John Linton's Personal Musings

John Linton

.....remains very unclear....at least it does to me.

Telstra Retail continues to 'attack' Exetel's ADSL customer base and it has become almost impossible to maintain the number of customers in Zone One that Telstra Wholesale requires  to maintain the current 'discounts for all zones. I did some more work on the possible results of not 'enjoying preferential volume discounts' from Telstra Wholesale if zTelstra Retail continues to take customers from Exetel and enough current Exetel customers chose to move their Exetel ADSL service from the Telstra infrastructure to either AAPT or Optus infrastructure. As I didn't have even the possible numbers, let alone any basis for estimating what the likely take up would be, this was not a particularly useful exercise - but then sometimes commercial life is like that. Irrespective of what those numbers turn out to be, and we will have the possible totals sometime later today, we are unable to do anything about the zone 2 and 3 customers on the Telstra infrastructure as there is no choice in almost all those locations and the NBNCo alternative is some unknown time away.

However my rough math indicated that if half the current Zone One customers currently using Exete/Telstra infrastructure services in Zone One decided to use AAPT based services for their ADSL2 services only (no change in telephone line supplier) then the savings on the port charges and back haul charges would cancel out the steep rise in the port rental charges on the remaining Zone One Telstra charges and 100% of the rise in the Zone Two and Zone Three port charges. If some additional proportion of the remaining  Zone One Telstra users elected to move their ADSL service and their Telephone line service to Optus then Exetel would be progressively better off financially and would have 'broken the bonds' of being chained to Testra....a cheerful prospect.

It's anybody's guess as to how many and how soon the NBNCo will provide alternative fibre services in the Telstra Zone 2 and Zone 3 areas - I very much doubt that it will be in my 'commercial life time' and perhaps not even in my actual life time given what changes may occur should there be a change of government at the next Federal election. So what Exetel, or anyone else can do to improve the supply of communications services to regional and rural areas is unclear to me. Over time I still think that wireless broadband will provide a more than adequate alternative to ADSL2 but the time frames are as unclear (at least to me) as the time frames for NBN2 availability. Which brings up the question of how to effectively deal with Telstra Wholesale in the near and medium term future....

.....and I have no firm views on either how Exetel might approach that issue nor how Telstra Wholesale may 'conduct themselves' if there actually is a 'real' separation of their retail and wholesale operations - itself something far from clear at the moment. The other issue is what we would do about buying other services from Telstra Wholesale such as, right now, business fibre services and, in some unknown future time frame, possibly mobile broadband services. While we don't buy a lot of fibre business services from Telstra at the moment (and obviously no mobile broadband services) we are slowly increasing our fibre purchases because, as with ADSL, Telstra provide services in areas where no-one else does. So not any sort of clear cut decisions can be made at this precise moment.

The future of the NBNCo (bearing in mind there is still no 'final' version of the wholesale contract) remains uncertain and it would be a brave (and immensely well informed) person who could spell out how that will actually work out over the next three years. Will NBNCo fibre actually become the only game in residential town? If it does what are the time lines for that to happen and, most importantly, when will the PSTN copper actually cease to exist where and when? Those questions are so difficult to even estimate it makes my head hurt just thinking about them....and as a rapidly increasing user of EOC those questions play a major part in Exetel's future plans.

It is a very difficult period in this always interesting industry.

Copyright © Exetel Pty Ltd 2011
ABN 350 979 865 46

John Linton

.....perhaps the only solution is to do a "Qantas".

I have mentioned, more than once, recently that we continue to struggle to find ways of providing low cost ADSL2 plans that achieve at least a break even financial situation. This is still possible to do with Optus and, to some extent, with AAPT but unless we sell our soul (commit to things that just make no commercial sense) we can't find a way to offer Telstra based ADSL services that make any sort of 'profit' at all. Our problem is that we don't sell enough Telstra based services to qualify for the discounts they offer to larger ISPs and we won't sell out our other long term carriers to qualify for the huge 'special' discounts that are offered for mass migrating other carrier business to Telstra.

Effectively continuing to deal with Telstra on the current terms is ruining our residential business (even ignoring that Telstra Retail has targeted our customers (and of course those of other ISPS for over three years with offers lower than they sell to us). It is a crazy situation for any company to find itself in - to have a major supplier do everything possible to destroy its business and even crazier for the company to continue to do business with such a predatory supplier without doing something about it. The problem is, of course, that we have tens of thousands of customers on the Telstra wholesale service who have no other option as only Telstra provides services in the overwhelming number of regional areas of Australia.

However we simply can't continue under the current Telstra pricing and business practices as provided by Telstra Wholesale today which, within a few months, will result in us making a loss on all Telstra based services. So when confronted with the inevitable for long enough, even the thickest of CEOs (which I am almost certainly one) eventually reach 'breaking point'. There is simply no point in continuing to sign up new customers that will simply join our current customers in a Telstra Retail data base of prospective customers to be offered incentives (including cash to cover the customers early termination fees) to cancel their Exetel contracts and re-sign with Telstra Retail. So on Friday we began the process of working out the financial cost of offering all of our Zone One Telstra based ADSL customers the opportunity of moving to either Optus or AAPT.

