John Linton's Personal Musings

John Linton

.....which is nice to see as sometimes it appears that too many nasty people don't get the 'punishment' they so richly deserve....and unfortunately legal process prevents me from explaining why I found it 'necessary' to explain why I have made that comment more fully at this time.

In business life, just as in personal life you inevitably have to 'mix with' people who, given a choice, you would not give the time of day to - let alone your money or any sort of 'service'. However there are less choices in business life than in personal life and you, too often it seems to me, find your personal principles, I hesitate to use the word 'ethics', compromised by what you have to do for the good of your company (and its customers and personnel) and what you would really feel you should do. I recently found myself in such a situation and it made me realise how many similar situations actually exist at any given point in time in business life. Clearly it's my own ineptitude that causes these conflicts of 'principle' but its too late for me to acquire the necessary skills/experience to deal more effectively with these aspects of business.

I wasn't sure how to react to this summary of Telstra's progress over the past two months as reported here:

http://www.smh.com.au/business/telstra-toughens-nbn-stance-20100929-15xh8.html

I know how Telstra's latest 'welcome home' programs are affecting Exetel (we lose almost as many current customers to Telstra as we gain from Telstra). However, assuming the reported numbers are correct Telstra is out performing the next best 'gainer' of new ADSL customers, TPG, at a rate of 15:1 and is winning back overall market share at a rate of well over 1% a month (rather than losing market share as it has done for several years) - a terrifying statistic for the larger ISPs in Australia who, in this static/slow decline ADSL market numbers are obviously losing market share at a scary per month rate.

It is a stark reminder that there must be a better way for Exetel to operate than the ways we operate the company today (and have done since it started) and I'm sure that there are. Most of those ways mean that Exetel would have to be changed and give up the base tenets of its existence to date and move to a more conventional set of objectives which in itself would seem to be sensible any way (except to me). It would, quite possibly, also be far easier for most of Exetel's personnel and, especially, it's owners and directors. However I would not have much interest in such an organisation so it poses a personal problem and one which I am not sure how to address - beyond the obvious.

We will be going to Sri Lanka in a couple of days time and I have always found that a few days spent in that country allows a different perspective to be gained on all sorts of things. Perhaps it will allow me to resolve some of the things that concern me at the moment and find new enthusiasm/different ways of dealing the growing number of aspects of communications industry 'life' that I find anathematic to so many of my personal views of right and wrong.....though that may be too 'dramatic' a way of expressing it. Whatever the correct way of looking at current circumstance may be the most obvious fact is that significant changes need to be made - changes that go way beyond the 'normal' constant changes required in any set of 'dynamic' marketplaces.

I will be glad to finish off the key outstanding 'issues' over the next two days and go away for a week to resolve the current contradictory scenarios that are beginning to emerge in these difficult times.

Copyright © Exetel Pty Ltd 2010
ABN 350 979 865 46

John Linton

....with all three monthly targets achieved and the aggregation of the three months exceeding any previous quarter in Exetel's brief history in terms of revenue........which is much better than not achieving the planned targets....but profit is a sad and sorry picture.

As we knew that these would be very tough times, and we have known they were going to be as far back as two years ago, it is heartening that we have kept the company growing and have met the first three overall monthly revenue targets of the new financial year. We failed miserably to meet the profit targets which we have addressed by increasing the number of plans that incur an account management fee and getting reduced costs of some services from one of our major suppliers - those two actions will redress the profit shortfalls assuming that we continue to generate net new customers at the current rates over the coming months.

I talked with two acquaintances in other ISPs who I have known for some time yesterday and they were not very happy with the current state of the markets in which they operate. Naturally they didn't disclose any 'hard' financial details but they both were anxious to know what the result was of Exetel raising its prices in both new sales and customer retention (their words not mine). I said it had no discernible effect on new applications and it was too early to tell what the actual churn number to be. Both of them expressed very negative views on the first quarter and both expressed even gloomier views of the coming quarter. They were depressing conversations. However one of them 'solved' my problem with 'bundling' Optus mobile plans with ADSL services by pointing out a different way of looking at the 'numbers'. Sometimes it's good to have chats with 'friendly competitors'.

We have been trying to work out how to use Optus new 'capped' mobile plans as incentives to bundle with ADSL plans to combat the current Telstra bundled offers and what we see as happening from other ISPs in the near future. Being the very conservative person that I am it didn't/doesn't appeal to me to take the risks I thought companies like TPG were taking in reselling the Optus mobile services and we don't have the 'need' to add profitless revenue in the ways TPG appear to be doing it....we certainly don't have the money to promote it. I had just about given up on this approach until the chance comment made in a conversation yesterday showed me how it could be done and doubtless how TPG was making such attractive offers at, effectively, zero risk.

Depending on the results of meetings with Optus today between Optus 'marketing experts' and our 'numbers researcher' we could solve the problems of bundling a zero month contract mobile plan at $5 - $10 less than the Optus retail price plus offer a $10.00 to $20.00 discount on the ADSL plan (depending on the mobile plan purchased). If a customer had transferred 3 mobiles they would get all our most popular ADSL plans for 'free' each month. Well worth the time of the two conversations.Perhaps it, yet again, illustrates that I am completely the wrong person to run a residential communications service provider.

One of the conversations also touched on the point of a buy out as the person concerned had been having a pretty awful time for over twelve months and didn't like what he saw in the immediate future at all. We don't have the money to be a likely buyer even on any sort of deferred payment terms but I gave him the names of two people who might be able to assist him. We briefly discussed using our Sri Lankan company to provide sales, provisioning, billing and support services and/or using other aspects of Exetel's 'buying power' but we quickly reached the conclusion that such arrangements were impractical though financially attractive. I was a little surprised at the problems he was having as his service pricing was between 5% and 8% higher than ours (if we could make those extra margins we would be 'rolling in money').

A sobering reminder of just how hard it is at the moment in this industry.

Copyright © Exetel Pty Ltd 2010
ABN 350 979 865 46

John Linton

....for the past three plus years in writing this blog......at least according to one person.

