John Linton's Personal Musings

John Linton

I'm not sure what it means but we seem to have received more approaches about "joint ventures" over the past three months than we have in the previous six and a half years..... and some of them seem to be more real than at any previous time....though as we have yet to make any significant progress with any of the discussions maybe they are not as real as they seem to be. The trouble with joint ventures for companies of our size is that they are seldom going to result in "joint" - they are going to result in one party or the other not getting what they expected from the arrangement. Perhaps that sounds far too cynical but I have had enough previous experience that shows it is the most likely result most of the time.

However, not taking too negative a view of current discussions we may be able to progress one, possibly two, of them to some sort of completion point before December 31st. If we do that we will not really improve our position in the short term but it is a future avenue worth exploring in at least two respects. Although we believe our automated systems are more than exceptionally good we would have the benefit of having to adapt them to other company's requirements and the scrutiny of new 'eyes' and the new suggestions that flow from such scrutiny so it would be a new source of improvement suggestions. We may be able to improve our buy pricing by adding one or two other company's start up buying volumes to our own. I doubt that would make any short term improvement to our buy pricing, the volumes would be too small to start with and once they grow it is unlikely that the 'partner companies' would stay with the 'joint ventures'.

I will meet with the closest to finalisaton 'partner' late today to determine whether they/we are happy to go ahead and we will progress discussions with the other 'partner' later this week to see if we can work out just what it is they really want to do and whether it's in our best interests to agree to do it. If it looks like taking up too much time then we will postpone any further discussions as the Exetel people involved have more urgent things to do in the time remaining before the new year is upon us and we don't have the resources to make both things happen...I wish we could but we have very limited resources.

I think the highlight of the day was reading Steve's report on the 'opening' of the model dairy farm that Exetel has funded in 'up country' Sri Lanka:

" I attended the opening ceremony of the farm we have provided the financing for along with 40 or so locals, three members of the government and the personnel who did the work from SLWCS. It was a nice event with the local senior priest conducting a brief dedication service.

So far, apart from completing the grazing facilities and building the milking and other sheds there are 20 cows (Jersey cross breds) which are, between them producing from 10 to 2 liters of milk per day depending on how long they have had to acclimatise. The milk can be sold to the local government milk processing plant for Rs. 35 per litre, or sold to locals who line up at the roadside with jugs for Rs. 50 per litre. Providing an income of Rs. 10,000 per day 'as is' or Rs.20,000 per day at full capacity of 40 animals.

Speaking with Mr Hewage, I found out that the government has a facility in place where farmers or groups of farmers can apply for a loan, and a funding pool is available at 4% less than the market rate to provide them with money for capital development - exactly along the lines of the dairy project.


Our future funding should be used in the following ways:

Copyright © Exetel Pty Ltd 2010
ABN 350 979 865 46

John Linton

.....with more to do than can sensibly be fitted into four weeks.This usually the case with operating a company of Exetel's size but somehow 'Christmas' adds some sort of 'finality' to a period that is more 'final' than other events.

We will have to make a decision today or tomorrow as to whether or not we take more floor space (on a rental basis) in the premises we occupy in North Sydney. We have been delaying this decision due to the uncertainties in the current residential marketplaces but there is now, apparently some other "party very interested" in the floor space. While this is probably more a case of the agent wanting to secure their commission before Christmas it really is a decision we need to make. There is no doubt that we will need more floor space in the immediate future to grow our corporate business but whether we need double what we currently have in North Sydney is the key element of the decision we need to make over the next 48 hours....or have it made for us by some other company signing an HOA before we are able to make up our minds.

Most of the week will be spent on decisions relating to revisions to the operating plan for the coming six months and trying to understand the most likely changes to current conditions and the offers by the various major companies that affect Exetel's business. For much of 2010 that has been Telstra Retail and TPG in the residential ADSL markets. However, over the past few months TPG's influences have faded away, quite considerably with fewer and fewer churn losses to that company each month. Telstra Retail's negative influences have also declined - though to a lesser extent. We will have to see whether either of those companies is able to 'increase their giveaways' via Christmas promotions but, for whatever reasons, there are days now where churns to Exetel from both those companies exceed churns to them for the first time in over eighteen months.

Our major efforts will be put in to determining what we do to increase our VoIP business and residential sales and how to increase the sales to small businesses. We have a quite strongly growing flow of sales to small business customers and (simply from our web site) and we believe this area of our business is easily our 'easiest' opportunity to grow our ADSL services in the event that Telstra/TPG/et alia continue their impossible price war into the balance of this financial year. The majority of the customers signing up for our ADSL business plans are coming from Telstra and TPG so clearly whatever those two companies are offering them (and in TPG's case perhaps the quality of service they are delivering)  is less attractive than Exetel's web site is offering. Perhaps there is a God after all?

Whatever remaining time we have will be spent on re-developing the Sri Lanka plan to determine just how we can use develop and acquire 'outbound' sales resources to continue to change Exetel's 'sales approaches' to the different markets away from purely web based offers to more direct contact ways of promoting our business services. Our initial few weeks have been very encouraging and we now need to determine just how 'brave' we can be in the new calendar year. We have completed the first two phases of our Sri Lankan 'strategies', very, very successfully, but having the courage to start Phase III is still something that needs careful assessment.