The immediate cost is that Telstra will increase all our Zone Three and Zone Two service costs as well as the Zone One customers that decide they want to stay on the Telstra infrastructure. The immediate benefit is that we can reduce the ludicrously expensive Telstra Wholesale back hauls (more than double the cost of AAPT's for instance) and reduce the port cost by around $10.00 for those customers that move to either an AAPT or Optus infrastructure service. The financial exercise is to determine whether the cost savings are enough to counteract the immediate cost increases. It is only a simple exercise to do that with the only unknown being the actual number of customers who choose to move from Telstra to either Optus or AAPT. This is a complete reversal of anything we have ever contemplated in the past but is something like what has to be done rather than allow Telstra Retail to kill us via the death of a thousand cuts.

If the separation of Telstra does in fact go through then Telstra will be forced/agree to change its current contractual arrangements, when they expire, t some sort of generic arrangement based on some like the terms outlined in this document:

http://www.accc.gov.au/content/item.phtml?itemId=1007091&nodeId=4729a3b85d4adcb0d931c6a482ffcf92&fn=A%20Guide%20to%20Telstra%27s%20price-related%20interim%20equivalence%20and%20transparency%20obligations.pdf

Of course, as you will see if you bother to read it, there is plenty of scope for TW to do whatever it likes and it carefully prepares the ground for that by on the one hand appearing to comply with the ACCC's requirement for a retail discounted to wholesale price structure but then injected the weasel worded statement that there can never be a 'standard' retail price....nothing will ever change with Telstra - once a monopolist - always a monopolist.

It will be an interesting exercise over the next few days.

Copyright © Exetel Pty Ltd 2011
ABN 350 979 865 46

John Linton

....which means the second quarter of the year will be gone in the blink of an eye.

October has been a better month than September and the observable 'slowing' has either flattened out or turned upwards in most areas of Exetel's business - though not 'dramatically' by any means. The early successes of the newly trained Sri Lankan business teams in the first week of their actual selling activities were a very encouraging indication of things to come and we will be sending more Australian based resources to Colombo over the last two months of the calendar year to continue the sales training and the technical understanding of EOC services (this being done by one of our carrier suppliers who is quite enthusiastic about supporting this 'venture'). So, in almost every respect the week was very positive and sales were the best they have been for the month.....

.....which are very positive indications for November - itself almost always the best month of the year in terms of new customer acquisition. From what I can see in a 'forecasting sense' we have very good prospects for a record November by some considerable margin and that will be a heartening result in this toughest of years we have experienced to date. This, if it in fact happens, will be mostly because we are finally seeing some of the benefits from the investments of time and money we have put into our corporate and voip businesses which are now providing solid growth that has more than compensated for the Telstra depredations in the residential ADSL markets we once relied on for our revenues and growth. That turnaround is also helped by Optus in the residential ADSL area of our business whose assistance has finally slowed the Telstra attrition and turned that part of the business to positive growth.

What we do about the Telstra ADSL business remains unresolved. The ACCC is making some noises and Telstra is also making some veiled threats concerning a post wholesale/retail separation which remain to be actually put in to effect but it seems unlikely that they will do anything to change the current position. Almost two thirds of our Telstra based residential ADSL customers are in Telstra zones two and three where neither Optus nor AAPT can offer residential ADSL services. So we have zero 'room to manouvre' in providing services to those customers and even providing ADSL2 service at a fraction above break in those areas is not good enough to prevent Telstra Retail offering the same service at a lower price. It seems that only a long ingrained hatred of all things Telstra keeps those customers with Exetel....we certainly don't offer a better price. A conundrum we have never been able to solve but we do need to do something before the new calendar year.

We did decide at our board meeting last week that we would decide what we did to resolve the ongoing Telstra problems which have basically just got worse each year since the TexMex invasion and, if anything, have continued to get worse under the Thodey 'reign'. I really detest people who just talk and talk about how bad things are and don't fix them and I am now realising I am becoming one of those useless people. The problem is, at least for me, that there simply is no solution other than to stop dealing with Telstra and I am finding that hard to find a sensible time frame in which to make that happen. The NBN2 seemed to provide some sort of alternative to an  in non capital city ares but God knows what sort of time frame that will be - in the event that it happens at all. (I have just about given up on wireless broadband providing a sensible solution in rural Australia, or even the larger country towns).

We need to find a sensible future residential customer strategy that uses completely different bases than those we have relied upon for the past eight years. I wish I had an inkling of what those may be. In the meantime we will continue to expand the business offerings and increase the sales and support resources allocated to them.

Copyright © Exetel Pty Ltd 2011
ABN 350 979 865 46

John Linton

Our small household is even smaller this morning. Lex, who celebrated his 16th birthday the day before collapsed and died last night just after 7 pm. Although he had been given a maximum of 6 weeks to live some ten months ago, for the overwhelming majority of that time he was a lively and companionable presence. He gave no sign of any problem yesterday evening being as alert as ever and eating his evening meal with his usual 'gusto'. However when he went outside for his post meal 'exercise' he suddenly whimpered in pain and collapsed. The vet pronounced him dead some 15 minutes later. We were very, very sad and remain so this morning.