I got an email yesterday from a customer who said he had read my blog for the first time and it caused him to immediately transfer to another provider. He said he had expected "the blog of a company CEO to be very positive and to promote the great things the company was doing and the bright future the company had - like the other blogs of CEOs in the industry". He was dismayed to find that "all your blog does is point out how bad things are, how you have no idea how to deal with your competitors and regulators and all you can do is bad mouth everyone and every thing in the foulest language". He went on to say many other things that offended him especially my references to "sheltered workshops and idiotic public servants". His interpretations of much of what I thought was very plain text was impossible for me to understand how such views could be reached.

I thought about replying but decided it was a waste of time. I am unaware of "blogs by other CEOs in the industry" - if anyone knows of any I would be interested in reading them. Perhaps those blogs are written in consistently up beat terms about how great the individuals writing them are, how brilliantly they are coping with every aspect of these very difficult times and how much they admire the ACCC, ACEMA and the current politician's decisions on how they can get re-elected. I would be interested to read their daily views and thoughts on what is happening in their daily business lives.

My, obviously negative, disrespectful to my 'betters' (now there's a word I haven't heard for a very long time) and generally useless daily maunderings since late July 2007 have been, against the eight criteria I was advised that such writings would achieve, very successful and have more than met all the expectations I was given to believe would occur up to January of this year when I changed my objectives in putting in the time to write them each day. I was very happy with the immense value that Exetel derived from me taking the time publishing my thoughts and the financial benefits especially have been very, very substantial.....apart from anything else. I have had a new objective since making this blog a 'closed' audience piece of writing and it's too early to determine whether it will be successful in achieving that, much more difficult, objective - but even if it doesn't it will serve a secondary, personal, purpose.

There are an infinite number of things that any small business manager needs to do each day to try and ensure the business firstly survives and secondly, if that's possible, continues to grow. My email correspondent yesterday took the view that I must be a total fool and completely unaware of how what I write would be regarded by anyone silly enough to read it. That was very disrespectful but it exemplifies the, completely incorrect, self belief of so many people who, 'educated' by the ill manners and anonymity of posting their views on electronic fora, seem to forget that when they address specific people with specifically demonstrated expertise they need to think beyond their own limited experiences and understandings....most of such people automatically regard themselves as being more intelligent and more knowledgeable than the person they are addressing - in almost every case a completely erroneous assumption.

If you could be bothered to read some of the better respected, quasi-academic writings on how and why blogs by various different types of people can generate value in commercial endeavours you would find, pretty much, a consensus on what those values should turn out to be along with various first hand experience stories by senior company executives of companies both large and small that detail their experiences and the results. I was first encouraged to write a blog by a chance encounter with an old business colleague while I was on holiday. I can recommend the writing of a blog, perhaps not daily, as very few people seem to do that. If you ever do decide to do it list the objectives you would like to achieve and then see how well those objectives are achieved - my own experience is that a blog can achieve every objective you set for it - and in my personal experience will succeed beyond your wildest expectations.

Perhaps such people as the person who emailed me yesterday should consider why anyone would, for over three years, every day of those years, take the time every morning of their life to write 600 or so words of their current thoughts about the industry they manage a small company within? I would have thought that it's very unlikely that they would expend that time in the expectation that the efforts would result in negative results for the company

Perhaps not all people believe that blogs are written for a positive purpose (hard to believe but possible I suppose) and are constantly measured against that purpose - like the individual who wrote his careless email to me yesterday though....I think he almost certainly lacks the intellectual capabilities to understand such things.

Copyright © Exetel Pty Ltd 2010
ABN 350 979 865 46

John Linton

....because, for whatever relatively 'anal' reason, Annette and I are
going to Sri Lanka next Saturday to do the quarterly reviews and
business review and when we do that I feel compelled to do all the work
scheduled for while I'm away before I go. The reviews and other
activities in Sri Lanka are very time demanding and there is not a lot
of time available to deal with Australian issues and what time there is
is impacted by the time difference. The Sril Lankan operation has made a
great deal of progress over the past 2 plus years and it has essentially met
all the objectives we had for it and exceeded more than a few. I was
always concerned about the obvious difficulties of setting up such an
operation (recruiting good people, then retaining them, transferring the
knowledge, and then making sure it had been transferred correctly,
building the supervision/management skills) and the 1001 other issues
involved in setting up a complex operation 'remotely'. This time we will
begin the process of the "next phase" which is far more difficult than
what we have done to date and will require doing things I have no
experience in.

 In the mean time we have to accomplish a significant number of
things over the coming 5 days the first of which is ensuring that we
meet our September targets. We had slightly  over target months in July
and August and it will be very important in this, the most difficult
year I have ever seen in my business career to get September 'over the
line' so that we can 'lock away' an on target first quarter. I
understand that it makes very little difference numerically/financially
whether a number is slightly above or slightly below 100% but the impact
on 'morale' is quite another thing. So our first 'order of business'
each day is to do whatever is required to make that happen.

We also need to finalise the new mobile offerings (which is dependent
on getting documentation from our supplier) so that we can offer $10.00
off ADSL plans for each mobile a customer transfers to Exetel. This is
proving strangely difficult but I am hoping to resolve the outstanding
issues before the end of this week. While the actual number of ADSL
customers who may want to do this is completely unknown to us - we have
to make some attempt to reduce the ADSL churn aways to Telstra who use
bundling to a good effect in persuading customers to move to Bigpond via
discounts from bundling.

Although I have rejected cheating wireless broadband customers by
under provisioning the HSPA interconnects I will give our supplier one
more chance to show why "what everyone else does" is actually ethical by
agreeing that two of our personnel would meet their 'marketing experts'
to go through the mechanics/numbers in detail. If they are persuaded
then we will re-look at the plans and see whether or not our collective
'consciences' can be salved. I doubt we will find a way to do this but
it seems prudent as well as courteous to make this time available.