Then there some other 'minor' tasks to complete like hiring a Sales Director, deciding how/whether to proceed with one or two 'joint ventures', selecting the 'source of money' to fund the planned growth and one or two other things that need time and attention....and then, of course, there is the ongoing uncertainties of:

http://www.theaustralian.com.au/business/opinion/there-is-no-way-of-knowing-what-the-final-cost-of-nbn-will-be/story-e6frg9if-1225961710110

which lead Testra to say that it expected its ADSL and wireline business revenues which currently comprised around 50% of its annual revenues to decline to around 12% by 2020. Our planning problems pale into insignificance compared to planning for that sort of change.

Copyright © Exetel Pty Ltd 2010
ABN 350 979 865 46

John Linton

......after staying up late to watch the Victoria election results and then figuring it was so late might as well stay up for the Arsenal game. At least both results were fairly positive. It will be interesting to see what the more balanced political commentators make of whatever result occurs later this week - not often there is such a turnaround in an election and not often that Arsenal dominates a match so completely.

We have to make some decisions on what we will do come December 1st regarding 'naked' ADSL and how we deal with the various 'bonuses' our main carrier suppliers are offering for 'new' customers in terms of our current customers. Although customers of ADSL services are quick to sign up for the various Telstra Retail giveaways they seldom comment on the requirements for 24 month contracts or for the requirement to also use Telstra Retail's ultra high priced mobile and wire line rental and telephone call charges.  I doubt that many residential customers realise that the carriers desperation to prop up their own ADSL customer base is only manifested in providing 'promotions' to their wholesale customers in terms of new customers - they simply ignore that times have changed and that it is ever more difficult to retain current customers in these times of exceptionally aggressive 'win back' campaigns. Our carrier suppliers simply ignore the immense pressures being exerted on our, and all other ISP's customer bases by the endless campaigns of Telstra Retail and TPG.

I'm not complaining, in any way, about the 'new business' bonuses being offered by our main suppliers. Using them in a way that doesn't 'annoy' current customers is hard to do. If a carrier gives us, for example only, three months free and zero activation charge for signing up a new customer on a twelve month contract that, using simple arithmetic is equivalent to a 20%+ discount on the monthly charge to the end user over a year. Attractive BUT only for a new customer. So if we somehow 'distill' these sign up bonuses into a lower monthly plan price for new users then all current customers who see those prices think they are somehow being 'cheated' by not being offered the same deals.

So it's a difficult thing to deal with and after considering various options I'm not sure that I can come up with any realistic solution. The best I can think of is to offer the first two months free for new or churn customers - using the carrier bonus to only benefit new customers.This will require some very difficult decisions, should we do that, but after many hours of thinking I can't think of any other way of passing on the bonuses without seriously damaging the ongoing revenue/profit we are currently achieving which is at the lowest level (in terms of 'profit') that it has ever been. Maybe inspiration will 'strike' later in the day?

PS: How many more federal public servants are there today than on the day Labor became the Australian Government? Answer, which surprised even me, is on page 36 of today's Sun Herald

Copyright © Exetel Pty Ltd 2010
ABN 350 979 865 46

John Linton

....gone in the proverbial 'blink of an eye'.

It was a surprising week for residential ADSL sales (up 10% over the previous week when the last week in any month is usually down 10%). Perhaps it another minor indication that Telstra and TPG are both suffering from discount exhaustion? Perhaps not. It was also a good week for business sales with two days to go the Sydney sales team is within a handful of sales of  reaching a record month and the 'prospect list' is stronger than it's ever been. The take up of the new Optus 'capped plans' has remained strong both bundled with ADSL and as standalone offerings - at least in terms of our previous experience with Vodafone based services. All other services, with the disappointing exception of VoIP also recorded orders well above what we would normally expect at this week of November.So a very solid 'sales week'.

The set up of the outbound sales operation in Colombo made a lot of progress over the past three weeks with Clarissa heading back home today. In a little over 12 working days over 1,000 upgrades were made by the first two newly appointed supervisors and in the last few days by their first two additional team members. As we didn't know what to expect it is not really possible to 'judge' the achievements but I think they are well in excess of what I expected. Of course the real proof of this concept will depend on the progress continuing to be made as we aim for more difficult targets and 'offerings' but I couldn't be happier with the progress that has been made so far.

Stupidest statement of the week was made by Internode and dishonest politician of the week (in a very close contest with Whine Swan) was revealed as the ever lying Ms Faustus according to this report:

http://www.theaustralian.com.au/news/nation/governments-broadband-not-up-to-speed-at-tasmanian-school/story-e6frg6nf-1225961150410

Of course, you should never believe what you read but for cynical lying by Ms Faustus and Stupid Stephen it illustrates a new low standard but the stupidity of the Internode statements beggars belief if they were reported in context - which, on balance, I can't believe they were. The back haul for higher speed connections (and 100 mbps is certainly very high speed in today's contexts) is always the issue (as cable/fibre residentiail services from Telstra and Optus have clearly demonstrated over the past 10+ years). So why would anyone expect the magical 'NBN2' to be any different? However it's revealing that Internode are saying they don't have enough back haul to Melbourne to actually deliver what they are offering - I don't recall that company ever making such an admission before and it will be interesting to see how they attempt to recover from that confession of misleading their customers. However, if the statement by the head master actually referred to video conferencing performance between Tasmanian schools then no Bass Strait bandwidth would be involved so it may be the case that Interode have also significantly under provisioned the NBN back haul bandwidth required for the number of customers they have sold services to as well as under provisioning trans Bass Strait bandwidth. Or, perhaps 'NBN2Co' have under provisioned the back haul between the three small towns and their Hobart hand off point? What a mess whichever the real situation is.