Like all dogs, he gave unquestioning and unstinting love for all of his life and his contribution to our family's happiness is irreplaceable.

Lex, our world is a much sadder place for your passing.

John Linton

We have a board meeting later today and we will make some attempt to decide on the overall direction of Exetel from early 2012 onwards. It will be eight years, almost to the day, since we decided to 'enter' the communications services supply business and if we had to make that decision today we almost certainly would not make it. So much has changed over that time the business is unrecognisable and the methods of providing services have changed beyond all recognition. The ongoing rate of change is, if anything, increasing and the 'unknowns' caused by the 'NBN2'/Telstra shenanigans are reaching inestimable proportions. I made some comments recently on how I believed the wholesale practices of the larger carriers were 'broken' and how difficult that made doing business with them to the point it was becoming impossible. All of these issues and several more minor things need to be sorted out over the next three board meetings. Whether we will end up in the same, or similar, set of relationships that exist today looks very doubtful.

To put in to perspective how much things have changed you only need to consider how Telstra (the monopoly infrastructure owner) itself conducts its business. In October 2003 Telstra sold communications services to the residential (and business) marketplaces at sky high prices and sold those same services to wholesale customers at much lower prices. Today, Telstra sells communication services to residential users at lower prices than it sells to wholesale customers - a crazy situation unknown in the commercial world for the whole of its 4,000 year 'history'. Obviously, if that had been the case in October 2003 then there would have been no Exetel. The fact that it has become the case in October 2011 (and has been the case for over three years) demands a major change in what Exetel needs to do. These changes range from divesting ourselves from residential services and concentrating on business services through to accepting an offer to buy Exetel by another entity. At the moment we have no intention of doing anything other than reviewing what we think will happen over the coming two years and then make up our minds as to what will be best for everyone concerned.

When we first signed up with AAPT to buy business, and then residential, communications services they were a relatively aggressive and growing carrier. Today they have a questionable future in terms of long term existence and have divested themselves of their residential base and now are in the process of re-defining whether or not they will remain in business. Optus has moved so far from their original wholesale practices that it is becoming almost impossible to find a way of buying services from them that makes any commercial sense (to either Exetel or, at least from what I can see, to Optus). Verizon, has got rid of so many of its wholesale personnel it's getting difficult to find someone to actually talk to and NTT, the most recent of our wholesale suppliers, seems to have misjudged what it wants to do in Australia quite badly.

You may think that I am exaggerating the instability in these relationships or, more cogently, you may more directly wonder why Exetel, if it has seen these changes happening, hasn't done something about them a long time ago. You would be right. There are reasons for that - they could all be summed up by the word "incompetence" if you were very black and white. A kinder person might suggest that Exetel is a quite complex business that has many inter-linked scenarios that prevent drastic change even when drastic change is quite possibly the only real solution. However - spilled milk etc - whatever past scenarios may have demanded it doesn't change the facts that current changes are now demanded. So over the next three months, an awful long time in communications land these days, we will have to change many aspects of our current business....beginning at today's board meeting.

Copyright © Exetel Pty Ltd 2011
ABN 350 979 865 46

John Linton

Personally, I was brought up to respect other people's ownership of property and have lived my life to date on that basis. Clearly my parents and educators belong to a past era as, I suppose, I do. Theft of other people's property is viewed differently by the progeny of parents today which, apart from calling in to question how today's parents have failed in their overall duties to the societies that have been so good to them means that everyone is diminished - not just the parents and teachers themselves or their progeny and educational charges. No big deal - in a society where lying exceeds truth by an overwhelming margin, it is a matter of indifference that base ethics, let alone common courtesy, is progressively ever more absent from social interaction.

This is irrelevant to me personally or to Exetel as a commercial organisation in almost every respect until quite recently. The appearance of scum like the Movie Group have forced Exetel to have to consider the base ways we operate the core systems of our business simply because we must now consider which is the greater of the evils our current society has forced us to confront. In this case it is do we go out of our way to protect those of our customers who knowingly and willfully steal other people's property or do we allow them to be exposed to even scummier elements of our society (a couple of New Zealand hard core pornographers whose disgustingness is beyond belief) who might be able, amazingly and disappointingly, to use the Australian court system to allow them to be blackmailed? It's a tough decision and one that will cost us a lot of money to address (redefining base parameters within or core data base software and the writing new code) if our detestation of pornographers/blackmailers exceeds our personal dislike of thieves - which it almost certainly will. Strange that it has taken the obvious choice of detesting people who promote the physical and sexual assault of females far beyond the unethical and immoral casual thieves of intellectual property to cause us so much expense.

Which juxtaposes the issue highlighted in this:

http://online.wsj.com/article/SB10001424052970204777904576653022926782608.html?mod=WSJ_Tech_LEFTTopNews

Because of copyright theft it is difficult to provide online content at a price that allows a commercial profit. Again, personally, I don't care - FoxTel has always provided whatever on line content I have wanted over the years and I've been prepared to pay the price for that since it first became available where I live. If it hadn't - then like so many other things in life I would have done without it and not been inconvenienced in any way at all as it would not have occurred to me to steal from other people to satisfy my desire for entertainment. But it does affect Exetel as a commercial organisation in as much as our residential customers, the honest ones, do have a desire for on line content that actions of copyright thieves make very difficult to provide.