The two most time consuming tasks to be completed are our responses
to the two companies offering different degrees of 'partnership'
opportunities. This may be very difficult because of the amount of
detail needed and therefore the time taken to double check the
information to be provided and to understand the detail provided to us.
As I said previously the amount of 'marketing budget' and retail
expertise on the one hand and the amount of customer base on the other
hand are very attractive to us - if the actual scenario works out to be
workable - something all previous such 'offers' have signally failed to
do.

So a lot to do in not a lot of time.

Copyright © Exetel Pty Ltd 2010
ABN 350 979 865 46

John Linton

.......for an increasing number of Australian communications providers.

We will be leaving shortly to drive to the lower Blue Mountains to attend the auction we mistakenly thought was last Sunday - this time without the leisure of staying overnight to avoid the hassle of Sydney's Sunday traffic. I doubt that we will buy anything but you never know with these 'deceased estate house contents auctions". It is a beautiful, warm and sunny Spring morning in Sydney and all is right with the world in general if not with the  world of Australian communications.

I spent some time yesterday going through the scant information we have on the directions of business services as supplied to the end user by Telstra and Optus - who hold the vast majority percentage of those marketplaces and in which, as the residential markets continue to become 'more difficult' for most data communication suppliers. We had a flyer dlelired to our office in North Sydney recently extolling the virtues of TPG's (Pipe's) 100 mbps fibre services at prices less than 50% of which they sell fibre services to Exetel as a wholesale customer - one sign of the times. I don't know how successful that will be but it seems to confirm what I said when it first emerged that Pipe was thinking of selling to TPG - "when wholesale contracts reach their expiry dates I doubt that Pipe/TPG will have any of the wholesale customers left that made Pipe what it was when it was sold". Not a problem for TPG, who would have realised that, but not a pleasant future for the remaining Pipe personnel involved in that business.

(I had to smile wryly at the fact that there is fibre in to our building only because we paid the old Pipe a huge amount of money to run it from the junction located 100 meters away)

However TPG's flyer (for businesses based in buildings where Pipe has fibre to - not that many in reality) does accentuate the problem facing the supplier companies (all of them) that have been content to build up a business customer base using Telstra's absurdly high business prices as the 'umbrella' they discount from to reap gargantuan profits from selling vastly over priced services themselves. By building businesses based on the huge margins that Telstra/Optus made available they have also built in a huge vulnerability in the future as those margins progressively, and possibly quite rapidly, decline. As with all markets the business fibre/EOC market will change and change quite rapidly.

Exetel continue to grow its corporate customer base and the means to do that more effectively and in larger numbers quite quickly but there is little doubt that the 'free ride' we have had to date (because we were so small) is diminishing day by day. Both of our major suppliers of business fibre tell us that our coverage is being noticed by their other wholesale customers who are losing business to Exetel on a more frequent basis. This will produce some sort of reaction from those suppliers, and other larger suppliers, which will make the task of continuing to build this business much more of a challenge than it has been to date. We always knew this of course and have put the required plans and developments in place to address the issues we foresaw  and will have to deall with the ones we didn't as they arise.

Our major advantage, apart from no pricing services rapaciously, is that we have far greater knowledge and experience in dealing with corporate customers than we have, or could ever develop, in dealing with residential customers. Perhaps I'm wrong, but I don't think there is any competitor that knows better than we do how to make the most of the current situations in the business market places.

Copyright © Exetel Pty Ltd 2010
ABN 350 979 865 46

John Linton

It was a very interesting week and, largely, very positive in many ways....considering the various 'challenges' of these difficult times. One of the things that really impressed me in several difficult circumstances and three difficult situations was the calmness and effectiveness with which different people, both in Australia and in Sri Lanka - perhaps my concerns at the speed of development of our very young personnel is misplaced and they will all live up to their potential for which they were hired in the first place. At the end of the day high intelligence combined with effective training is an unbeatable combination though not always easy to sustain in terms of hiring policy and 'forgiveness' in the early stages to make such a policy work in most environments.

Personally, I had several interesting meetings with two major suppliers a potential 'partner/investor', a major new customer and a very interesting potential new supplier........in between the multiplicity of tasks and reviews that tend to fill every available minute in the day. Although we have invested a considerable amount of money, at least by our own modest standards,in Exetel (which is everything we have) we have never had any money at all to promote the company in any meaningful way nor have we had the money to even make operating the business 'comfortable'. This has never mattered in any real way but it has meant that our growth of an average in excess of 25% each year for the past 6+ years has been via word of mouth augmented in the business markets over the past 18 months by growing an outbound corporate sales force.

So, I was particularly interested in discussing a possibility of working with a 'partner' who has the money that we have never had and a lot of experience in retail marketing. It may all come to nothing but of the approaches we have had over the years it appears, at first sight, much more sensible than most. It would be nice to have the 'promotional dollars' we have never had and to use a totally different approach to promoting our services to a very different set of market places. It's far too early to tell whether their is a real match between the two, very, very different, organisations but for once there is some sort of chance.

The meetings with the suppliers (one over a very pleasant lunch) were not specifically productive but could result in some new/better opportunities. We will have a meeting with the third major supplier next week and then be in a position to decide if there are any 'different' things we can do or approaches we can take in dealing with the difficulties in the current residential marketplaces we currently operate in. We were unable to find a way of providing lower priced wireless broadband services because we couldn't bring ourselves to do "what everyone else does". However we think we will be able to lower the cost of ADSL services by bundling an Optus mobile telephone offering fro those customers who like those sorts of bundling ideas - apparently a lot more than I would have thought. Whether our current users of the Vodafone network will want to change suppliers is something we have no idea about.

So a week of talking about major changes in almost every area of how Exetel does business with the rest of the time more than adequately filled in with the work required to run a $A60 million dollar business in difficult times. Although it was mainly talk we will begin to implement the first of the possible changes before the end of September.