The major event of the week was that we signed a series of contracts over the past week to allow us to provide business services in Auckland and to add a third layer of redundancy  to our Australian network by triplicating the national Australian back haul and adding routes via Endeavour to the USA and via AJC to SE Asia and particularly Japan and China (to the existing routes via Southern Cross to the USA and Singtel to Singapore). We also made the first moves towards the upgrading of the Australian network from 1 gbps to 10 gbps

Late on Friday afternoon our operations and data base development people met with a prospective "joint venturer" to show them what a real set of integrated automated processes can do compared to what they have in place. It isn't until you actually demonstrate what we do to a cynical prospective buyer that you realise what a gigantic gap there is between what we have spent seven years of intellectual effort and insight building and constantly refining and what some other people think is a usable set of internal and external processes.

An interesting week.

Copyright © Exetel Pty Ltd 2010
ABN 350 979 865 46

John Linton

....though in this particular year - that's not saying much.

We rolled past our overall November revenue target yesterday which is always good to see in a tough year - though it was far from 'ambitious'. We still have a little way to go for the three remaining individual targets to be achieved but with three full days and a weekend to go I would have little doubt two of them will be achieved though I have my doubts about the third. In any event it is another tiny indication that business is slightly better now than it was over the previous four months of this financial year. I am not 'going overboard' about one month's apparent 'pick up' but at least it's better to have an on target month than a below target one.

The lack of 'Christmas Specials' hitting the residential markets so far is perhaps more important in signaling 'discount exhaustion' by the market destroyers and it will be very, very interesting to see their half year results early next year. Not that our half year results are going to be anything to write home about as we, like many others, have been on the receiving end of the market destroyer's give aways. It's far too early to tell and, of course, I have a very, very limited knowledge of what is actually happening but the 'straws in the wind' seem to indicate that things may be getting a little better - or at least not getting any worse.

Reaching the end of November so quickly means that there are precious few days to the end of this six month period and we have made little progress in revising our plans for the next six months which has now got only three weeks for us to complete. I keep changing my views on what I think the real opportunities are in the coming six months and I keep getting more confused as the days go by. I am still a little bewildered by the range and 'character' of the 'offers' we are receiving but I have stopped considering them in the context of what we are currently doing and what we are contemplating doing in the immediate future.

Our focus is on how we can more quickly build our business revenue, the products/services we need to do that and the types and numbers of personnel we need (and where/if we can find them). A key decision is, of course, do we appoint a Sales Director to take over the sales responsibilities I have carried since Exetel has existed (since it was first created some 20 years ago and over the past almost seven years of its current incarnation). November looks like it will be the best business sales month we have ever had but I have many concerns about the rate of progress we are making compared to what I had hoped for....though perhaps I was unreasonable in those expectations. We have had some interesting, and at least two very 'strong', applications for the Sales Director position and we should be in a position to make a decision by the end of next week.

A decision we also need to make is just how we use outbound sales based in Sri Lanka - our initial three weeks efforts have been very positive but, of course, we are only at the 'starting blocks' in terms of working out what we can really do. How we can use SL based personnel to help build business sales more quickly is going to be the real challenge and I don't think we are going to be in a position to make such decisions until sometime next year - but they really need to be made now. Overall the cleverer utilisation of SL resources is going to be very important to the Australian company over the coming six months....it is one significant advantage we have over all of our competitors.

A lot to think about.

Copyright © Exetel Pty Ltd 2010
ABN 350 979 865 46

John Linton

......in the event there is such a thing? It's pretty obvious, at least to me, that in the communications industry it's the harshness of current conditions in the residential communications market continuing to increase and the 'sound' of desperation is the ever more bizarre and amazingly changing offers being made at both the retail and wholesale levels.Major suppliers who say "absolutely out of the question" one day are coming back a few days later saying "let's do that". What changed?

I was told that TPG approached us yesterday to try and establish a price at which we would buy residential ADSL2 services from them (having approached us a couple of weeks ago with the same pitch on business services). Perhaps this is simply a new marketing ploy to fill up their unused ADSL ports caused by falling direct sales and Telstra's depredations which could be a logical extension of any network owner's ongoing marketing opportunities but it seems a very unlikely 'strategy'. TPG's approach to the retail markets appears to be based on taking as much market share as it can get based on a more for less approach to end user pricing which, by definition, can only be successful if it gains customers at the expense of its competitors. Why would it expect its competitors to help TPG put them out of business? (that's ignoring the reputation TPG has for a congested network that generates so many end user complaints). It sounds more like a company that is not meeting its publicly promised growth targets and is looking for a 'quick fix'. The thought of on-selling the TPG network is simply quite bizarre to someone like me....but perhaps its a sign of a truly changed future?

On the same day we had a re-approach from a long term supplier who we had 'taken some business away from' who had then threatened us in a most unseemly manner. Apparently forgetting their immediately previous belligerence they wrote to me asking Exetel to tell them at what price it would take to continue doing business with them. On balance this was even stranger than the TPG approach. We have been dealing with this particular supplier for well over 5 years and we have always kept them advised of the future pricing we expected as the market changed. It was no different in the recent contract end discussions but they chose not to meet the market prices now existing so we advised them we would have to change providers. Their reaction was unprecedented in my experience and resulted in a very 'bad taste in our corporate mouth'. To then come back and say, effectively, "OK the blackmail didn't work so how about you tell us at what price you'll keep the business with us" was......I'm not sure I can find the words to adequately describe our reactions.