FetchTV is something we have looked at over the past year and will look at again now that Optus is seriously promoting it but, from the 'research' we have done, it is a pretty poor alternative to the NetFlix offering and the cited article shows why that is likely to remain the case. Telstra has had at least two (non FoxTel) attempts at providing pay per view on line options, both of which bit the dust. NBNCo pushes the need for on line content delivery to make its fibre services appealing to legitimate users but the people to whom on line content 'appeals' won't pay for it when it is almost just as easy to steal it.

So by the end of this week copyright theft by some percentage of our customers will cost Exetel something over $200,000 the coming six months to change our core system code so that it only retains IP address information related to the last billing period to ensure blackmailing scum can't target our law breaking customers. Thanks a lot - really appreciate that. It will also delay any decision on enhancing the overall offering of additional content because we will almost certainly not be able to find a price for such a service that is more appealing than the current "free" obtainable by copyright thieves.

We live in strange times.

Copyright © Exetel Pty Ltd 2011
ABN 350 979 865 46

John Linton

Have you ever wondered just how incompetent and corrupt every aspect of the 'public service' administration in Australia (or any other country for that matter) is? From the Prime Minister and the State premiers on down through your local council approval apparatchiks to the policeman eating at the local takeaways? Have you ever wondered how it got that way?

A general view of the hopelessness of public administration:

http://www.theage.com.au/opinion/politics/idealism-turns-us-on-but-reality-bites-20111022-1mdp8.html

Part of the price paid by tax payers for Ms Faustus to buy her illegitimate prime ministership:

http://www.theage.com.au/national/billiondollar-men-on-electoral-skids-20111024-1mgef.html

Do you ever try and think back to a time when 'public service' was not a sick joke or was Cincinnatus, some 2,500 years ago the last example of 'civic virtue' that ever existed? Have you noticed that no Australian Labor prime minister ever left 'office' without more money and assets than their total published salary and allowances while in office could possibly have generated? Did you ever wonder how the planning committee members on your local council paid for the new cars they always seem to drive? Perhaps, like me, you simply accept that in today's world, corruption is the highest tax any 'honest' person pays to work and live in today's Australia?

Why such dark thoughts to start the day? No particular reason other than scanning the 'news' and half listening to Annette's breakfast conversation about aspects of life in Mosman. It seems that everything any person who pays taxes and/or owns a home has to pay a considerable amount of money to just 'live' in a community over and above the taxes paid on your own earnings and the rates for the various 'services' that are required to stay alive in the area you have selected to live in. Despite the GST having been around for so long every 'tradesman' seems to only accept cash for any work you need done that is beyond your own strictly limited competencies in replace and repair situations.

I tried to find incidences of public probity in today's papers/actual and online, but failed to find one. Instances of public malfeasance appeared on almost every page and I gave up counting at 30. While I realise that only 'bad' news makes media distribution and 'good' news largely goes unreported it would also be true that almost all corruption never makes it to public knowledge and that you can be pretty sure that nothing has changed much, only got a lot worse, since Diogenes went on his torch light searches. So why do honest citizens put up with the total self serving corruption of the public administrations that they allow to control their lives? I certainly don't know and never have understood the situation beyond meaningless aphorisms such as "all power corrupts...." and others of similar ilk.They may well express valid commentary but they don't explain the essential evils of 'public service' being a synonym for 'public theft'.

Doubtless it is advancing age and the concomitant long period of never believing a word that is said by any politician (having lived long enough to have seen every utterance proven to be a lie) and having seen so many 'public servants' arraigned by some court or other for criminal acts. It didn't help, at a very young age when one of the three jobs I worked to keep myself fed was at an illegal gambling club, to see so many policemen being paid quite large sums of money to allow the illegal casino I dealt Baccarat in to continue to operate and also sell drugs and run prostitution. I have never looked for a single honest man but I very much doubt, that if I did, I could ever find one among 'public servants'.....irrespective of how much torch technology has improved over the intervening years.

Not the brightest mood to start any day.

Copyright © Exetel Pty Ltd 2011
ABN 350 979 865 46

John Linton

....which must make the NBNCo the only business in Australia that hasn't seriously considered that scenario. Whether there will be a change of government at the next Federal election or not - it is inconceivable that any organisation in Australia hasn't made their future plans without seriously considering how such a change might affect them:

 http://www.abc.net.au/news/2011-10-23/nbn-could-be-a-salable-asset/3595870

If Mr Quigley had been attached to a polygraph when he made that remark I suspect that the needle would have bent double. How could any currently operating business in Australia not have determined what a change of government might mean for its future - particularly one where the current opposition continually states that it will almost certainly significantly amend its future? Wouldn't you, if you were a senior planner within NBNCo, just HAVE to plan for a possible change of government when the likelihood of that happening is a significant probability? If you bother to watch this clip to near the end you can make up your own mind as to just how honest NBNCo's CEO addressed the questions addressed to him. His replies to the questions about the embedded "CPI plus 5%" price rise clause and why has he not talked to Malcolm Turnbull and his statement that prices will go down over time were just the sheerest nonsense.

