John Linton's Personal Musings

John Linton

We added another lower end Optus ADSL2 plan yesterday following the relative success of the 10gb plus 10 gb plan we added some ten days ago - this time a 5gb plus 5 gb plan. The reason for doing this is that, despite all the 'air time' given to unlimited a terabyte plans the fact remains that a very, very large percentage of Exetel's user base doesn't exceed more than a few gigabytes usage a month - Annette and I have never exceeded 1 gbyte of usage in any month since Exetel began providing ADSL services and we both use it for many hours each day, seven days a week. When we looked at how our lower usage customer's usage patterns had changed over the past two years we found little or no difference to them over that time and realised that we had progressively moved away from any really low end offerings over the past two plus years.

One of the reasons has been that as IP costs have continued to fall and as the newer caching clusters from first Akamai and now Google have become ever more efficient that cost has more than halved over the past year alone and fallen by 75% overall. Unfortunately back haul costs have not fallen very much but the net cost of providing 'gigabytes' has continued to drop quarter by quarter. This has meant, with some, very much appreciated, accommodation from Optus that we can now offer a new lower cost ADSL2 service to those customers who (like us) use the internet constantly but for purposes that don't require 'terabytes' of downloads. The new plan at $24.50 for ADSL2 including $20.00 a month for a PSTN line is the lowest, genuine, ADSL2 offer on the Australian market and allows Exetel to begin to return to its initial basis of being in the residential telecommunications business.

Telephone call costs still remain an issue in Australia with VoIP providing the only sensible solution to any 'wire line' user. Exetel's (courtesy of Optus) unlimited local, STD and calls to Optus mobile 'package' at $10.00 together with the $20.00 line rental offers, by far, the lowest PSTN service for those customers who still have some 'fears' about VOIP or at least their capabilities of implementing a home VoIP solution. While an ever increasing number of Exetel residential customers are using Exetel VoIP (and presumably many others are using another providers VoIP services) there are still customers who find VoIP, for whatever reasons, not something they are prepared to use. These customers seem to be evenly divided between not wanting to pay f0r VoIP hardware and the 'fear' of whatever they perceive VoIP to lack in terms of capabilities and reliability.

Over the next two months we will try and find a way to alleviate the incorrect concerns while simultaneously finding a better way of highlighting the more obvious advantages of using VoIP (much lower cost international and mobile calls) and see what can be done about reducing the initial hardware costs. We think that the 'technical fears' of setting up VoIP could be an issue and one of the 'ideas' we are mulling over is providing 'unlimited technical set up and trouble shooting support' for VoIP services and, possibly, payg amortisation of the hardware over a twelve or twenty four month contract....plus any other 'innovations' we can come up with. Any suggestions would be welcomed.

Copyright © Exetel Pty Ltd 2011
ABN 350 979 865 46

John Linton

It isn't easy doing many things in life, assuming that you actually work at something on a continuing basis that requires you to make some decisions by yourself and take responsibility for their outcome. It's even harder if you rely, in some ways, on working with other people to bring about all or some portions of the results you are attempting to achieve. Almost every mother has known how hard this is since there was sentient life on the planet and a relatively high proportion of working human males eventually come to the same conclusions. Malcolm Fraser added his, derivative and truncated, phrase that summed up his observations of life generally although he should have ascribed it to its real author. As another year rapidly reaches its close I am wondering whether I have the courage for life to be delightful.....or whether GBS had it completely wrong?

As a 'semi responsible male' I don't have the luxury of feeling sorry for myself or to allow any similar emotion to intrude into my life but there are some times when such indulgences seem to be highly desirable. Fortunately, I had an upbringing based mainly on the strictures of poverty leavened with a rigorous education in times much tougher than the overwhelming majority of Australians born after 1945 can begin to contemplate. Those facets of life at impressionable ages provide a semi sound background to deal with most of the stupidities you encounter in adulthood - assming, as a male, you ever reach that stage of life. However every now and again, like right now, I do get totally p***ed off at the sheer pettiness and uncaring attitudes of people I come in contact with in 'business' and it does result in making me wonder whether "it's all worth it". So before extending this rant I will simply say that 1) no it isn't and 2) there is no other choice so get on with it.

I think the last three years has been tougher than any other period of my business life and I am sure that would be the case for many other people who actually do any real work in the telecommunications industry in smaller companies. The definition "real work" isn't easy to put into context as I seem to run into a lot more people who impute that phrase to themselves whereas I seem to observe that they have never done any 'real work' for as long as I have known them. Perhaps I fail to be able to define 'real work' correctly and that would be entirely my problem. Perhaps as Australia has moved to a 'services based economy' and fewer and fewer people either make things, grow things or dig things out of the ground 'real work' has become harder and harder to define.

'Real Work' is like 'real money'. The issuing of credit cards to 18 year olds, often before they have a job, and EFT replacing a wage 'packet (in which there were bank notes and, gasp!, coins) has somehow made "money" something different today to what it was previously....an absolute necessity to say alive until the next Friday. I recently attended a 'careers afternoon' at a local North Sydney school (invited as a 'local businessman and employer') and was fascinated/horrified at what some of the boys said which described their understanding of what 'working life' might comprise and what their income expectations were. In general terms they seemed to expect to go to university and then be paid around $80,000 in their first year while they 'learned the ropes' and then rapidly progress to senior executive level earning their first million a year well before they were 30 - most said 25. The people from 'industry' plus the school teachers present said nothing to even gently contradict these pretty generally held expectations - I merely nodded when asked for a contribution. (anecdotal 'evidence' suggests that more than a few of those year twelve boys will join their predecessors 'doing drugs' and living with their parents with no income of $1millon a year but whatever the dole, sorry - income support - is these days).