Again, on the same day, we had yet another potential provider this time, whose previous offer we had considered but then decided against proceeding with come back to us with such a vastly improved offer that it made nonsense of the original proposal and seemed to contradict everything that had been previously said.

We know, equally as well as most I would have thought, how difficult 2010 has been and although Ms Faustus backed down enough yesterday to get the Senate to pass the Telstra Separation bill (a small mercy in these confused times that is only a small step along the way towards a more sane set of marketplaces):

http://www.itwire.com/it-policy-news/regulation/43457-nbn-co-business-case-summary-leaves-many-questions-unanswered

the first six months of 2011 are still going to be far from enjoyable....and that's probably the most optimistic view that can be taken. These three incidents (in one day) together with the general feelings generated from so many casual conversations, media reports  and email exchanges each day keep emphasising that however difficult things were 'yesterday' nobody seems to be expecting them to be anything but more difficult 'tomorrow'. Sometimes it makes you wonder why you get out of bed each morning.

So, nil desperandum, tough times allow the talented to shine and the less talented to move on to something easier they can cope with. The problem is trying to work out which category you fit into before circumstances make it abundantly clear to you. Meanwhile it is somewhat comforting to know that other people are as, or more, perplexed by current conditions than you are.

Copyright © Exetel Pty Ltd 2010
ABN 350 979 865 46

John Linton

I had lunch with one of our nicer suppliers yesterday and we discussed the 2010 calendar year which they had found as difficult as we had - based on several of their comments perhaps more so. Inevitably we discussed the ongoing actions of Telstra Retail and how annoying it would be if the Senate didn't pass the Telstra Split legislation that would eliminate the current uncertainty that of itself in causing so many of the current problems. The other 'irritant' in the current residential ADSL marketplaces was also a topic of discussion and whether the reports of a network under severe strain as variously reported including here:

http://www.computerworld.com.au/article/368976/tpg_faces_customer_backlash_over_slowed_net_speeds/

http://www.sharecafe.com.au/fnarena_news.asp?a=AV&ai=18573

were the first signs that the pricing and inclusions forced upon themselves by themselves by TPG was beginning to become too heavy a burden to continue to carry. The first of the analysts that 'follow' TPG seems to confirm that view - from one of TPG's more enthusiastic 'supporters' they have become sufficiently disillusioned to downgrade their 'advice' from buy in April to hold in August to sell a few days ago. Neither online web sites peopled by who knows who nor stock price analysts provide any definitive views on how a company is performing but the 'signs' that are available are all negative.

The TPG plan pricing has continually fallen since Telstra Retail began its assaults on other ISP's customer bases. It also was the introducer of unlimited plans at very low prices and reached the current lowest point of of $60.00 per month ($30.00 for ADSL and $30.00 for 'a telephone line'). However, as I pointed out some time ago the issue with putting in place plans that are based on 100% of your users being ADSL2 unlimited customers at plan prices that are lower than your previous prices for 'limited' plans will result in your average usage per user continually increasing ever more sharply and your average revenue per customer constantly decreasing. However the real problem with this 'strategy' is the cost of backhauls which eventually require upgrading from relatively inexpensive 1 gbps to much more expensive (in terms of hardware cost) 10 gbps boxes.This transforms a network performing at an efficient 90% of capacity to the same number of users on a network performing at less than 10% of its capacity and, worse, with little prospect of ever growing much beyond that and, worse again, with a much shorter payback period if there ever is an 'NBN2'.

If the current complaints about TPG speeds are more than a slightly higher level of web site whiners exaggerating their experiences (and their own incompetence and lack of understanding) are the first signs of a network that is not being dimensioned to cope with a customer base of ever growing numbers of very high down loaders then the cause of that lack of capacity is almost certainly a lack of back haul upgrades which in turn is a sign of reluctance (inability?) to spend the money required to provision to the new levels required by a customer base of unlimited down loaders. Pure speculation but it is the logical explanation of a program of growing a customer base based on 100% heavy down loaders.

So we had a very pleasant meal and agreed that the sooner 2010 ended the better for everyone except possibly Telstra Retail who don't really count as pretty much anyone can buy an increased market share if you are prepared to pay $300 (or whatever it really is) for each 'new' customer. Hopefully both Exetel and our supplier achieved what they wanted from the meeting and learned more about the strange times we are living through.

Copyright © Exetel Pty Ltd 2010
ABN 350 979 865 46

John Linton

....."catch up for Christmas/celebrate/thank you for your business invitations" - 23; Christmas Cards - 11.....indicating an even higher level of insincerity or desperation than in previous years.......alternatively an increasingly "bah, humbug" attitude on my part.....probably the latter.

Yesterday was spent mostly on looking at various aspects of the various budgets for the next two months and trying to work out just how to deal with various aspects of providing ADSL2 services in the future - particularly how to deal with 'naked' ADSL2 services in the current marketplaces where the illusions of providing an ADSL service (which by definition require a PSTN line) without charging for a PSTN line have become truly ridiculous. I always, somewhat grimly, smile when I see various people say/write "I'm going 'naked' so I don't have to pay !@#$%^ Telstra any more". I wonder how such people would react if they knew that their ISP was actually paying Telstra 500% more to cripple a ULL line rather than simply providing part of that line to provide ADSL over SSS?