Then his comments on voice only prices were pure casuistry - or for the vocabulary challenged - mealy mouthed lies. The interview was a total embarrassment in terms of content and the stuttering and glassy eyed staring were clear indications of the interviewee's acknowledgment that he was not telling the truth. It is obvious from the statements in this interview that the current Labor government has changed tack, by more than 90 degrees, and is now pitching the 'NBN2' as a cross subsidy by city dwellers to provide communications services to 'the bush" - a turn around of epic proportions and, in itself, a gigantic lie that totally contradicts its other claim of "lower cost for everyone" and "we will sell it off to commercial interests as a profitable going concern once it is built". But then what is one more giant lie to the current, illegitimate, 'prime minister' - "There will be no carbon tax if you elect me".

I have no interest in what happens regarding any possible change of government or any build out of a government monopoly fibre network. From the time the Australian electorate decided that Krudd should be allowed to run riot with his version of neo-socialism we decided that there was, probably, no long term future in our continuing participation in providing residential communications services.This view was not based on politics it was based on the upheavals that would plague the industry throughout the 'build phases' and the resultant commercial problems that would bring with them. I also looked at the GSM road map and formed the only conclusion that anyone else who was even vaguely familiar with that document would form. What has always concerned me (from those first vote seeking lies by Krudd) is how does a communications company of Exetel's size cope with the "seven years of famine" that government meddling in the communications infrastructure would bring with it before it all ends in tears?

The only solution that has ever been practicable in such circumstances has involved doing something else until "the rains return" and crops can be grown again in the requisite quantities to provide a living. It cost Telstra $800 million last year for it to survive the neo-socialism of the 'NBN2' and, from the figures on the public record it cost all of the other companies comparable, with their revenues, similar amounts. I have seen no estimates of what it may cost in the coming year but there is no reason to believe that it will be any less - irrespective of how it is 'dressed up'. So we are in to year five of seven years of "famine" and the number of communications businesses that have not survived continues to climb. Perhaps that's a good thing and with the "cross subsidising" of communications costs "in the bush" perhaps the murderous discounting to retain market shares in "the city" will actually benefit, at least in the very short term, communications users in the city.

Who knows - Ms Faustus promises of cheaper and faster communications for everyone may not be the obvious lie every fact says it is? Just don't ask how it is being paid for - "subsidies" always have to be paid by someone - unless you are very naive.

Copyright © Exetel Pty Ltd 2011
ABN 350 979 865 46

John Linton

We had an uneventful flight home and as we drove over the bridge from the airport last night we realised that we had left in 'winter' and returned in 'summer' something that was confirmed this morning as we awoke to a very warm day. Nice to see that Spring is finally here. I did my best to catch up on the communication industry 'news' - but there didn't appear to be any. No follow up to the simple ASX announcements the TPG had acquired a small shareholding in iinet and nothing on the ACCC's views on Telstra's proposed 'split'. It's hard to see that TPG's small purchase is anything other than the precursor to an attempted acquisition of iinet and equally difficult to see that the ACCC could endorse the 'Clayton's' proposal to split Telstra's wholesale and retail operations. However neither issue has any real relevance to anything else and won't even if both events happen as currently speculated.

It's almost "Christmas" in terms of the business year with all that means from the steady stream of invitations to various 'end of year/catch up events' through the range of "Christmas promotions" by so many of our competitors to the mid year check pointing of various aspects of the business plans. If I could plan my personal business life better I would be in New Zealand today attending the final of the Rugby World Cup as the guest of one of our more generous suppliers which is perhaps a sobering thought as I involve myself in the far more serious planning sessions that occur in November and December. From everything I can see and read - business conditions in NSW continue to 'soften' (a euphemism for heading South which itself is a desire to describe conditions without using the real hard words.

So the business analyses to which I subscribe and the few financial journalists whose views appear to be more based on facts than headlines all point downwards and all indicate that is the likely future direction. What general commercial conditions mean to the Australian communications industry has always been unclear to me other than tougher financial times usually mean that the major suppliers crank up their 'special offers' to the residential markets and more discounts to business markets. The most obvious example is the current mobile promotions from all carriers. I have very little/no knowledge of many of the ways the carriers operate but it appears to me that at least two of them have reached a point where there commission models have reached either a highly cynical point or a recklessly dangerous point as they attempt to promote their mobile market shares. In one instance very recently this discounting cynicism led to a ten million dollar 'forgiveness' of commissions over paid to keep the Ponzi scheme this particular carrier/wholesaler's relationship is based on from collapsing and triggering a massive commission payback demand (in this context ten million dollars was a, relatively, 'minor' amount). That particular collapse both demonstrated the extreme cynicism of carrier commission schemes and also demonstrated that  the cynicism can be pushed too far.