I have obviously lost touch with the 'realities' that now exist and I doubt that I can play any further part in today's business market places. I wonder how long that has been the case and I just didn't notice?

Copyright © Exetel Pty Ltd 2011
ABN 350 979 865 46

John Linton

It's very quiet in the international media concerning telecommunications companies and issues. Basically, apart from the spat between AT&T and The FCC regarding the proposed takeover of T-Mobile there appears to be nothing happening. Similarly, the Australian telecommunications media is eerily quiet apart from the massive over reporting about non events connected in some way with the 'NBN2'. Nothing on real news of either companies or technologies which I find that situation to be strange as in the US, the EU and in Australia the introduction of more and more LTE services would have been quite 'news worthy' I would have thought. But then I clearly view things differently to Australian media writers.

I only raise this issue because of the possibilities of Telstra 'wholesaling' its LTE mobile services in the first half of 2012 either as mobile telephony with high speed data tethering or as a standalone mobile data service. I have no specific knowledge of whether or not this may happen - only the obfuscatory words of various Telstra 'spokes people' and I lack the Byzantine mental processes that could make any sense of those - but the implications appeared to be that it might be a possibility at some future time. Given the various pricing scenarios that are always part of Telstra's 'wholesale' offerings it is unlikely to be a very attractive possibility - at least initially - to a company of Exetel's size but it is something to be considered as neither Optus nor Vodafone seem to have any hope of catching up with Telstra in this product category any time in the foreseeable future - and certainly not in the areas that we are mainly interesting in providing such services.

Exetel's progress in providing mobile broadband services has been a continuing disappointment to me since we established our interest in this technology more than five years ago. We have made almost no progress in establishing a viable mobile broadband offering that is widely accepted although the business users who like our back end management processes are all remarkably 'loyal' with almost none moving to other providers once they sign up and use our add on services. So the years have passed and nothing much has changed in the larger business markets - but we tend to believe that there is now an opportunity in small business usage that could be a genuine option to provide wireless broadband as a real back up to an ADSL or fibre small business service. Currently a 'tethered' mobile handset can provide a measure of back up for a small business ADSL service that loses connectivity and will therefore take 24 to 72 hours (possibly more) to restore. However it would be better to provide an 'auto fail over' MBB solution for all the obvious reasons.

So, as we have played around with a new small business offering, with some sort of 'magic box' and an affordable stand by wireless broadband capability, we are much closer to delivering such a service than we have ever been in the past.....not quite there yet....but so much closer than at any previous time. We continue to work on a 'final solution' that includes ADSL/Fibre with wireless broadband back up and affordable business VoIP that is supported via unlimited telephone engineering advice and guidance.....plus on site help at a charge if that is required for more complex services. With a bit of luck and some better buying on our part we may almost be there - with the one remaining 'obstacle' being what speed mbb back up service is required to make this solution really practical? The best combination is fast fibre plus LTE - however that is not on any immediate horizon. If either/both become available then 2012 could be the year of mobile broadband - even though it will mainly be used statically.

Copyright © Exetel Pty Ltd 2011
ABN 350 979 865 46

John Linton

....almost to the day, we decided to start a business providing communications services to residential and business users.

At that time Telstra totally dominated that business and, apart from mobile telephone services, had no competition of any size or sort making it relatively easy to find a 'niche' marketplace from which to begin to grow a viable business. At that time, or very shortly thereafter, some 1,000 other people had similar ideas and, at least according to the ABS the reselling of Telstra ADSL infrastructure based services was booming all over the country creating miniscule/tiny/very small 'competitors' to Telstra. It is hard to know how many of those tiny companies started up and then closed their doors - but it would be a large number well in excess of 99% I would have thought....but I don't really know nor do I have any data on which to base that assessment other than observationally. But as I write the final 'text' describing Exetel's new targets and aspirations for the 2012 calendar year I am reminded just how very different they are to what I wrote eight years ago at about this November day.

In revenue dollar terms, we haven't come that far (revenues for Exetel are obviously far greater than the zero we had at this time in 2003 but in the scheme of the telecommunications industry they remain miniscule) and we are still an insignificant company by all measures except to our customers. The fact that we have survived at all when so many other companies that started before us and after us have disappeared is, possibly, the only notable achievement we can point to....if we were the notable achievement pointing to type of people - which I don't think we are. I am happy that we have more customers today than we had in November 2003 (none) and I am, personally, very happy that some of the first customers we had mid February 2004 are still with us. Doubtless other communications providers could also claim that 'distinction'. Quite possibly Telstra can claim to have had many customers for over 100 years - if for no other reason than those customers have never had any choice as to which company provided their wire line communication services.