It is just one of the Alice In Wonderland scenarios that a company of Exetel's size has to deal with on a daily basis. It is the cloud cuckoo land scenario of Telstra Wholesale telling us that our pricing for a 'bundled' telephone and ADSL line from them is 100% more expensive than the Telstra supplied service we buy from Optus (who buy from Telstra) and Optus is making a 100% mark up on that service - how does a rational person keep their sanity in such circumstances - assuming you don't possess the Red Queen's ability of being able to "believe six impossible things before breakfast"?

I found these of little comfort:

http://www.abc.net.au/news/stories/2010/11/22/3073469.htm

http://www.businessspectator.com.au/bs.nsf/Article/broadband-internet-NBN-Gillard-Conroy-government-pd20101123-BFS78?OpenDocument&src=kgb

As anyone who has read my opinions on the 'NBN2' would know I have regarded it as a political stunt since it was first announced to cover up the total ludicrosity of the 'NBN1'. However, since the Australian electorate allowed Mrs Faustus to cling on to a pretense of government a few months ago it is now inevitable that the communications industry in this country will have to suffer the consequences and no good can come of any protracted delay in proving to the dummies that the 'NBN2' is nothing but a political rort that will badly damage the Australian communications industry. The only way of now dealing with the 'NBN2' is to expose it to reality by seeing just what gets 'delivered' as soon as possible and then making some far more sensible decisions - but perhaps that's as far beyond the Australian electorate as it is beyond the clowns and liars in the current 'gubmant'- as Ms Faustus continues to pronounce it. Has anyone else noticed that her beautician (now there's a challenging job) has put too much pink in her red hair dye recently?

If the crazy Greek does get to delay the Telstra Split legislation required to keep the 'NBN2' fiasco on track then Telstra will face even more issues than if the legislation is passed and the current 'win back market share at all costs' campaigns will go on even longer than if the legislation is passed. If that happens then who knows what ongoing repercussions that would cause?

It appears that the lunatics really are now running the asylum.

Copyright © Exetel Pty Ltd 2010
ABN 350 979 865 46

John Linton

.....and before you know it - three weeks of November will have passed by the end of today with virtually nothing accomplished over the past almost eleven months. A wasted year in which what ever opportunities that might have existed have been buried under the weight of a set of residential marketplaces in a constant state of upheaval and change.....or so it now seems.......at least to me.

I looked over my diary and saw I had a very busy week with the major planning processes now running behind what is required and too many projects too far from completion for comfort. I personally blame the 'NBN2' which even that most left wing of senior economics writers is now expressing the first real doubts about:

http://www.smh.com.au/business/nbn-plan-has-the-signs-of-a-historic-stuffup-20101121-182ld.html

which is quite a shock coming from someone of his political bias. He, for the first time in anything I have read, points out the real situation with as he puts it - "a characteristically grandiose scheme her swaggering predecessor announced without thought to its daunting implications".

I am not going to re-iterate my views on the perpetrator of the 'NBN2' nonsenses and the inescapable damage already been done to Australia's communications infrastructures - the article adequately supports the views I have been expressing and I cannot be bothered to re-summarise them....I moved on after the last election. I have three meetings this week that I wouldn't be having if there was any form of sanity in federal government in this country or any level of common sense in its electorate....but that falls in to the category of not expecting the sun to rise and set according to the times in the tables. The first two involve 'joint ventures' on two different aspects of residential ADSL2 and the third is to determine how best we can more rapidly increase the take up of VoIP by our residential users. All three of these meetings would have been unthinkable to me at the start of this calendar year but then so much has happened, or more correctly, not happened because of federal government fiat that companies such as Exetel are looking at very, very different futures.

One example of this has been the fact that we developed some software that allows a customer to use VoIP (MoIP) to reduce call costs on their mobile handset and have been offering that service for almost 9 months now. We have had people from all over the world buy that piece of software as well as a steadily increasing take up by our own users and other users in Australia. With the ongoing decline in the number of households using wire line telephony we see a big future for that application in terms of increasing the amount of wireless broadband services we provide. The most important meeting I have this week is with someone who we might be able to work with to sell such a service at 100 times greater volumes than we could begin to think about achieving via a jv. If there had been no talk of an 'NBN2' we would never have committed the resources or looked for non-ADSL2 services as a serious component of our future service offerings.

Maybe that opportunity will fizzle out in the discussions as to who does what and who provides what and, crucially, who gets what from this opportunity - that would not surprise me. However, to me, it illustrates the value of both developing your own software and of building an 'independent platform' to provide services that larger competitors cannot easily compete with. The other two meetings are  along the same lines - looking to work with other companies to provide services that are based on components our competitors don't currently have and that address markets that are not susceptible to their bulldozer marketing/advertising methodologies.

Might be an interesting week.

Copyright © Exetel Pty Ltd 2010
ABN 350 979 865 46

John Linton

......in residential communications offerings.

I had a long telephone conversation yesterday with someone I met a long time ago and have 'bumped into' in various airline lounges over the years. In another life he was part of the Silicon Valley minor entrepreneurs who always managed to become part of new start ups that never really went anywhere but always had great ideas and fabulous PR and marketing events at Comdex which were a 'must get an invite' occasions. He was, and is, a thoroughly nice guy and despite his advancing age he has lost none of his charisma which brings excitement and laughter to even long distance phone conversatons.