As general business conditions worsen I would expect more such carrier commission schemes to collapse because they simply are not financially sustainable - Ponzi schemes never are and although the carrier's slightly more sophisticated version of the basic Ponzi scheme has some measure of 'insurance' (for the carrier) it is fairly threadbare cover and, as in the recent case, is not going to really work. The other down sides of any general business 'lack of confidence' is that sales revenues fall across the board and after the more desperate attempts to prop up revenue streams prove inefficacious then it becomes necessary to resort to more conventionally proven measures of reducing expenses (which generally means salaries) which in turn increases the downwards pressure on the economy generally which then feeds back......into the self perpetuating cycle that creates all downward spirals.

The coming months will continue to pose quite a few challenges.

Copyright © Exetel Pty Ltd 2011
ABN 350 979 865 46

John Linton

.......the magnitude of the decision I have just been part of making has begun to sink in.

We stopped off in Singapore for a day on the way back to Australia to do a couple of minor things and as a 'reward' for giving up two 'weekend' days flying to and from Sri Lanka (only kidding - we almost always fly on weekends to maximise the time in Colombo). So time to, once again, acknowledge that Singapore Airlines and Changi airport set standards of cleanliness, timeliness and efficiency that other airlines and airports can only dream about.

While Annette was busy doing other things during our 'daylight hours' in Singapore I completed the actions from the SL review and assessed just where we are at in 'Phase Four' of our objectives for the Sri Lankan operation so that the updates I am doing to the overall Exetel business plan for calendar 2012 can be completed on schedule. This will be far ore difficult and time consuming than in the past because we now have to seriously consider working with a partner, in a very real sense, to more rapidly develop the business/corporate areas of our business - possibly as far as shared equity in the Sri Lankan operations. So, pretty serious stuff and very difficult to actually put in to words and numbers that have to be clearly understood by people who have not been party to the actions and decisions that have allowed the current plans to be seriously contemplated.

So my final 'act' before leaving Colombo was to confirm that we would take the remaining 4,000 square feet of floor space in the WTC and also to give the go ahead for the fit out that will allow us to add an additional 50 people in Colombo to be dedicated to business corporate sales and support. This will double the number of people currently involved in these activities once we are able to hire and train the new personnel and will mean that we will be able to deploy one of the larger business communications sales forces in Australia and therefore make our ambitious aims of adding 400 new business data customers a month (compared to the current 100+) a very real chance of becoming a reality.

As I re-developed the task list/schedule for making that decision a reality in the hotel room yesterday it still seemed to be not really real. For almost exactly three years we have been developing a corporate sales and support operation and it is certainly very real that we now have closing on 2,000 business/corporate customers and it is also certainly true that we sell over 100 new business/corporate customers each month for it to have become almost 'common place'. So I shouldn't be surprised that the time has now come to make a serious attempt to much more rapidly expand our operations in this set of markets where we can compete much more effectively than we have ever been able to do in the residential markets we have put so much  effort into over the past eight years.

So, having crossed our personal Rubicon by approving the new lease expense and all the other much greater expenses that go with that decision we now face an almost immediate exhilarating future!

Is it some sort of omen that as I have tried to write this particular entry in the airport lounge the internet has now crashed for the fourth time and despite using the 'save' function frequently I have lost most of what I have written on each occasion?

Copyright © Exetel Pty Ltd 2011
ABN 350 979 865 46

John Linton

We leave for a day in Singapore in a few hours time (at the godawful time of 1.10 am) having completed the operational review late this afternoon. The only disappointment was that there is now no more space at all left in either tower of the WTC and our/my smug assumption that we could take our time in signing for additional space starting with the remaining 20% of the floor we currently occupy. So much for smugness. When we came to Sri Lanka almost four years ago both towers were virtually empty and, because of the ongoing civil war and the frequent 'incidents' around Colombo there was zero interest in office space and those companies with a presence in Colombo were pulling out on a frequent basis. Today there is a waiting list for floor space in the WTC and we may be able to get the remaining 4,000 square feet of unoccupied space on the 35th floor of the other tower - but that is by no means certain. Otherwise we will have to find alternate accommodation which is almost as difficult to do. A bad miscalculation on my part.

Other than that we have had a very productive review and have addressed the remaining issues 'left over' from the previous 'regime' and continued to develop some new initiatives. While we were here Clarissa and Clare were in the final stages of training two new business sales teams which very shortly will add a further 14 people to our business/corporate sales force and allow us to prove out the processes we will follow, if they prove successful, to grow our business/corporate operation to eight teams of eight by mid 2012. It is a very exciting project and we have made some very real progress over the past twelve months in refining the processes and plans needed to make more rapid progress over the coming months. Whether we will be successful as we aim much higher than we have to date remains to be seen and I am certainly not counting domestic avians prior to their nativity - but I am getting some pleasant anticipatory frissons of possible success.

We have also organised an advanced English language pronunciation skills course via the British Council Corporate Training Scheme which, while very expensive, could make quite a difference to the overall effectiveness of the Colombo personnel - which is a requirement as we move more of our efforts to selling and supporting business solutions rather than residential ADSL type services. The difference that we need to bring about is not really that great but it is a significant change to the way our current personnel (except those who have worked overseas for considerable times) use the natural rhythms of Sinalhi when they speak the brutally arrhythmic Germanic languages such as English. I don't know whether it will be possible but the nice man from the BC seemed to know exactly what I meant - either that or he was a good salesman.