Practically every aspect of that start up business has changed not least that we now have almost 150 employees (whom we pay) as opposed to the three directors who worked for nothing for the first few months of Exetel's 'life'. We also have business premises in two cities in two countries rather than the spare bedroom in our Sydney home crammed with three computers, three telephones a fax machine and a printer by the time we abandoned it for sub let rental premises from a decidedly dodgy 'land lord' from whom we had to 'escape' shortly before his 'stand over' father was shot dead in his last 'stand over' assignment outside a NSW country town. We now have 13 PoPs with over $3 million dollars worth of equipment in every State of Australia plus New Zealand and Colombo compared to the $50 thousand dollars of equipment in one rented rack in Sydney's Clarence Street. Those are the most obvious signs of development over the past eight years....as I write new budget figures for capital expenditure and reference spread sheets detailing the rapidly growing expenses for personnel acquisition and development costs.

So much has changed over the past eight years that the Exetel of today, even in its minor ways, is totally different to the start up Exetel there seems to be no point of similarity. Fortunately, in terms of the true bases of the business, nothing has changed. We remain totally different to every other company with which we compete in every aspect of WHY we are in business and what we are seeking to achieve by setting up and operating a commercial business in Australia that puts the interests of its customers, its employees and the good of the countries in which it operates ahead, well ahead, of profit making (and that s one thing we have been spectacularly successful in achieving) or other 'standard commercial interests'.

We are still setting aside a very large proportion of any small profit we earn to attempt to protect endangered fauna, avia and flora. We still aim to provide communication services to businesses and residential users a lower prices than any other provider without compromising on speed or quality. We still provide all of our employees with a 'no fire' policy which we have only had to breach some three times in eight years.....and only under extreme 'provocation'. So many parts of the 'text' of the 2012 operating plan are eerily similar to the words I wrote at this time in 2003. Either those objectives have stood the test of eight very difficult years, with the last three years being almost impossibly difficult, or there is no fool like an old fool.

Copyright © Exetel Pty Ltd 2011
ABN 350 979 865 46

John Linton

I was interested in this update:

http://www.zdnet.com.au/isps-propose-copyright-notice-scheme-339326850.htm

not because it indicated that the Federal Government and an ISP like Telstra were prepared to agree to deal with on line piracy, it is still a long way away from actually putting some sort of workable scheme into place, but because there is now a public consensus that stealing other people's property is rampant and a really bad thing. Presumably any further attempt to justify such practices is now at an end and no further "it's my right to take whatever I want because it's wrong for the makers to charge for it" will be seen as the infantile nonsense they always were. Then again......

Despite any claims to the contrary, it has always been a very simple process to automatically process any infringement notice and on send it to the IP 'owner' at the time of the alleged infringement. It has been equally easy to allow the alleged infringer to reply denying any infringement and letting the whole matter drop. As the next time an infringing customer gets a notice they could be using a different IP address (either by changing their IP themselves or via the policy of their ISP to allocate a different IP each time the customer logs on introduced.) it would only require the ISP to log the infringement notices against the customer's account (rather than the IP address) to ensure simply changing the IP address doesn't 'defeat' the process of three strikes and you get a termination notice or whatever policy is eventually introduced - in the event that happens.

There will need to be some sort of legislation introduced that requires ISPs to maintain adequate records of IP usage going back over some reasonable time and that, assuming it happens, will take some time. The woosie nature of the 'education emails' and the whole prolonged process is a major nuisance for the ISP but can, depending on what may be finally required, be totally automated so that no cost is incurred in complying with whatever is required. So, it appears that at some time in the future there will be an end to copyright infringement or, at least a massive reduction because at least reasonably honest parents of larcenous children will put an end to that source of infringements. The 'grown up children' may be another matter.

Adult thieves may be quite prepared to change ISPs to continue to pillage other peoples assets which would require any proposed legislation to include a 'register' of names/addresses of people who have had their connection terminated for copyright infringement - but I think that will never happen. The proposed processes as they stand seem easy enough to implement and will, almost certainly, succeed in significantly reducing copyright infringement if they are ever expanded to 100% from the ludicrous '100 per month per ISP'. By publicly agreeing that copyright theft is a bad thing and will cause some sort of inconvenience to the perpetrators the current nonsensical defences of their theft by the thieves that indulge in it will be shown up for just how stupid it is and, presumably, a lot of parents will get a reminder of just how bad their parenting has been.

I can't see any 'down side' from the full implementation of a real process.....other than the increase of public service drones.

Copyright © Exetel Pty Ltd 2011
ABN 350 979 865 46

John Linton

Fibre services, while still a tiny component, of total residential services, continue to evoke more interest where they are available. While the Tasmanian 'experiment' (a cynical election 'winner' ploy by that bunch of crooks posing as a federal government) remains a disaster other areas are showing much better take ups. The 'NBN2' locations are still very slow but Telstra's Point Cook, South Brisbane and some of the Opticom locations are beginning to generate a slightly more positive order flow. Still very small but noticeably increasing and enough for us to try out some different 'marketing' ideas this weekend in Townsville by running the first ever newspaper 'ad' in Exetel's 'history'. It is only one of some different ideas for promoting ADSL services in regional Australia and perhaps my liking for that particular city contributed to the decision.