John Linton

It seems that there are becoming an endless succession of forms and questionnaires that need to be completed by the nanny state we now live in. Throughout its 'life' to date Exetel has been mercifully free of commonwealth and state interference (apart form paying payroll tax to the NSW government, GST, PAYG and withholding taxes to the Federal government and all the efforts and cost those 'protection monies' involve. Undoubtedly due to our size (and the fact that we are honest and ethical as well as being straightforward) we have 'escaped the attentions' of the mindless clerks employed in the sheltered workshops known as the ACCC and ACEMA. This week though we have had two sensibly qualified people (plus time from all sorts of other people) taken up with 'compliance' issues.

The minor of the two intrusions from the lick-spittles of the Labor nanny state was from the ACCC who objected to our presentation of pricing on our web site ADSL pricing pages. Now, with minor changes we have set out our ADSL pricing in the same way since we commenced business almost 7 years ago. Over that time I can't recall ever receiving any comment, let alone complaint, that the way the pricing is displayed is anything but unequivocally clear. The ACCC insisted that we "show a prospective buyer the total cost over the period of the contract". There I was, thinking that anyone with the mental capacity to open a url , would by definition have the numeracy to see that he/she would have to pay the monthly cost (shown under the column heading = "Monthly Cost" for the number of months specified under the column heading = Contract Term". I was also of the opinion that that this same prospective customer would be able to understand that they would also have to pay the amount specified under the column heading = "Activation Charge" in addition to the number of monthly payments.

Apparently not. Apparently people who visit Exetel's web side can do none of those things. Apparently Exetel was in breach of many and varied recently promulgated conditions of various acts and was liable to massive fines and possibly company closure. "Who are these guys"? (as, if I remember correctly, Butch Cassidy once wondered). I don't know what I found more surprising - that some idiot in the Federal Parliament actually wasted the time it would have taken to get this nonsense developed and passed by the houses or that some drone could actually express the views in the letter I received and subsequently expanding them over the telephone without bursting out into hysterical laughter at the Kafkaesque wording of the documents they quote from. So we changed the layout of the pricing pages and performed the kindergarten calculations demanded by the ACC and went back to the real world.....

....only to be confronted with a much longer peroration from ACEMA demanding information that surpassed Kafkaesqueism and devolved to the nonsensical realms of Charlie Dodgson. Not only were the requests for information nonsensical but they demanded lengthy answers containing immense quantities of information that could not, by any reasonable understanding of how a business actually operates, actually exist. A very sensible person within Exetel, now aided by a second sensible person, is attempting to provide rational answers to questions that only a person of the mental outlook of the Queen of Hearts could contemplate seriously. The combined efforts of sensible people will be able to produce a semblance of a response within the required time frame but it begs a very serious question. What sort of mentally challenged idiot, or group of idiots, could have framed the questions in the first place? Perhaps more importantly - what on Earth are they going to do with the answers they receive from the companies that are forced to respond to them?

I suppose it explains how the screech owl is able to say "affordable high speed fibre broadband for the whole of Australia" in her strangled syllables and keep a straight face.

Copyright © Exetel Pty Ltd 2010
ABN 350 979 865 46

John Linton

.......but the screech owl and the dummies that allowed her to preside over the last days of our version of Rome in 44 bce remain pre-occupied with their 'super fast broadband at affordable prices'.

I have commented on the destruction of the Australian communications via the desperate whim of a grubby little man of zero knowledge and no ethics trying to prevent the populace from finding out about yet another of his blatant lies yesterday and previously - the stock market delivered its confirmation of that judgment yesterday after digesting David Teoh's "explanation" of TPG's financial projections for the coming twelve months. After extolling the huge successes that TPG had achieved over the previous twelve months he revealed that while TPG would grow in revenue in the new financial year it's profits would flat line. For the simple minded (like me) that seemed to indicate that TPG would have to sell more just to stay where it is today - in other words its overall business would become less profitable even if it did meet its new, increased, revenue targets.

The performance analysts immediately reacted changing their buy recommendations to their clients to either hold or sell. In turn the TPG share price (after David Teoh's presentation on how TPG had performed in the previous twelve months) fell by 9% having fallen more than 10% over the weeks leading up to announcements and briefing. The same analysts pushed Telstra's share price, already at a record low, another 3% lower as the evidence of a new fiercer stage of the ADSL price war became more evident (TPG trying to protect its customer base from Telstra's billion dollar funded 'welcome home' wars against all other Australian communications providers):

http://www.smh.com.au/business/little-joy-for-telstra-investors-20100922-15mzz.html

Now the ignorant populace (and the screech owl) probably don't read the financial press and also probably couldn't care less about prices of shares in companies they have never thought of buying nor think such things have any impact on anyone but 'the rich' who can own shares. They don't consider the impact on their own superannuation funds or the effect on Australia's "wealth" generally that pays for their CentreBet, sorry, CentreLink sources of income nor on the immense effect falling share prices have on every aspect of the Australian economy. I don't own shares in Telstra and I sold my TPG shares (on which I made a handsome profit thank you very much) a long time ago. But I do recognise that falling share prices in Australian communications companies do represent a loss of value in those companies which in turn represents a falling ability to finance future investment by those companies.

Ignoring the share prices, they are simply facts that support views that the 'NBN2' is destroying rather than enhancing the Australian communications industry, the reality is that TPG as the new 'shooting star' of Australian communications may well have reached its apogee and, another consequence of Telstra's 'welcome home' campaigns, will now struggle not only to maintain its momentum but to remain relevant in the very, very, high stakes gamble Telstra is now involved in courtesy of bus ticket planning. Irrespective of what happens in TPG's dealing with that scenario it underlines that ALL Australian communications companies are facing similar difficulties - simply stated - the whole industry is facing its own individual company's versions of Telstra's and TPG's falling worth....and the consequences of that quintessential aspect of company survival.

Australia no longer has a viable communications industry it has a back of the bus ticket political stunt driven by two pork barreled country con men and a screech owl desperate enough to sell her soul to keep her nose in the trough.

More bread, more circuses and more social service hand outs to keep anyone from noticing that something valuable is being destroyed with absolutely no plan as to how to replace it.

A small change to Australia's dreadfully mundane 'National Anthem' needs to be made - substitute "free' with "dumb" in the second line.