We also managed to progress the 100% call resolution on the first call for support issues and devised the basics of introducing the same objectives for provisioning and billing which we will begin to put in place before the end of this calendar year. So with those major issues dealt with and a host of less important issues addressed it has been a very positive four days.

Copyright © Exetel Pty Ltd 2011
ABN 350 979 865 46

John Linton

We completed the third day of the SL operational review by late afternoon yesterday and only have the odds and ends to tidy up tomorrow.We have almost run out of space in our current facilities and by the time the latest round of approved hirings are done over the next few weeks we will be at 100% 'occupancy'. One of the last tasks today is to decide whether to continue renting the ever more expensive space where we are at the moment (sometimes it makes you long for the old civil war days when space was being 'given away') or to take the risk of renting space in one of the new buildings nearing completion. We have to make a decision one way or another in the very near future.

I wish I had a better and more positive view on just what will happen to the 'NBN2' and therefore, more importantly, what will happen to Telstra. Without being sensibly sure as to how the next Federal election will 'play out' and therefore what actual future the 'NBN2' has makes it more of a gamble than I like to take, and I am not averse to gambling, on just how successful Exetel will be in providing business services through a range of sizes over the coming one to two years. If our current estimates are correct we could easily double our current personnel levels in Colombo over the coming twelve months and that justifies renting a whole new floor in the current premises providing we can negotiate a suitable take up schedule. Then again we could fall flat on our faces and end up with a fairly large continuing expense for which we have no need. We will settle on a course of action before the end of today.

Over the past three days we have met with three different organisations to explore how we can make lasting improvements to all SL personnel's ability to converse in 'Australian' English. While we only hire personnel with very good English skills it is obvious that if we were able to lift the current standards to something better then both they and the people they and the people with whom they converse would enjoy a better experience. We estimate that approximately 50% of ur current personnel would benefit from such a program if we were able to put one in place (many of our SL personnel speak better English than I do after years of working in English speaking countries - predominantly the UK and North America). We think we may have found the right organisation and Rukshani will work with them over the coming weeks to see what can be done. Perhaps it's a 'mares nest' but if it can be done it will add significant functionality to what already exists.

So, as usual when visiting Colombo for quarterly reviews, the time has flown by and after we complete today's work there is only the depressingly long wait until our flight back to Singapore leaves at 1.00 am tomorrow morning......under normal circumstances it would be bad enough but when you are still 'time displaced' by five and a half hours it is a real pain. Oh well....

Copyright © Exetel Pty Ltd 2011
ABN 350 979 865 46

John Linton

....before we have properly made the changes to deliver the latest business services.

We completed Day Two of the review of the Sri Lankan operations and made some further progress in putting in place new actions that that should result in further improvements to the way the company operates here. We will see what more can be done over the remaining two days and also determine what further interaction needs to be put in place to allow further increase in the generation and implementation of ideas from all SL personnel. It looks likely that we will make far more changes in the coming dew months than we have made in our total time in Sri Lanka to date.

I read with interest the announcement by TPG that they had begun to buy up iinet shares and have a 4.4% holding at this time.  What TPG's eventual intentions are would be unknown to anyone beyond a small number of TPG executives/board members but companies don't buy shareholdings in competitors as general investments. Having said that, both Amcom and AAPT both bought much larger shareholdings in iinet in the past for reasons best known to themselves at the time but subsequently divested them - for different reasons. At the current iinet share price and dividend yield it seems unlikely that TPG sees iinet as a sensible general investment opportunity. Time will tell but as iinet doesn't provide any sort of differentiated product or service offering to the Australian market it has no real value other than a customer base that another company could make more money from by dumping the excessive expenses associated with operating the company.

I suppose it is inevitable as the 'NBN2' begins to show some signs of affecting the ADSL marketplaces more changes to the ways current service providers operate will become apparent. One of these changes may well be a consolidation of the remaining residential providers with the inevitable changes a completely new government monopoly must bring in to being. Any real change will, of necessity, not occur until the next Federal election determines whether the electorate votes for or against a continuation of the Gillard 'government' and its litany of incompetencies among which is the 'NBN2'. If a Labor government is elected then it would seem, at least to me, that there will be more than a few changes to the way, and by whom, communications services are provided to residential users. Among the more obvious changes will be the number of suppliers under whatever wholesale arrangements come in to being. It would be a brave person who cared to spell out what the new arrangements might be.

I have been giving some thought to what impact the 'NBN2' might have on small/small medium/medium business users once services become available in major business areas. In theory, a 100mbps/40 mbps line would be a serious threat to the current remaining SHDSL services but more seriously the current and projected EOC services not just on a cost basis but because of the implicit requirement to discontinue the PSTN lies that EOC requires to operate. My time in Sri Lanka is partially being spent on planning the development of providing and supporting EOC services to medium/medium large businesses in Australia. EOC represents a really large opportunity fpr someone but we are already seeing the effect of TPG's fibre offering and how it affects the EOC market. Obviously an NBNCo fibre offering would have an even greater impact and it is something that is very important to get exactly correct.

In theory, an NBNCo fibre offering will be much, much lower cost than the TPG fibre offering.