The trouble with NBNCo services is that they are so patchy in the places they are now available that 'advertising' is impossible and the fact that there is no NBNCo provided availability look up tools makes it very difficult to do any sort of  'general' promotion. Looking in to the future across 2012 nothing gets any better in NBNCo terms with, despite all claims to the contrary, very little additional coverage becoming available. So it becomes quite a challenge to promote fibre services in any meaningful way other than to contact our own ADSL customers whose details are obviously known to us....and even with a free install/free trial not a surprisingly low percentage of those took up the offer. So more widely 'promoting' NBNCo services to residential users poses a real problem over the coming months and the real target marketplace, small business, verges on impossible to promote to.

At the moment the only NBNCo orders we are getting are coming from our own web site or from the NBNCo web site that simply lists Exetel as an NBNCo re-seller. The challenge is to find a way of promoting NBNCo fibre to other ADSL users in the limited areas of the various towns where fibre is available. So we will now and try, for the next month or so, to work out whether or not we can successfully promote NBNCo and other fibre services in the areas where they are available from Exetel by print advertising and perhaps radio advertising as well. It's almost 20 years since I have used such advertising to promote products in regional Australia (and New Zealand and South West England) and, although that was successful over several years I have no current knowledge and nor has anyone else within the company.....

....so we are going to have to learn very, very quickly about print and radio advertising and also other more esoteric promotion media of which we have less than zero knowledge. Quick learning curves are OK - we have learned to do so many new things over the past almost eight years. We will use Townsville as the base for trying out these new ideas because (ignoring my personal affinity with the city) it is an ideal size and has NBNCo infrastructure as well as a large ADSL user base and, more importantly, a large small business base with a realistic number of competent companies providing IT services. It will give us the opportunity of trying out various promotional ideas with some reasonable prospects of 'success' while also giving us the opportunity of closely analysing the results and being able to work out the financial practicalities of extending the coverage areas based on real data.

Who knows - we might use adverting to promote Exetel residential and business services in 2012?

Copyright © Exetel Pty Ltd 2011
ABN 350 979 865 46

John Linton

Sales of all services continue to get stronger following the normal November pattern established over as many decades as I have been associated with commercial life in Australia. Over the last two years the November 'surge' has started later and continued well into December for most services. It is not anything dramatic but always good to see and nice that with so many changes occurring that some positive things can still be 'relied' on. We continue to grind away at making the remaining changes to the business plan for the start of 2012 and that process is always assisted by the good things that happen in November and the first half of December. 

The main issue that we are faced with for this year is what 'attitude' we take to residential ADSL in 2012. Unless Telstra renews a more vigorous 'win back' campaign or TPG finds a way of offering unlimited services at a lower price and delivering a better quality then it appears, at least at the moment, that we have 'ridden out' those particular storms with net loss/net gain from those providers returning to a slight, but slightly increasing, positive return month on month. Losses to companies such as Internode/iinet/iPrimus are almost zero and have been for some time and only Dodo (with major assistance from Optus) have emerged on the 'churn away' consideration. So, after three years of ever higher rates of churn from wave after wave of Telstra 'win back' campaigns residential ADSL sales are returning to 'normal'.

Good to see, but what will happen in 2012? I haven't got any real ideas other than it is now 'calmer' than it has been since mid 2008 and there has, very definitely, been some very significant changes in the competitors in ADSL services in all market places. My views are limited by what I see happening in Exetel's 'world'. What I see is that Internode is no longer as well regarded as it was prior to the start of 2009 and iinet, apart from its ongoing purchases, is a non-event in any competitive situation. TPG has made a lot of progress over the past three years but appears to be running out of the ability to deliver on its 'marketing' promises and faces the same losses to Telstra that all other providers have been subjected to.

Perhaps it's the changes we have made to managing the ADSL residential 'marketing program' that have caused the turnaround or perhaps its that all residential suppliers are exhausted and 'punch drunk' from the unceasing Telstra onslaughts that seem to have been going on 'forever'. It's very hard to decide what to do with residential ADSL over the coming year. The best option seems to be to work more closely with Optus to try and take advantage of the 'exhaustion' of so many of previously significant competitors to slowly grow our customer base. With the Telstra/NBNCo deal due to be signed 'soon' that will mean that Telstra's residential ADSL prices to wholesale customers and Telstra Retail will be 'regularised' - that is if you are a naive moron - because, of course, that will never happen. What will happen is some pretense of that which will have to pay lip service to redressing the current massive imbalance at some future point of time.

So, our remaining decision is just how to offer residential ADSL and small business ADSL services in the new calendar year. Is it time to be more aggressive? Or is it possible to come up with some truly unique offering?

Copyright © Exetel Pty Ltd 2011
ABN 350 979 865 46

John Linton

.....as viewed by Telstra?

If you read this brief article:

http://www.itnews.com.au/News/280919,telstra-plans-national-cable-upgrade.aspx

you would have to wonder why Telstra would be doing such a thing if they actually believed that NBNCo would survive beyond any future change of government. There are obvious reasons why a current fibre network would need to be enhanced - because current customers would need more capacities and facilities - but the question remains - why do it now?

If there is a change of federal government within the next two years then, barring a massive change of heart by the Australian electorate the bunch of doctrinaire morons currently feeding from the trough will be replaced by some other mob who have made it clear, at least currently, that they will scrap the current misadventure and do 'something else'. Having a government communications company makes as much sense in the 21st century as having a government run car manufacturing company - for all the same reasons. However, having a privately run company running a government funded and controlled communications company doesn't make that much more sense.....but that appears to be the only alternative.