Copyright © Exetel Pty Ltd 2010
ABN 350 979 865 46

John Linton

......so they killed Caesar and precipitated the beginning of the end of the greatest civisation the planet had seen to that time.....which in turn precipitated the 600 or so years of the 'dark ages' of European history.

Many things change in any marketplace/industry as time elapses but things can, and often do, change more quickly in most parts of the technology industries than in any other that I'm aware of. This is because changes are not subject to the laws of physics in the same ways as the aircraft, automotive or other manufacturing industries are - they are simply based on how densely you can etch silicone, how finely you can tune a laser gun or how innovatively you can write code for the most part. In other words changes in the technology based industries are only constrained by the thinking capacities of a very large number of the brightest minds on the planet.

Changes in the Australian communications industry, perhaps because we are situated in the 'reverse' hemisphere of the planet, are also subject to the 'output' of the stupidest minds on the planet as in the current case of the 'NBN2' which continues to destroy the Australian communications industry without any cogent plan to replace it with something better. My Rome analogy is apposite, only in the broadest sense, but it does pretty much describe daily life in today's Australian communications industry where a tiny group of people have taken a precipitate and completely un-thought out action for all the wrong reasons that has released chaos on the rest of the community in pursuit of their own self interest. "Panem et circenses" has been replaced with "100 mpbs broadband for all at affordable prices" to gull the dumbest of the peasantry and burning Rome to the ground will be replaced with the equivalent destruction of something much more important.

It doesn't matter whether federal governments of any political persuasion borrow tens of billions of dollars to waste on useless military hardware (F111's that never saw unfriendly action for 25 years, Collins class submarines "built in Australia" that simply didn't work and crews couldn't be found for them, even army uniforms that endangered the wearer's lives because their ammunition 'pouches' wouldn't 'release' the ammunition easily). Apart from the uniform fiasco the stupid, and often venal, decisions by people who have zero knowledge of matters military (on any side of politics) don't usually destroy anything much except the financial well being of Australia. If you were not very bright you could even argue that rather than enriching the US military manufacturers the 'NBN2' borrowings will be spent within Australia (that would be partially true but if you ever saw a cost analysis you would almost certainly find that most of the borrowings will go to EU and Korean communications equipment manufacturers).

The problem with Krudd's cover up for the ludicrosity of the 'NBN1' and its subsequent enthusiastic adoption by the screech owl is the damage, quite possibly irretrievable damage, that a few stupid people have let loose on the Australian communications industry which has already begun to change inexorably the supply of services to the residential communications marketplaces for the worse and the changes aren't even yet noticeable to anyone but the people directly affected and won't be until it is all too late...which, in my view, it could already be.

As everyone who has some sort of minor understandings of business knows - significant  changes provide significant opportunities - almost always for the 'carpet baggers' but also for less rapacious people and entities. It would be extremely foolish to believe that the death of Caesar would have restored the mythical visions of the old Republic (history tells us that all you do is replace Caesar with Augustus who was Caesar without the remaining political and social restraints). So,not being part of the large sections of the industry that will be destroyed by one intensely egotistic man's caprice it only remains to work out how best to weather the storm that has been engendered and determine what to do once the new circumstances are in place....which we have pretty much done over the past two years. It  wasn't hard to do and I would have little doubt that every other company in the industry would have done the same by now. There can't be that many alternatives as things stand today.

Exetel has one problem to make the most of the post Julius world wished on us by that grubby little man. To take most advantage of new Rome we need more money than we can provide from our own financial resources. To date we have been more than content to take our time building the capabilities needed to do a lot more than we have managed to do to date. All of those capabilities, with the exception of the last phase of the network build out, are now in place and it has taken almost seven years of unremittingly hard work to reach this position.

There are two ways to resolve this issue - one conventional, one conventional with a major 'twist'. Either would allow Exetel to take most advantage of the changed circumstances every Australian communications company finds itself in.

Copyright © Exetel Pty Ltd 2010
ABN 350 979 865 46

John Linton

.....pretty much as expected and not 'good news' for 'NBN2' proponents.

I looked at the ABS latest report yesterday which contained no surprises:

http://www.abs.gov.au/ausstats/abs@.nsf/mf/8153.0/

ADSL broadband users 'increased' around 68,000 while wireless broadband users increased around a little over 600,000 and continued to 'close the gap' to less than 800,000 between ADSL and wireless users (4,246,000 - 3,455,000). The ABS revised many of their figures in the previous report but none that made any real difference - except for something I will reference later on. So no surprises - ADSL continues to shrink in terms of percentage of in use services and wireless continues to grow though despite the increase in the number of wireless users the reported usage was actually lower than on the previous report. However, it must always be borne in mind that the base figures are reported by ISPs themselves and, apart from Exetel's which I know are accurate, I would have little faith in the accuracy of the other companies that report. However they are the only real guide anyone has to the overall trends in the marketplace (outside their own numbers of course).

The growth in wireless users is an indication of the amazingly fast take up of that service - from zero to 3.5 million in less than four years and makes it the most successful 'data technology' of all time - at least to date which you must always add when talking about any technology product. What will happen over the coming year is not possible for me to comment on as I have no idea about what will happen on pricing and speed beyond what is available to anyone who reads the industry media which, while seldom being reliable, contains the obvious media releases from the mobile network carriers. The growth over the last six months was slower than the previous six months but the yearly 'add' of more around 1,500,000 users compared to less than 75,000 ADSL services shows a 20:1 take up differential.

The 'growth' in ADSL connections as reported by the ABS was surprising but could almost certainly be explained by the decision by the ABS to include 99 very small and 166 small ISPs in this survey whereas they weren't included in the previous two surveys. As those ISPs have to have a minimum of 100 subscribers each it would mean that the number of ADSL users reported by the ISPs included in the previous survey didn't increase at all but fell by some unknown number; but likely to be up to 50,000 (rather than a 68,000 rise). Given the 'rubberyness' of the statistics it isn't possible to form any definitive conclusions but the trend is becoming clearer.....it also confirms the figures reported in the Telstra annual report that noted the increase in residences that do not have a PSTN line connected.