He had sent me an email setting out his latest company's products which look different and interesting and we arranged a follow up telephone call for yesterday in between trans Atlantic travel for him and prior to my one engagement of the week end for me. After we talked I don't think the opportunity is suitable for Exetel though it initially appeared it might be relevant to the residential markets we at least partially address. I think it would just take too much time at a period when time is very precious - more so than it has ever been. But it did make me think that it was a different approach that needed to be taken to residential communications in Australia or, for that matter, anywhere else.

I had, foolishly as it turns out, always assumed that Exetel (despite its small size) would always be able to compete with any other company (from Telstra Retail on down) because of our inherent advantages of far greater efficiency, no expenditure on advertising and marketing, no desire/requirement to make a profit from residential services and reasonable negotiating ability with suppliers. Seeing that listed companies need to make more profit than Exetel's requirements to break even on residential sales and their propensity to 'fatness' in every aspect of their operations this seemed a reasonable assumption that would allow Exetel to offer the lowest price for a good services producing year on year growth by word of mouth. As that 'go to market' methodology is no longer sustainable we have to change it but it has been difficult/impossible to find something to change it to over the past almost two years.

If the current federal government has its way and Telstra no longer provides the residential infrastructure in Australia has anyone really thought about what that actually means? Personally, I haven't seen a single word written on how communications services will be delivered without a long term experienced carrier doing the delivering (let alone the maintenance and development). Think, if you can get your mind around it, of what sort of organisations will  provide you with your telephone and data services when/if Telstra and Optus become irrelevant in providing the vast majority of them? Does the word "chaos" enter your thinking? Have you ever, in any aspect of your life/at any time of your life lived through 'revolution'? Almost certainly not - yet who is actually considering how the chaos of the revolution unleashed on Australia by an unthinking one term only prime minister in a desperate attempt to save his snout in the trough perquisites (unsuccessfully as it turned out) is going to be brought about?

Absolutely no-one it appears to me. But then that's why the 18 year olds and the below average that voted for "fast internet" at the last election will live long enough to try and fix what they have so unthinkingly and casually broken and suffer the consequences of their stupidity.

Copyright © Exetel Pty Ltd 2010
ABN 350 979 865 46

John Linton

....or there probably would be if we actually looked out over a meadow of ripening corn.

We made some progress over the last week in a number of areas which was good to see. Among the highlights were business data link sales passing the 50 mark earlier in the month than in any previous month with a stronger than ever 'prospect list'. The rapid progress being made in setting up the outbound call centre in Colombo with the first two people each making 30 sales each yesterday and the second 'round' of people all making progress. The continuing growth of sales of the new Optus mobile plans as both standalone and bundled services continuing to exceed our, very modest, expectations.The completion of a major software development project pretty much on time and a record number of new business installs for any two week period. Much to be satisfied with and perhaps even proud to be part of bringing about. Perhaps it's the bright and sunny morning in contrast to the previous few miserable days?

So we had a very good 'sales' week and no real 'disasters' in any other part of the business with provisioning and support both reaching new 'highs' against the metrics we set for them and the performance of the network reached new pleasing levels of symmetry. The only negative things about the week were the level of ASDSL2 sales (ADSL1 were quite good) and, of course the ever lower pricing of ADSL2 sales generally. If I was going to be really picky I would add the attitudes of two of our suppliers to commercial reality which left a bad taste in my mouth.

We are considering hiring a Sales Director in the new calendar year as I, at least, have given up looking for a General Manager or even an Operations Manager. This is a path fraught with extreme danger (for both Exetel and any possible hiree) as I doubt that the position of Sales Director with a company of Exetel's size is a position that can be easily handled....and not only because of the diversity of 'products' and 'marketplaces' but because our company is a very different working environment to other companies and our work ethic and methods of operation (especially our sped of decision making and implementation) are so different it might prevent even the most skilled and experienced person lasting very long. However the job of managing our current breadth of sales activities is becoming beyond my ability to cope with (personally I think that has been the case for some considerable time) and we do need to add new insights and knowledge to this rapidly growing part of our business...in the not too distant future.

The problem is finding someone who is capable of managing in the hands on way we need across such a broad area of products and responsibilities. The other issue is, of course, adapting to the very unusual way Exetel is structured and the very young age and diverse backgrounds of our sales people - in two different countries selling to very different demographics with no marketing/advertising/promotion budgets. Anyway, nil desperandum, I began the process some two weeks ago in several different ways and would hope to determine whether such a person can be found from the 'short list' I established with some help from an old acquaintance who knows far more about these things than I do.

So I am going to do very little this week end other than read a couple of meaningless books and look at real estate web sites offering beautiful (in my opinion) houses in far away countries - ie. indulge in pointless escapism.

Copyright © Exetel Pty Ltd 2010
ABN 350 979 865 46

John Linton

.....perhaps reflecting the bleak communications market conditions.

It's a miserable wet and windy day in this part of Sydney which disinclines even the most cheerful of people from 'looking on the bright side of life'. I can't even take comfort from the fact "it's Friday" as my working week is seldom if ever a five day proposition with 'week ends' something from a barely remembered past. We have a couple of meetings today with suppliers - something that we are doing much more frequently than at any other time I can remember - to try and make sense of their current changed offerings - which I cannot see any sense in having looked at them several times. Perhaps its my failing mental acuity but I'm more inclined to think it's the failure of the provider's concerned to express their lack of 'real offers' lucidly.