My, once across lightly, view is that Malcolm Turbull (either as PM or Minister For The Whatever It Is Going To Be Called At The Time) will simply call a halt to the 'NBN2' roll out and then 'sell' whatever has been installed by that time (in reality not very much) to Telstra, or if both parties were really brave and the $Sing had not self destructed by then, to Optus via a 'tender' process that included some non binding commitments to do something or other in the future. Though the betting would heavily favor Telstra. This would be done after the 'new government' releases an audit of the 'NBN2' showing that the costs have blown out and that it could never be made to work financially nor operationally - and have no doubt a 'new government' could spin that line very, very effectively by simply telling the truth - if they actually could understand what that word means. The current claims and lies by the current 'government' compared to the then factual situation would be sufficient to ridicule the whole concept.

So, one of the issues about the future of telecommunications in Australia is what the combination of Krudd's arrogant stupidity and Ms Faustus 'rabbit frozen in the headlights' stupidities have actually done to what Australian telecommunications users will have available to them over the coming years and who will be providing it? Despite the Labor rhetoric, that is very far from clear and is, almost certainly, not going to be a government operated national fibre network. What it is, most likely, going to be is a reversion to some version of Telecom Australia (not Telstra) in a pre-1991 version with a genuine (and I hesitate to use that word) wholesale split. Despite any view to the contrary, Australia can't afford to have more than one fixed 'wire' telecommunications provider and the only viable way of achieving that is NOT to tax payer fund another national carrier...simple financial modeling insists that is the case.

So, in my opinion, Telstra Mark II will come into being within 12 months of a possible change of government with a 'controlled' pricing regime that will control whatever the 'NBN2' has become by that time.Telstra will control the network and the new and subsequent Federal governments will control the pricing. Everyone will be happy because Telstra will run the operation much more efficiently than a cobbled together new operator and the pricing will be not as expensive as it would have been if the Federal government remained trying to operate a huge commercial business.

Pity it's going to remain a total shambles until that, or something like that, happens.

Copyright © Exetel Pty Ltd 2011
ABN 350 979 865 46

John Linton

........business euphemisms for reduced cmpetition.

I noticed that iinet had bought out Transact for whatever reasons that made sense to the two parties - presumably $60 million dollars was a sensible return for Transact and an appropriate expenditure for iinet. Whether any customer involved benefits is a irrelevancy in such transactions but there is no reason to believe that there is any customer 'down side' as presumably the customers will see no difference in any aspect of their services for some considerable time and its not as though there isn't enough competition in the ACT residential, business and government markets. I was more interested in the latest whining by a giant multinational in a completely different field:

http://www.smh.com.au/business/heinz-hits-out-at-home-brands-20111121-1nr1l.html

Personally I don't put tomato, or any other sort of sauce, on my food and haven't eaten many cans of baked beans since I was at boarding school in another country in another century - so whether Heinz products are available in the local super market or not is a matter of complete indifference to me. However other recent articles about bread and milk changes referenced in the article do concern me a little more - on a selfish basis (I like fresh bread) and I think the destruction of dairy farms by voracious companies like Coles and Woolworths are deplorable....but then I have a deep appreciation of farming that doesn't involve the slaughter of animals generally and a particular affinity for dairy farms.

Similarly whether American multinationals (or any other multinational) have trouble competing with an Australian mega-business would usually not attract my sympathy/support - which it doesn't in these cases other than to realise that all dominant businesses are bad for the end user of their products in anything other than the very short term when they are destroying their competitors - simple business principles, and endless business school courses, have made that abundantly clear for several millennia. So why am I raising this issue in my overly cluttered mind that has far more directly relevant issues to consider?

Because it is a stark reminder that in any business that is 'stagnant' the only result will be the destruction (a la Transact) of all companies that are faced with the tyranny of 'market forces' that demand ever lower prices, and therefore ever lower profit margins, that inevitably lead to ever more companies getting out of businesses - even multnationals that have dominated their marketplaces for almost 100 years....in the case of the Heinz example.....and, you would have thought, had an economy of scale that was 'competition proof'. It just goes to show how badly even the largest and long dominant companies can mis-guess their strategies.....Heinz shouldn't have continued to concentrate on canning food they should have added the distribution to the end user to their capabilities....not placed themselves in the position of allowing supermarket chains to take over all food outlets and then turn around and eliminate their suppliers. "Beans Means Heinz" was fine to destroy Cross and Blackwell (or whoever) but unfortunately it wasn't going to work against "No Heinz On The Shelves" means No Heinz.

All Woolworths will do is to sell 'white label' beans at a loss until Heinz closes its factories and then they will increase the price - no big deal - Heinz have employed that basic practice for as long as they have been a dominant provider of various products. Telstra have employed the same tactic for the past three years in the ADSL and other markets in Australia. It all revolves around getting to a 'monopoly' scenario (or failing that a duopoly will work almost as well). It is not worth commenting on in the media let alone in a random rambling such as the words I am currently writing - except for the fact that such incidents will, almost inevitably, add up to a more comprehensive change, for the worse, for baked bean eaters and tomato sauce slurpers. Perhaps that's a good thing if those current users stop buying those pernicious products altogether?