Copyright © Exetel Pty Ltd 2011
ABN 350 979 865 46

John Linton

....in developing a Sri Lankan operation since we first hired two work from home support engineers in February 2006.

I spent much of yesterday talking with our Sri Lankan operation General Manager who will turn 25 in a few weeks time. This was our first face to face conversation since I asked her if she would consider taking on much more responsibility in April this year (at the time she was managing the billing query resolution process of five people). So almost four months in to her 'tenure' as the manager of our 80 or so Sri Lankan based personnel - what did I find? Firstly a quite obviously slightly happier group of people and secondly a group of people now embracing the freedom to make the changes they see as necessary to improve aspects of the business across a wide range of areas. So the initial impression is that I waited far too long to replace the original Sri lankan appointee to the position who was more and more obviously doing a poorer and poorer job - at least from Exetel's point of view. I guess even an old fool eventually can eventually come to admit his more obvious mistakes.

Why do I get the impression that I have made less of a mistake this time? Well, there is one very, very obvious difference. Rukshani argued, politely but firmly, on two occasions that what I wanted to do was wrong and even when I persisted in pushing my point of view she continued to attempt to persuade me that it would be wrong to pursue my requested actions and she persisted in holding to her views until I relented. It was very impressive. The first view I put forward was genuinely believed by me and I did 'argue the point strongly' until eventually conceding I was wrong. The second point I didn't believe in at all but wanted to verify that she would persist in attempting to persuade me of the error in my thinking and I was left in no doubt that was the case and was likely to continue to be the case in any such future circumstances. It was a starkly contrasting situation to the grovelling and always immediate unconsidered agreement of her predecessor.

The rest of the day was spent adjusting the concepts for the '100% of all support calls solved within the first contact time" and fixing up the final processes to allow an additional 13 Sri Lankan based sales people to begin business/corporate sales activities today. Clare and Clarissa have done an excellent job over the past 12 months to make this concept a reality and I will be very eager to see how the next few months turn out. As with all longer term planning you initially have time in which you don't have to produce too many real sales but as time goes on actual target measurement becomes the only indication of real progress. So far all the, pretty easy, targets have been met and now we will begin to see whether the real targets can be achieved on a regular basis.

One thing is very obvious - especially to someone who has never contemplated setting up a seriously complex operation in a not so developed country some 10,000 kilometers away with a completely different culture. It's a very difficult thing to do and you need a great deal of mental toughness and clear thinking to make it happen.

PS: I read this article with increasing disgust and feel dirty by giving such dross the mistaken 'exposure' I have played an unintentional part in doing for which I sincerely apologise:

http://www.theage.com.au/technology/technology-news/playing-dirty-20111017-1ltam.html

Copyright © Exetel Pty Ltd 2011
ABN 350 979 865 46

John Linton

We left home at 2.00pm yesterday and have just checked in to our hotel room in Colombo fifteen and a half hours later. It is an uneventful trip with a 'quick aircraft change' in Singapore (including a terminal change) and the final hair raising trip from the airport to the hotel. Uneventful - but punishing in its own ways.

I listened to the Bob Thodey interview on Business Today before I left Sydney. Pretty tame stuff with a very deferential interviewer and a set of pretty anodyne questions which by the time I reeached Singapore had been reported here:

http://www.theaustralian.com.au/business/companies/thodey-close-to-coming-up-trumps-from-what-looked-like-a-losing-hand/story-fn91v9q3-1226167125197

It is interesting to see both the interview questions and this piece of reporting subtly switching tack in terms of how Telstra is now choosing to explain the scenario that has been created. It is, at least sort of, true that "Telstra had no choice" but only in as much as any business "has no choice" in any aspect of its existence. It's also true as the reporter has spun the interview, heavily guided by Mr Thodey, that at this juncture, Telstra has done as well as it possibly could out of this 'lack of choice'....and its shareholders should be grateful for those negotiating skills - in the event that negotiating is the correct word to use in th is context.

If in fact Telstra has now, truly, been confined (at least at some pretty long distant future time) to simply the largest among a group of wholesale customers of the new Federal communications monopoly then Mr Thodey's interview was an interesting insight in to how such a new scenario might work - but if anyone actually believes that it's possible for a sluggish monopoly with monopoly attitudes ingrained in to every aspect of its being to change to a 'light on its feet' and customer service oriented willing market place competitor, in any time frame, then they are truly naive. It was a skillful and well 'measured' interview performance and appeared to fool the Australian's reporter but it was the sheerest nonsense.

The true reality is that Telstra cannot compete, even as a first among 'equals'. It has no capability to do that because EVERY person within that organisation was hired and then indoctrinated to behave as a monopolist employee together with being indoctrinated in to acting within a giant/sluggish corporation within which time frames for even the most modest decision are light years longer than those required in non monopoly commercial life - they simply cannot survive in the world of true, or even partially true, competition. I am obviously travel weary and quite possibly a little jet lagged so I will go to bed now but I just had to make the point that, in the history of commerce, there is no example of a government monopoly ever making even a partial transition to becoming a successful commercial competitor.

Copyright © Exetel Pty Ltd 2011
ABN 350 979 865 46