundry ranting and raving?

John Linton

It depends on whose view you take of various aspects of the Australian communications industry as to what you think is has happened over the past year or so, what is happening now and what is going to happen. Telstra's executive remuneration committee obviously has a more optimistic view of the performance of its senior management than any shareholder could possibly have - given that under the direction of Telstra's senior management the company made less money tin the year just completed than it did in the year prior and its forecasting to do worse in the current year:

http://www.smh.com.au/business/telstra-cuts-executive-bonuses-20100816-1272e.html

They managed to pay 23% of the planned bonuses even to executives who presided over sections of the business where both revenue and profit declined. An amazing view of business life - considering the Telstra senior executive "team" managed to deliver a decline in share price to its lowest point ever and, according to one of the statements in the cited article, the backbone of the executive bonus scheme was share price growth. On the actual financial results and the effect on share price I would have assumed that the remuneration committee would have been putting in place debt collectors to retrieve the money they had already paid to the Telstra senior executive "team" based on woeful failure to perform their responsibilities adequately and then recommending to the full board the need for immediate replacements.

If you've paid any sort of attention to the various price changes that are going on in the Australian market you would have seen that many suppliers of internet services are changing their prices - mainly downwards but at least two are changing some prices upwards. This is unsurprising and is all part of the pricing blood bath that was obviously going to happen over the last year and will continue to happen over the coming year. No surprises there then....except maybe there are one or two beginning to appear. There is NO doubt that Telstra's ongoing need to stop losing customers has finally begun to break down their retail operations attitudes to pricing and the recent reductions will continue either in actual price reductions or ever larger 'sign on bonuses' and 'special marketing programs'.But there are some signs this going to prove more difficult if there is no 'NBN2' revenue:

http://www.smh.com.au/business/telstras-dividend-under-siege-20100816-1266j.html

How far this has yet to run is impossible for me to try to predict but perhaps you should see that if, say, Optus/iinet/TPG can sell at the prices they do and increase their reported profits then clearly the newly re-focussed Telstra retail could do the same. Should Telstra retail carry out whatever dramatic programs they have foreshadowed in their annual results statements you would have to think its going to take more than a few more bus sides and annoyingly intrusive web placements to counter the $A2 billion in incentives Telstra seems to be prepared to sacrifice over the coming two years to 'win back' lost customers. If Telstra is aiming to win back a 10% market share (probably the lowest they would aim for) simple arithmetic tells you that all of the other ISPs will lose 20% of their current market share as Telstra has around 50% of the ADSL market and they would rationalise that it was only 2 -3 years ago that they had a 60% share so it shouldn't be too difficult given the amount of money they are apparently prepared to lose to restore their declining fortunes.

Given the dismal performance of Telstra's senior executive "team" over the past year (and presumably previously) though, this objective may not be as easy as throwing truck loads of money at 'promotional programs'. However if early attempts fail to produce the planned results presumably even more money/price cuts will be 'thrown at the problem'. So, assuming that Telstra is aiming at some sort of customer recovery program around the 10% mark it makes you wonder what will happen to the overall market place while this plan plays out. Could iinet or TPG cope with some significant loss to their current customer base? Clearly the 'smart' investors had reservations  - they wiped off around 8% of their respective share prices when Telstra announced its plan to recover market share and that was based on a simple statement. What will happen if Telstra manages to turn that statement of intent in to a reality?

A really rough year is going to happen.

Copyright © Exetel Pty Ltd 2010
ABN 350 979 865 46