Perhaps Australian communications buyers would be better off returning to a Telstra only set of service choices at whatever price Telstra wants to sell them for?

Copyright © Exetel Pty Ltd 2011
ABN 350 979 865 46

John Linton

The last piece of the business plan for 2012 is just what part the NBNCo fibre offerings will, or can be made to play. To date there has been little take up by Exetel customers in the few areas we service and we are lucky to see one new NBNCo customer sign up a day at the moment. There are promises of a much larger deployment from now onwards but we have yet to see any sign of that happening so far. Our interest in NBNCo is, like everybody elses - subject to the Telstra separation agreement being signed which isn't showing any sign of meeting its 'before Christmas' dead line.

Looking at the information provided so far there appears to be some chance of being able to use the NBNCo services in a small number of country towns that have previously been locked up by Telstra. Our interest is not in the residential customers in those towns but in the small businesses and the schools, clubs, doctors, dentists and possibly the auto dealers and pharmacists.....as well as all of the other small businesses. Part of our 'drive' into the business marketplaces is to provide a very solid and very attractive small business offering based on the NBNCo fibre services. This is partly because we regard this as an 'untapped' market (due to Telstra's monopoly to date) and partly because we think the many value add on services we can offer will be more highly regarded by small businesses than by residential customers. However the incredible slowness of th roll out means that there will not be many opportunities in 2012 which means we will have to find a substitute service until the NBN is a reality - if it ever becomes a reality.

The obvious difficulties, apart from the erratic nature of the actual roll out, are the sheer uncertainty of the NBNCo's future and the unpredictability of how other NBNCo wholesale customers will approach the initial difficulties of selling the services. I am pretty sure they will show the same clumsiness and lack of imagination they have consistently shown over the past many years and, without any sort of product differentiation, they will flounder in developing viable strategies. Maybe that is a too jaundiced view and they will in fact massively change their ways and come up with a series of brilliant innovations and then execute those innovations perfectly. While that may happen I am not losing any sleep over it. I am pretty sure that the 'package' we have come up with will be more than just a little better than everything I have seen to date and it has its own inbuilt trump card that I am certain cannot be matched by any other provider.

All and any planning is pointless until there is some certainty on the actual roll out which appears to be dependent on the Telstra separation agreement which is anyone's guess as things stand today. The other major problem is the appalling nature of the NBNCo qualification tools, almost entirely manual, that make it very difficult to actually determine whether or not an NBNCo service can be provided to a particular address. That problem, plus everything associated with it, will make the actual provisioning of the service far more difficult than it should be in these early stages. So it looks like it will take some time for us to put in place just how we approach the NBNCo 'opportunity' but we do need to make some sensible decisions in the next few weeks as it is becoming a more important aspect of our future business that it used to be - without the worry of a future coalition government's attitudes and actions. It seems unlikely that NBN services will play any part in next year's plans.

Copyright © Exetel Pty Ltd 2011
ABN 350 979 865 46

John Linton

.....that it can't be ignored.

I completed my parts of the revised operating plan late yesterday evening after dithering for more than a week. This leaves a little over two weeks to finish the rest of the work, which is mostly just translating the changes into documentation and then issuing the various personnel change letters. I managed to complete this work, which has been stalled for some time by a lack of decision making on two major aspects of what we might do next year, by simply ignoring both decisions and completing the planning on the basis that neither decision really affects the major thrust of the business and if they are made over the coming months then that will be time enough to consider the implications and take the required actions. So it allowed me to watch the cricket and the Arsenal game with a relaxed mind.

One of the things I have missed over the past year has been the involvement in people selection as we have gradually grown our business. This was deliberate on my part because it is well past the time when direct line managers should hire their own people without having 'interference' from 'senior' management. The other thing I have missed has been the close direction of the sales processes which, if I have ever had any commercial talent at all, that has been my only claim to fame. Based on the planning just completed I have basically 'written myself out' of playing any part at all in those activities in the new year which is only a few weeks away now. I need to find myself a more effective role in the ongoing development of Exetel or alternatively something outside the company that will engage my interests more than has occurred over 2011 - which I haven't enjoyed at all.

Perhaps its reaching the time that Exetel needs new leadership and much better direction. Alternatively, maybe it needs different people who can motivate themselves better than the motivation and direction they are currently getting which, it appears to me, to be totally inadequate....we have very definitely lost the zest that has always been a key aspect of the company with far too many of our very limited number of people not contributing anything at all and dealing with every situation with which they are confronted by 'blaming' the inadequacy of others. That very clearly indicates that too many 'managers', and others, are simply marking time which means there is no real direction being given from the very top and then on down.

Perhaps three years of unrelenting financial pressure have sucked the life out of the constant creativity we used to bring to bear on our daily thinking and therefore resultant actions. Perhaps we just need to have some time where every second of the day is not spent looking at negative scenarios or perhaps doing that year after year dulls the mind so much new ideas and new initiatives are ground into dust by the sheer dullness that surrounds every aspect of current marketplaces. Maybe it's just me - I am just not cut out to manage 'holding patterns' - especially year after year - it provides no satisfaction at all.

Maybe the new year will see some positive changes?