If you read the media you might have noticed one of Stupid Stephen's more ridiculous claims for the 'NBN2'. He said "The take up of 'NBN2' connections will be 100% by current ADSL users because Telstra will rip out the PSTN copper as the new fibre connections are activated" Mao Tse Tung or Pol Pot couldn't have said it better. It was as stupid as Mike Quigley's statement around the same time that "It's very important to the 'NBN2' that people continue to use a telephone service once they connect to the 'NBN2'". If those are two of the assumptions in the unannounced 'business case' for an 'NBN2' then someone isn't really 'following the conductor'.

What percentage of Australian residential users will be using any sort of carrier telephone service other than VoIP in five years time?

What percentage of Australian residential premises will even have any form of telephone line in five years time?

Personally, I don't know, but I am willing to bet it won't be "100%" of the current number of lines in use today.

But then I didn't make a decision to spend billions, possibly tens of billions, of borrowed dollars based on a political stunt to hide my idiocy.

Statistics may very well be worse than "damned lies" but facts remain inconvenient to people who either choose to ignore them or don't even know where to find them.

Copyright © Exetel Pty Ltd 2010
ABN 350 979 865 46

John Linton

I 'played around' with the basic figures that relate to the supply of wireless broadband services by Exetel using the revised 'offer' from our current suppler and an alternative offer from another provider. I didn't make any headway in finding a way of offering anything that would have any appeal to the residential market places that we currently sell to and I, yet again, wonder how anyone achieves break even let alone making any profit from offering wireless broadband services in Australia. In the event that they do they must buy at a far lower cost than we have been able to achieve or they have found some 'magic' formula which completely escapes me after juggling with buy pricing and two years of actual customer usage 'patterns'.

I have come to two conclusions:

1) If you make the assumption that it MUST be possible not to lose money at the current price points offered by both the carriers and the wholesale customers of the carriers who resell their product at Layer 2 (in other words don't simply get a handsome commission from reselling the carrier's retail products) then the task is easy. All I have to do is make the pricing the same and assume that the various buyers will use less than half of the monthly allowance and.....you don't make much money but you don't lose any.You also have no basis for being in the market because you aren't offering anything that isn't already available from other providers.

2) If you under provision the actual bandwidth you buy to connect your 'customers' to the supplier network you can make a little bit of money and use the general belief that all mobile broadband carrier's networks are unpredictably congested from time to time to explain away poor performance you can make a lot of money.....(relative to option 1). To do this you have to have the sort of personal standards that are the equivalent of offering a new car with a four cylinder engine while stating that it has the power of a turbo V6.

What this means is that 1)'s a gamble and 2)'s a sure thing. Doing both 1) and 2) would be be much less of a gamble and pretty much a sure thing. But I have a great deal of trouble with 2). Even if you did both 1) and 2) and sold at the same price as the multiplicity of other sellers in the market places - what have you achieved? A 'me too' scenario - and what's the point of adding no value to a market place? None whatsoever. You also have to lie to every single customer who buys the service. We currently make a derisory amount of profit from wireless broadband which falls each month over the past few months and will make an actual loss either next month or the month after so we have to do something quite significantly different to what we do now....and we've run out of time to 'think' about what we should do.

The issues that to me are irresoluble are the fact that the cost of providing the service is around $A4.00 for a monthly 'port' charge and around $A16.50 per gb downloaded. With a marketplace that seems to think that any port charge is unthinkable and anything over $A10.00 is "daylight robbery" it makes it very difficult to offer an "attractive" residential service....without ripping the residential customer off in the ways that have been suggested to me. I am no "saint" - but I can't deliver a service based on lies.

I have always seen absolutely no point in 'copying' but I think the time has passed for people like me to make decisions in the Australian communications business - if in fact there ever was a time. Maybe its only the current turmoil that is making everything so difficult but even if that is the case that turmoil will continue for the foreseeable future. So we will have one final meeting this morning and make the decisions required to be able to continue to provide viable wireless broadband offerings without losing money. Business life....not really much of a life at all at the moment....then, as Steve sometimes reminds me.....it never was.

Copyright © Exetel Pty Ltd 2010
ABN 350 979 865 46

John Linton

........is 'spirit reviving' after all.

Due to mix up in dates we found ourselves in the Blue Mountains overnight with nothing to do but enjoy Darley's excellent cuisine and eclectic wine list and chat amongst ourselves in on of the small dining rooms with the Edwardian decor and a real open fire crackling away quietly to itself.  We had worked up an appetite by walking down to Echo Point and admiring the views of the Megalong Valley while resisting the idea of undertaking the trek out to the Three Sisters so late in the afternoon.....we hadn't left Sydney until after lunch and had the normal problems with the short stretch of Parramatta road forced on anyone trying to use the motor way out of Sydney in the general direction of the mountains.

It was quite col and the brisk breezes added wind chill to ambient to redden the cheeks and make the fire in our bedroom and the dining room not as de trop as it may seem. We had chatted  about the usual long term married couple type things on the drive up to our hotel and over dinner we talked more about the business which is an inevitability between people who work together as well as live together. We re-hashed the board meeting topics of the previous day and re-discussed the needs of moving Exetel towards new objectives at a much faster pace than we have been able to achieve so far. Annette has always held much harsher views than I have/do about many aspects of business life but we both agreed that our major problem remained the development/acquisition of 'visionary management' who would see and act beyond the immediate needs of their positions.

The impositions and restrictions that are obviously present in any start up from 'day one' through and beyond the first years of any company's life are well understood by both of us - this is not the first time we have tried to build a company that is very different to the ones it competes with.....and we failed to find a sensible way round this issue/problem in the past. This time we have incorporated at least two differences in approach; but so far at least we have seen no real changes in the circumstances in which we find ourselves and Exetel. That re-assessment took us through to the main course by which time the effects of the pre-dinner aperitfs and the wine had more than begun to weave their magic effects of dissolving all difficulties and making any suggestion sound infinitely more promising than the cold light of dawn would subsequently show it to be.