We still haven't come up with anything sensible in terms of a revision to the 'naked' ADSL plans with the best version so far being including a VoIP service with the plan and a $5.00 inclusion of calls to ensure it is actually used. I have little confidence in that particular idea but it is the 'best' we have come up with so far. The major problem is that 'naked' now costs so little less than an ADSL service with a 'bundled' working telephone line it is a pointless offering - well done Telstra. It is just making it even clearer that a wireless broadband service for an increasing number of people is the only way to go.

I don't envy any provider the task of framing offers that make sense to anyone (wholesalers or retail buyers) in the current environment and I'm wondering what more 'madness' will transpire in the 'festive season' run up to Christmas. This coming weekend is usually the earliest time such offers begin to appear as the various 'marketing' people involved take an ever more wider view on what constitutes the 12 days of Christmas which, presumably based on observation, includes a fair amount of November these days. The first 'Christmas drinks gatherings' were held this week without my attendance as I can never see the point of such things and I have received more than a dozen Christmas cards which is very 'icky'....there can be absolutely NO excuse for sending Christmas cards in November.

So perhaps its the strangely unseasonal cold and gloomy weather or more likely the ongoing 'grind' of dealing with ever more 'impossible' situations but I feel unusually reluctant to begin my working day this morning. The more I think about the fact that the end of the calendar year is so close the more I find it difficult to think of anything very useful or positive I have done or contributed to over the past almost eleven months......and the thought of starting another year of such lack of progress in the immediate future doesn't give me any sense of 'new beginnings' - new year - new adventures.

I see that I have now meandered along in such a dilatory fashion complaining about life in general that I am running late for my first meeting. If you've bothered reading this I apologise. My thought processes, such as they are this morning, have been disrupted by trying to work out what I am going to say in a few minutes time on the 'early morning' teleconference arranged to progress something quite important.....I hate teleconferencing at the best of times and never seem to get much from such 'events'.

Copyright © Exetel Pty Ltd 2010
ABN 350 979 865 46

John Linton

....signs of slightly greater acceptance.

I was thinking about the 3,000 unit order for wireless services we received a day or so ago and what it may mean beyond the fact that it was easily the largest order we have ever received in the 'history' of our presence as as an Australian communications provider. I must check with Optus to determine whether their corporate business has made a larger unit sale, not for some BS self congratulation rationale, but to determine what sort of other opportunities there are for such business at this point in time in wireless services in Australia. We have made two bids over the past year for 1,000+ numbers of wireless broadband services but, as far as we know, neither of those opportunities ever reached a decision - or maybe they just stopped talking to us.

We are currently bidding to a major bank for over 1.000 ADSL2 services, which while it is unlikely we will be the successful bidder as it seems unlikely that Telstra will not provide some price that is below our buy price (they do that for one off residential customers) but it is interesting that they specifically asked us to bid and we will make a serious effort. We have some quite large business customers for our data link services and one other large customer for our business wireless services and may shortly have several more and we are getting much more interest from larger companies than we did a year ago.

Our new business order values are now approaching the gross value of our new monthly residential orders and have already exceeded the net value of residential orders (after monthly churns and cancellations) which means that our net revenue from business services is closing the 'gap' between residential and business net monthly revenue at a constantly increasing rate. As we develop the revisions to the CY2011 business plan this is something that we need to determine much more accurately. How we approach the business markets from now on will be very, very important to the growth, or otherwise, of Exetel and just how we are able to provide viable residential communication services. If we can be seen as a viable provider of services to more of the 'next tier up' of businesses (the ones whose IT managers currently say "we only deal with "Tier One" carriers) then more orders for 3,000 services at a time will make a big difference to us...not just in business customers but will allow us to continue to provide viable residential services.

The very big difference between our business customers and our residential customers is that in the almost 7 years we have provided business services we have almost never lost a business customer except a very, very few due to them moving premises to a location where we cannot provide services or because of 'financial difficulties'. The reasons for this are several but, clearly, the major reason is that Exetel remains easily the lowest cost provider to the Australian market and yet provides business services that are at least as reliable and consistently fast as any other "premium priced" provider in Australia - bar none. When other suppliers approach our customers their lies and FUD simply don't work because our business customers have a long and consistent track record of Exetel's very low costs, very high reliability, consistently on spec speeds and 'instant' support whenever they have needed it. The unthinking lies dished out by the very low standard "account managers" of our competitors just don't work in those scenarios....they just prove themselves to be what they obviously are - dedicated self abusers.

So while we will not make any provisions in any revised CY2011 business plan for any more very large orders - perhaps it is coming to the time when they will become a reality.

PS: If i ever think I have pricing/competitive problems (which I do constantly) I can at least be grateful that my tiny problems are totally insignificant compared to these sorts of scenarios:

http://www.smh.com.au/business/vodafone-pushes-telstras-buttons-20101116-17vvy.html

Copyright © Exetel Pty Ltd 2010
ABN 350 979 865 46

John Linton

We have been having some discussions, protracted and not really getting anywhere, with three companies over the past three months about some sort of collaborations. We have had similar, much briefer, discussions in the past 24 months on similar or related subjects but they, too, came to nothing. The problem was always the same - two companies can seldom find enough trust with each other for either of them to 'give up' their total control of what they do. I, of course, am dreadfully 'scarred' by our Lorraine Rose experience - so badly that I would never consider giving up even the slightest control of how Exetel's key services are provided or even influenced. One of the reasons for transferring our Pipe circuits to Nextgen, AAPT et alia as soon as they are out of contract is because the thought of TPG having any influence over even minor parts of our network is something I view with horror.