Copyright © Exetel Pty Ltd 2011
ABN 350 979 865 46

John Linton

We held our November board meeting yesterday. It was shorter than usual because although there were two more serious than usual items to be considered the uncertainties in the current market places meant that we couldn't really consider anything operationally until we resolved those issues at some future time. We did approve the most expensive capital expenditure program for next year - required to move to the next phase of upgrading the Australian network and we also approved the expenditure required in Sri Lanka to fit out new offices to accommodate another 60 people for the proposed growth in small and medium business sales and support. So, in one way, it was the most 'expansionist, board meeting we have ever held......which was very strange given the other circumstances that we will need to address over the coming months.

The build out of the Australian network, apart from being the largest expenditure we have ever contemplated will also involve, almost certainly, a pretty comprehensive change to our IP and back haul providers....in itself a seriously major change and one not undertaken lightly....I always dread network changes of any sort. Over the years of developing corporate and business sales we have added a considerable number of circuits to our network - something approaching 2,000 additional links - 'on top' of dozens of links required for the residential customer network. While this has, of course, been done gradually over time it has totally changed our network topology and, looking at the likely future growth, will require massive increasing changes in the not too distant future. While we have signed the appropriate supply agreements with Cisco to acquire the new equipment at sensible commercial prices the costs are still quite considerable.

Similarly, the costs of adding 60% more space and personnel to our Sri Lankan operation are not inconsiderable and all of that expenditure has to be incurred before we can generate a single dollar of revenue - let alone profit. While office space and fit out costs are lower in Colombo's CBD than they are in North Sydney they are still considerable though they pale into insignificance when compared to the massive costs of hiring and training the additional personnel....and that continues to be the major problem we continue to confront as we look in to the future - just how well can we select, employ and train the large number of people we will need to make our 'planning' a reality? I am probably more troubled than I used to be on this issue - because I don't see the personnel management skills that the planned growth needs developing as quickly as I had expected.

So the caution displayed at the board meeting, apart from a major decision not being capable of being made, was generated by a hesitation caused by this lack of personnel management skills - perhaps even desires. I do understand that no company, of any size, can grow easily when there is doubt about its personnel management skills. I just don't know how to ensure all the obvious problems are addressed let alone all the problems I just don't see. It will be necessary to make a judgement on which of our current employees can rapidly develop to make this planned growth 'happen'. I have been trying to do that over the past few months without success. Perhaps I am looking at the issues wrongly? I never seemed to have had this problem in the past - perhaps I just never noticed?

Copyright © Exetel Pty Ltd 2011
ABN 350 979 865 46

John Linton

This time of year is always very demanding. I don't know whether late May/June or late November/December requires more 'thinking' than any other times of the year but right now I would put my money on Nov/Dec. I can't seem to get my mind around some of the issues that need to be dealt with and that, in itself, is extremely frustrating. I spent a pleasant hour or so yesterday exchanging views with someone I think knows more about this industry than anyone else but can relate to the difficulties a company of Exetel's size faces in these particular times. He also has a PA who makes great coffee and a really nice office (the size of a small football stadium with paintings, sculpture and books that most museums would envy) with stunning views and furniture that is perfect both to look at and use.

I am not sure that you could actually do any work in such surroundings but what a great place to spend your working days. It was a very pleasant place to spend an hour or so and the advice is always well considered and referenced in detail....a great rarity in my personal experience. So we discussed how Exetel should proceed from here in the marketplaces that have now changed so completely they no longer bear any resemblance to what they were four years ago and looked into the near future to see what they were likely to become - as realistically as such estimates can ever be. It was not a pretty sight. So much has changed and, in my opinion, so much is going to continue to change that it is pretty difficult to 'plan' too much for the present and virtually impossible to plan anything for the 'future' - where the future is defined as a time more than three months away.

However discussing a range of issues with a 'disinterested third party' was very helpful and, as I said, the coffee was the best I have had anywhere in Sydney (probably the only place that uses Blue Mountain beans freshly ground for each cup). As I drove 'home' I realised that I hadn't considered, for a very long time, what I was getting out of Exetel as a person and as a person who is reaching the end of his commercial life....one of the questions we had briefly touched on as he courteously walked me to the lift. I must give that some thought over the next few days.Whether I can actually address such a question rationally is highly problematical but it is the most important issue for me at this and all other remaining time.

Certainly as we decide what we are going to change for the coming year it is going to be necessary to consider just what our new overall business objectives should be given that providing the lowest cost residential internet services at the highest level of quality and speed is no longer possible given Telstra's likely objectives over the coming year and what those objectives will mean to other providers to the residential marketplaces. How we could go about making such a significant change to our operations to manage such a major change will need some careful consideration over the remaining weeks of the 'planning period'......and will almost certainly require more objectivity than I seem to be able to muster these days. I doubt that there is enough time for any realistically 'correct' decision to be made.

I am coming to the conclusion that this year we will not complete any sort of reasonable planning on time - there are just too many variables and, far too many, just plain unknowns. I need a holiday.

Copyright © Exetel Pty Ltd 2011
ABN 350 979 865 46

John Linton

We had a very pleasant 'planning lunch' yesterday which could be regarded as just an excuse to take a few hours off from the slog of trying to work out how to make the required changes to the operating plan by involving other people in a discussion about some of the key issues....there were certainly elements of that. The food was as good as ever at one of our favourite restaurants and, to suit the occasion, we had some very nice wine and also had a, largely, productive discussion on two key aspects of what we need to do next year....increasing the technical expertise of our sales force and making more of the large scale opportunities we develop but don't close enough of - for a range of all the more obvious reasons.