Over the past few months there have been three other companies that have approached Exetel to buy us out (for effectively zero of course). One of the things that has interested me is that each of the people who have approached us have shown an almost insouciant confidence in their ability to take over running Exetel and do it infinitely better than we currently do. Now, I don't dismiss the possibility that anyone of any business common sense could take over the operation of another company and run it much better than we, with all our limitations, have been able to do over the past almost seven years. When I have asked them why they think they can do a far more effective job they haven't been able to be specific in any respect except to mumble about economies of scale and inherent synergies - in other words - nothing at all.

So over dessert and coffee we drew up a list of all the current aspects of the company that were really wrong and needed fixing immediately. Over the best part of an hour we came up with nothing - except a large capital injection would make life much easier but as we didn't have any more 'spare' cash we scratched that off the list....leaving us with no 'action items'. It's obvious what this means. We either run a perfect company - which we know is simply not true - or we lack the objectivity to sensibly analyse Exetel's and our own failings. Perhaps the second point is valid.......except we seem to have done OK for almost 7 years so why would we have suddenly lost the abilities that have allowed us to achieve whatever it we have achieved?

The excellent food, the superfluity of wine and the drowsiness inducing  effects of an open fire all contributed to a very pleasant dinner and discussion and I only wish I had written down some of the more brilliant sounding ideas which this morning's gentle drive back to Sydney have failed to reproduce.

Copyright © Exetel Pty Ltd 2010
ABN 350 979 865 46

John Linton

We seemed to have more 'meetings' than usual over the past five 'working days'. Most of them were 'internal' involving making changes to various aspects of the way we do things in terms of selling our services and managing our businesses but a few key meetings with 'outsiders' as well as our monthly board meeting yesterday afternoon. Our key pre-occupations were with with the continuing issues brought about by the continuing 'turmoil' in the various residential market places brought about by Telstra's ever more aggressive 'marketing' and the 'actions' being taken by the companies affected by Telstra's marketing that in turn affect Exetel.

I have 'been around' a fair while in the Australian communications industry but I have never observed so much change taking place so frequently over such a sustained length of time. Virtually all of the change is 'negative' as far as our company is concerned and it is becoming more and more evident that it is just as painful, perhaps more so in some cases, for many of the suppliers we are in regular contact with. Personally, I think it will all end in tears for everyone with the possible exception of Telstra. Again, personally, I think that may (emphasis on MAY) end up being the best long term result for the Australian residential user but will almost certainly do immense short term/medium term damage to the Australian industry and any beneficial longer term result in return for that possibility seems, to me, to be a ridiculously high price to pay. But then I am obviously biased in my view.

Despite the current shenanigans in the residential marketplaces it's not all gloom and doom though. We continue to develop more and, hopefully, better plans to allow our company to continue to exist and continue to contribute to making Australia a better place. At yesterday's board meeting we discussed the need for an Auckland PoP in the immediate future - next 4 to 6 months and a similar need for PoPs in the UK and the USA in the longer term - perhaps before the end of 2011. We have discussed these issues more than once in the past but have not gone beyond brief discussions as we had many more 'pressing demands' on the limited financial and personnel resources we can deploy at any given time. There seems little doubt that we will go ahead with an Auckland, and perhaps, a Wellington PoP either on our own or in some sort of 'collaboration' with a New Zealand company that has presences in those two locations - all we need is a thoroughly costed implementation plan (not being a cargo cultist or Labor politician) and an associated business plan.

We also discussed the timing of the development of an outbound calling capability in our Colombo office. Since we began our business back in January 2004 we have totally relied on our web site and 'word of mouth' supplemented by an initially very small number of 'agents' to bring customers to our residential services. That has worked very, very well for the whole of that time but, as I have been remarking, times are now very different. Annette and I will go to Sri Lanka in early October to conduct the quarterly reviews and part of those reviews will be to determine just how we can 'build out' an outbound sales capability for residential and small business services using the experience we have now developed over the past 18 months building an outbound corporate sales presence in Sydney. Hopefully we will have hired the first three people that will allow three of our current inbound residential sales personnel to move to outbound sales by our target date of November 1st 2010. This will be a whole new venture for us but, admittedly knowing nothing about how to do this, we can see huge advantages for Exetel and a new 'dimension' to our overall activities.

We also are seeing the early signs that our contract programming and technical consulting business may become more successful than our original modest plans indicated that it might. We have a great deal of expertise (because of our own ongoing ever more sophisticated developments) in data base and voip integration and more expertise than we can find externally in voip and Asterisk development. Our sales of voip to small, medium and medium large businesses are beginning to grow exponentially and that has exposed us to the yawning and ever widening gap in general expertise in Asterisk and other aspects of VoIP implementation across all sectors of the business marketplaces. How we can identify suitable prospects for this part of our business remains to be seen but it may prove to be much easier than I thought when we decided to explore this possibility.

So, the last few days have been very challenging (as always) but they also provided more positive signs than usual - perhaps I am so 'punch drunk' from the constant "issues" I deal with every day I am mistaking 'daylight at the end of the tunnel' for the onrushing freight train.

Copyright © Exetel Pty Ltd 2010
ABN 350 979 865 46

John Linton

.....they have well and truly changed and I don't think we have made enough progress in the time we have been preparing to meet those changes.

We have been trying for some time to make new wireless and mobile plans available to Exetel customers but have had no success in doing that despite some progress seemingly being made on a few occasions. Why it should be so much more difficult today than at any previous time to make this happen has surprised me but it seems that times continue to change and Exetel is not moving quickly enough to meet the challenges of moving from one business 'model' to new model made necessary by the changes that are inexorably seeping aside the old 'givens' of the Australian communications industry. 