However one of the companies involved in the most recent discussions may prove to be a much more realistic possible 'joint venturer' in that their needs and our ability to meet those needs provide a much more logical fit and could benefit both companies without the normally inherent loss of 'sovereignty' - by either company. We will see what happens but there is some sort of sensible basis of proceeding further which we have never reached in previous discussions. Whether or not this particular set of discussions does eventuate in a positive outcome or not - I think I am more confident than I have been in the past that Exetel has some things of very real value to offer in some sorts of joint venture arrangements that deliver both benefits to both parties without compromising 'sovereignty' issues. Then again I am obviously biased in my view points so we will see what happens in this instance and see if one or more of the other 'opportunities' can be revived on a similar basis.

We continue to make progress in our nascent out bound sales program in Sri Lanka with yesterday being the most successful day in the first five days in terms of actual sign ups. The people involved in Colombo continue to identify things that we need to do with the software to improve the efficiency and effectiveness of the early processes we have put in place and that will almost certainly be an ongoing requirement. Fortunately that is one of Exetel's key strengths  - the ability to identify how software can improve any aspect of business and the people skills to actually get new processes implemented in the shortest possible times. Training additional people will now begin and we see no reason not to reach the objective of two fully functioning out bound sales teams by early in 2011.....assuming progress continues to be made at the current rate.

We still have not managed to work out a sensible solution for offering 'naked' ADSL2 plans despite putting in more hours to try and do so than we have for any other service. The stark fact is that there is now no rational reason to have 'naked' ADSL2 (from Exetel's point of view - nor I suspect from any other provider's view point). The fact that 'naked' ADSL is anything but 'naked' - given that it requires a standard PSTN telephone line that has to be 'disabled' in terms of dial tone makes a mockery of cost saving attempts and really is a perverse way of providing a 'telephoneless' service. We need a thinking breakthrough. Meanwhile the 'onslaught' on wire line continues:

http://www.smh.com.au/business/vodafone-tempts-phone-customers-to-hang-up-on-landline-20101116-17vvr.html

though, of course, this sort of effort does not address the households with a need for ADSL. It fits with the concept of wireless broadband of course.

Copyright © Exetel Pty Ltd 2010
ABN 350 979 865 46

John Linton

..........we'd all be born with the athletic prowess of Tiger Woods, the looks of Angelina Jolie (or her male equivalent), the intellectual capacity of Isaac Newton, the caring instincts of Mother Theresa, the money making skills of Bill Gates and a billion dollar trust fund - just in case. Clearly that is not the case for many of us but does life have to be quite so difficult for so many human beings on this planet? However the plain fact is that life 'just happens' for the overwhelming majority of us irrespective of how we attempt to control the various circumstances we find ourselves in before they occur. I have worked out what the problem is - it's other people. Having reached that stunningly insightful conclusion it makes each day's vagaries much easier to 'bear'.

All my personal and business 'problems' would simply go away if no other people were involved and I'm pretty sure the same situation would exist for everyone else on the planet. Life would be a whole lot better without politicians, other road users, neighbours, US 'foreign policy', public 'servants', tobacco growers and an endless list of unhelpful  'contributions to daily life'. When you think about it - every single thing that annoys you or gets in your way in everything you do or try to accomplish in your daily life is caused by the thoughtless, greedy or pathologically dangerous actions of other people pernicious influence on my and everyone else's daily lives. However it's the start of another day and such thoughts have to be dispensed with although they are hard to ignore when your day starts with reading the 'industry press' and your over night emails.

Sorry about that.

We need to make a number of decisions over the balance of this week which are fairly difficult and about which we really don't have enough information to make. Nothing out of the normal in many respects but, for whatever reason, they appear more difficult to me than usual. They range from 'simple' decisions like do we sign a lease for additional floor space in our current building or wait until something suitable comes up to purchase to complicated decisions like do we accept an offer to sell the company for far less than it's worth and not have to be concerned about all of the current issues and the even more complex issues that are almost certainly going to confront us, and everyone else, over the coming year? Then there's the 'naked' pricing issues to make a 'final' decision on as well as the continuing decisions that need to be made on the business plan for next year.

Being someone who landed in Australia at a few months short of his 18th birthday, knowing nobody and with less than the equivalent of $100.00 at my disposal I have a pretty good idea of what difficulties life can produce and due to my personal characteristics (for which I blame nobody but myself) I have an even better idea of just how difficult life can be made if you're not very careful....something I have never been capable of being. But....having lived with quite considerable levels of difficulties all of my life it seems that living life without difficulties would be as attractive as living life without being part of a family or without access to single malts or fine wines - pointless and without savour. So perhaps other people do have a purpose other than impeding every sensible action anyone wishes to take.

So, by taking the time to write these words which unfortunately you have had to read, I have stopped being annoyed by what I read earlier and have begun to get on with my day...having wasted the first hour or so reading what a few stupid people had either written publicly or privately.

Copyright © Exetel Pty Ltd 2010
ABN 350 979 865 46