Training generally is very high up our list of issues to be addressed at the moment with hiring better people close behind - as we have to hire more people over the coming year than we have done in any previous year and by quite a large number. If we actually manage to execute our current plans we are faced with hiring 60 or so new employees (a growth of 50% over our current numbers) and of running an ongoing technical training program for 100 people throughout 2012. These are not easy tasks for companies much larger than Exetel and, for a company of our size, they are more than daunting. So yesterdays lunch was aimed at discussing these issues in a very relaxed environment to come up with the building blocks on which we could attempt these tasks. I don't think we got as far as I had hoped (but then my hopes almost always exceed realities by a fair margin).

Involving new people in any process inevitably means that you have to go over a lot of background which takes time and adds nothing to where you are starting from.  That takes a fair amount of time before you can realistically get to a point where 'new voices' can add different views - no problem - an inevitable process. There were some new thoughts introduced in to the discussion and some previous thinking abandoned in the light of different views expressed. So some positive outcomes. The issues, always, with any discussion (wide ranging or tightly focused) is what actually gets done as a result of the discussions. My long experience is that very little gets done as the result of most discussions unless there is someone controlling the follow up from the meeting.We will try and put in place a video based training program together with a 'white paper' covering some 50 technical topics together with an 'exam' for each topic which will trigger one on one follow up if the person doesn't 'pass' each topic. If this can be done it addresses many of the issues of constantly hiring new people across a twelve month period in two very different geographic locations.

So it will be interesting to see whether the three 'new' ideas that were introduced in the last one third of the lunch are taken further by their proponents or whether they end up with so many other ideas just words that get forgotten amidst the need to concentrate on day to day issues. Whatever the case we have 15 working days to make two very big decisions and a plethora of smaller ones as well as to write and re-write a considerable amount of documentation. Though I still don't know how to ensure we can hire better than we have done to date and I'm not at all sure how to put in place the required training processes....and a whole lot of other things.

Copyright © Exetel Pty Ltd 2011
ABN 350 979 865 46

John Linton

.......that certainly is the question of the day.

I met with one of our major suppliers yesterday to progress our discussions on how we could possibly work more closely together on delivering business services next year. We have been 'planning' this 'association' for almost twelve months now and are getting closer to a go/no go situation. I still have some reservations about just how quickly we can build this concept into a practical reality but it remains pretty much on track for a February 1st 2012 'start'. The last big 'hurdle' has yet to be jumped and we will put quite some considerable effort in to clearing that last obstacle between now and Christmas - all being well we will take a deep breath and give the green light. I  am not sure how much leeway we have to make a 'no go' decision on this initiative having already committed to the extra floor space and expensive fit out to house the additional sixty people required over the next few months.

Something that has been considered for some time now is whether we should emulate the Danes of the dark ages and, at least metaphorically, "burn our boats" to ensure the waverers are totally committed to their new lives and have no chance to return to their old 'jobs' in our case. For some time we have been unsure as to whether we can continue to provide retail ADSL services that provide a clear advantage to our residential customers over those offered by even Telstra who seems to be able to do 'deals' that we cannot match. The latest one is offering fibre services in Point Cook that are, yet again, at below our wholesale buying cost. I think it may be the fabled "straw". There seems very little point in continuing to wholesale Telstra ASDSL services when Telstra continues to 'attack' our user base offering ADSL services at below our wholesale cost. We really should take the attitude that we have played a small part in bringing about this change in attitude by Telstra and we can serve no further purpose and should devote the largest percentage of our time and resources currently devoted to helping Telstra to some much more useful purpose.

Exetel has offered residential ADSL services for almost 8 years now. We began this business on the basis that we could offer an ADSL service with more downloads for a much lower price than BigPond but still provide an equivalent or better level of speed and service than any other provider to the residential market place. That remained the case until Telstra Retail began their "win back"/"welcome home" assaults culminating last year in a marketing spend of some $A800 million to acquire new customers. Telstra's huge marketing expenditures compelled other providers to lower prices/offer inducements to protect their own customer bases (largely unsuccessfully) and certainly Exetel was forced to do the same. Irrespective of all 'emotions' - just how sensible is it for a company like Exetel to offer residential ADSL services when Telstra offers them at a lower price?

Although I think I see what might well be the beginning of the end of these depredations - the churn aways to Telstra and TPG have reduced to a trickle while the churn backs from those companies have begun to slowly increase to more than the churn aways - the concern is that we have to put in far too much of our resources and time to accomplish very little in terms of either growth or profitability. That has been OK to date but now we are faced with rapidly growing a new business and the justification for devoting the amount of resources we currently do to residential ADSL is becoming harder to justify. While we may well end up making no such drastic decisions our modelling, for the first time, includes a scenario where there is no Telstra ADSL revenue or expenses.....I emphasise that is simply one scenario but the fact that is there at all means we have come a long way from the thinking that was in place in November 2003.

So the current planning 'season' is more 'fraught' than usual with some, for us, very big decisions having to be addressed and, as always, the time to make such decisions is rapidly diminishing.

Copyright © Exetel Pty Ltd 2011
ABN 350 979 865 46