Our 'desire' to move from being a supplier of services to mainly (by weight of monthly revenue) residential customers to mainly (by weight of revenue) a supplier of services to corporate  customers is 18 months 'old' and has made some considerable progress - but not nearly enough and the lengthy transition is leaving us in 'no man's land' as far as our relationships with our current suppliers is concerned. One of the things this means is that our current suppliers see us as far less 'desirable' when it comes to 'residential services' than they did wen we started and therefore are less able to provide us with sufficient wholesale margins than we need to more effectively compete with their larger customers. This becomes a 'vicious circle' (I have never understood how the meaning of this phrase relates to its actuality) in that as the supplier is less able to provide us the margins they supply to larger buyers the less we are able to compete with those companies unless we sell plans/services at such low prices we can't make any profit at all.

I think this most evidences itself in the current wireless and mobile 'discussions' where when we look at the opportunities we may be able to address we constantly run up against the current market realities that larger suppliers are selling at prices which we cannot possibly meet. So the problems I alluded to yesterday regarding dealing with Telstra who sells to residential customers at lower prices than it sells to wholesale customers are very similar to other suppliers to Exetel who sell to our competitors at much lower prices than they sell to us. I am not complaining about this situation just making the point that it is an inevitably of changing business models if you take too long to execute the changes - which we have done/are doing.

There is only one way to address this situation - we have to rapidly increase our buying volumes. Easy to say - pretty difficult to do. The QAD way of beginning to address this scenario is to reduce the number of suppliers in any given 'product category' b.y transferring the volumes from one supplier to another which gives some sort of greater 'buy' with one supplier at the risk of seriously 'annoying' another supplier.....and also subsequently reducing Exetel's future buying flexibility of course. We need the capability of providing wireless and mobile services in the future and we need the ability of selling them at a profit today but the two requirements are becoming very difficult to achieve.

I don't know how to 'make this happen' more quickly than we have managed to do so far but there is less time to bring about a sensible result than there was back in December 2008 when it first became obvious (to us) what was going to happen in the ADSL, wireless broadband and mobile residential marketplaces. Any ideas would be welcome.

Copyright © Exetel Pty Ltd 2010
ABN 350 979 865 46

John Linton

.......Not only did 'something' truncate yesterdays post but 'overnight' it disappeared entirely and, for what it was worth, I had to re-post it this morning. I will attempt to make yesterday's point today which was that.....

...all business plans have a use by date which means that most companies need to constantly look at what there aim of being in business is and whether it's still relevant looking in to the medium term future. I referenced Vodafone that had succeeded brilliantly in growing a second tier and quite small mobile telephone company in to the largest mobile company in the world but that the rationales for doing that had faded over time and the verdict of the stock market was that it was a poor investment without a 'bright' future (irrespective of how it had 'kept all its promises' and was a luminary in its field of operations).

Since the Telecommunications Act of 1991 it has been a 'given' that the basis for existence of 'competitive' communications providers has been that Telstra was 'forced' to offer a wholesale price to 'other' companies and because Telstra was so inefficient ANY company of any size and competence (even start ups like Optus was then) could compete effectively by offering more responsive and better 'service' than Telstra and offer those services at a lower price. The whole concept of that period of government divestment of commercial services (Commonwealth Bank, Qantas, TAA, Satellites, Power stations, major highways, etc) was that privately owned companies could more efficiently provide such services than government owned utilities). And that worked out just fine until......

.....in the communications equation Telstra finally, after 15 years, ran out of the customer inertia that prevented a serious degradation of the various customer bases and realised that with the intervention of the then federal government in saying it would build a competing network the 'erosion' of its remaining customer base would quicken appreciably. So Telstra began to reverse the raison d'etre for the existence of almost all of the currently operating communication companies by selling communication services to end customers at lower costs than they did to wholesale customers. Now this is fair enough in the commercial world and even the ACCC doesn't see anything wrong with it as the intervening 20 years since the act was passed has allowed enough time for several true competitors to emerge (Optus, Vodafone) and several other companies to begin to build infrastructures that could be considered to be true alternatives to Telstra's infrastructure - especially if the last mile dependency on Telstra was removed by a government supplied alternative.

Only one minor problem - Telstra is still, with its depleted customer base, a $25 billion dollar behemoth with enough 'free cash flow' to not only continue to build out its fibre and wireless networks but to easily fund whatever 'marketing' programs it thinks will take away whatever number of customers from its 'competitors' it deems 'necessary'. So, now that the national government of the day has deemed Telstra to be 'just one of many RSPs' the original basis for communications competition in Australia has been swept away. Exetel as a tiny example, was only brought in to being because Telstra offered sufficient differentiation between the prices it sold ADSL services to retail customers and the prices it was prepared to sell wholesale to even a 'start up' that we could enter that market and grow an Australian telecommunications business.

But if Telstra decided that not only was there no wholesale margin but there was a price premium to buy at wholesale from Telstra then it's obvious that there is no longer any reason for companies to exist in the supply of services to the Australian residential markets. That's, pretty much, where things stand today and there's no reason to assume that there will be any change in the directions taken by Telstra in the future. The ACCC has already stated that ADSL2 is not a 'declared' service based on the claims by so many other companies that they have DSLAM networks that more than match the capabilities of Telstra and at a derisory $A1.50 per month to use Telstra's infrastructure to connect customers to their DSLAMs they have a massive price advantage over Telstra (I wonder what they'll do when 'NBN2Co' want to charge them $A30.00 for the same connection?).

So, like Vodafone, (in an incredibly more minute way) the reason for Exetel's existence which was to provide communication services at the equivalent or better level of quality, with better 'support' at a lower price than all other providers to residential customers no longer exists. Telstra, the only source of ADSL1 services and the only source of ADSL2 services outside the major cities now sells directly to our customers via telephone and door knocking at prices much, much lower than they sell the same connections to us via Telstra Wholesale. You don't have to be very bright to understand that you cannot offer a sensibly attractive service under those circumstances (and neither can anyone else for very long) and therefore your basis for being in the residential business has 'disappeared' in a puff of Telstra "welcome home" smoke and a billion dollar 'welcome home' budget.

Exetel, and perhaps some other communication companies will have to change their basis for being in business in the immediate future because the previous basis of providing services to a sizable chunk of the residential market places has 'disappeared'.

Copyright © Exetel Pty Ltd 2010
ABN 350 979 865 46