opinion Reality check: Simon Hackett didn’t sell Internode because of the National Broadband Network. He didn’t sell it to cash out. And he certainly didn’t sell it to take Internode to the next stage of its development. He sold it because one man — no matter how strong — can only hold up a visionary ideal for so long, and twenty years of doing so is more than enough.
In Haruki Murakami‘s recently published novel 1Q84, one of the leading characters refers to a famous literary technique employed by the Russian physician and author Anton Chekhov. “According to Chekhov, once a gun appears in a story, it has to be fired,” the character tells another. “Meaning, don’t bring unnecessary props into a story. If a pistol appears, it has to be fired at some point. Chekhov liked to write stories that did away with all useless ornamentation.”
In short, as a symbol of violence and death, a gun is such a potent image that an author shouldn’t introduce it into a story unless it will eventually be used. The very presence of a gun implies that it will be taken up and fired. It’s not an object so much as the visual representation of an inevitability. A similar concept appears in the writings of American author Don DeLillo, who famously had one character warn another that all conspiracies or plots tended towards a single endgame: death. Someone must eventually die as the fulfilment of any conspiracy, DeLillo suggested; the gun must be fired once it is known to exist.
Faithful to this ideal, Murakami’s character in 1Q84 does introduce a gun into the story; one which becomes a central plot element. I haven’t finished the book yet; but I can already sense where things are going. It’s a one way street.
In the days before Christmas, it’s not hard to imagine that much of Australia’s telecommunications industry must have felt themselves to be wandering around in a Murakami novel; distanced from their emotions, with a confusing world vaguely swirling around them; unsure what to feel about iiNet’s sudden and unexpected announcement that it would buy its long-time rival Internode.
An iiNet buyout of Internode had been speculated about for so long that when the news actually arrived, it did so in the sort of surreal atmosphere with which Murakami is famous for. iiNet founder Michael Malone and his counterpart at Internode, Simon Hackett, have such large personalities; everything they do and say is virtually the stuff of industry legend. To hear them on the same teleconference promoting the marriage of their companies felt like your parents taking you aside and announcing that they were to be separated. You weren’t quite sure what it all meant; all you knew was that your world had irrevocably changed.
On the conference call, neither could really explain why the buyout had occurred. There were plenty of facts, figures, EBITDA ratios, customer numbers, strategies and plans. But underpinning all of it was a confusion that left most onlookers out of sync with reality. Wasn’t it only one month ago that Malone had publicly called for Hackett to “cash out” of his company? What had changed? Why was Hackett selling? What made now the right time? Nobody seemed to know.
The reaction from Internode customers was instant and clear. Although it was mostly expressed online, at the time I visualised many of them raising their heads and hands to sky and crying: “Noooo!” iiNet was a good company, many of them seemed to feel, but Internode has always represented something more. Something they cared strongly about.
There is no doubt that this feeling revolves around and stems from the fact that Simon Hackett has never been a ‘normal’ executive or entrepreneur in the usual sense of the word.
Where executive like Malone have followed a path of rapid expansion through constant acquisition, Hackett has preferred to quietly and steadily build Internode’s customer base through the constant development of its network infrastructure. Where companies like TPG have blanketed Australia with massive and misleading marketing campaigns, Internode has virtually relied on word of mouth alone. Where many of Australia’s ISPs have gone public and made their founder instant multi-millionaires, Internode has remained independent and almost 100 percent in the hands of Hackett himself.
Where some ISPs have cooperated to a certain extent with the big bad, Telstra, Internode has waged a war against the nation’s biggest telco that has now lasted several decades and has seen no quarter or mercy given. Where almost every ISP holds back some information from its customers, sometimes for their own good, Internode has been unflinchingly, brutally honest in its dealings constantly. Rarely do you wonder where Internode sits on a certain position. Internode does not deal in shades of grey — only black and white.
Hackett’s naked honesty in places such as Whirlpool has become the stuff of legend. His blog posts on Internode’s own blog have exhaustively disclosed how the company is serving its customers, including fine details of its financial model. And his rare industry speeches are always packed houses as those attending await to hear how one of the only true ‘outlaws’ left in the sector sees the ISP industry of today — and what he will do next.
And yet, Internode has not been a perfect company in the capitalistic sense over the years.
Hackett’s ongoing and very public war with Telstra has no doubt led to his company receiving less favourable terms from the former monopolist’s wholesale division than more diplomatic companies like TPG have been able to achieve; with the net effect of hurting Internode’s bottom line and its ability to compete for customers.
The company’s reluctance to spend any money on marketing has drastically limited its reach outside South Australia — Hackett joked on the acquisition conference call that “both” of Internode’s customers in Western Australia were extremely satisfied with its service — and its reluctance to go public or accept any outside investment has limited its ability to expand. Perhaps most critically, the lack of Internode interest in acquiring other companies to build scale has left the company in TPG and iiNet’s dust as a distant fifth player in Australia’s broadband market.
There are also other troubling aspects to Internode’s management style.
In August 2008, Internode appointed staffer Patrick Tapper as its chief executive, with Hackett to continue to set the strategic direction of the company as managing director but Tapper to grow the company in practice. At the time there was much speculation that the move was a precursor to Internode listing; speculation that Internode itself helped fuel.
But in reality Tapper became a virtual nonentity.
Does Tapper really exist any more? It’s hard to say. I’ve been covering Internode constantly for the past half-decade and as far as I can recall, I have never spoken to the man. I’ve never emailed him. I’ve never received an email or a message of any kind from him. He does not issue press statements. He does not appear as an important figure in the occasional leaks I receive from other staff inside Internode.
For all intents and purposes, Patrick Tapper has become like the Sheep Man from Murakami’s novel Dance, Dance, Dance; an almost mythical figure locked away in the disused back room of a dilapidated hotel, surrounded by reams of information on things which almost nobody cares about; signifying perhaps nothing, nowhere visible, existing only on the strength of a rumour.
It is extraordinary that Tapper — Internode’s CEO — did not participate in the conference call with Malone before Christmas regarding Internode’s acquisition. What it signifies is that Tapper does not run Internode and never did. The company has always been Hackett’s baby and Hackett’s alone.
All of these aspects of Internode — both the positive and the negative — has lent the company an anti-capitalist, anti-authority swagger infused with the technical excellence that technologists of any stripe worship. Internode has always felt like a company composed of sysadmins, providing services for sysadmins (see: Hackett’s constant re-tweeting of the DevOps Borat Twitter account). And so many have loved the company for it. On that journey, Internode’s weaknesses have become its strengths; its strengths magnified by its honesty. Its capitalist success; perhaps, driven often by its anti-capitalist leanings. Its network engineers, even, permitted high-profile public battles with the nation’s Communications Minister.
Likewise, Hackett has become something more than a man to many in Australia’s IT industry. Instead, he has represented an ideal; a new Internet visionary for the modern era; Australia’s Vint Cerf — promoting online freedom, impeccable quality broadband at a decent price, independence from the mainstream, and even alternative energy sources and communion with the sky.
But all of this could only last so long.
Ultimately, like most companies, Internode’s strengths and weaknesses all stem from its founder. Hackett’s refusal to let Internode become a ‘normal’ company like any other could only last as long as he was personally able to shoulder the responsibility for leading the ISP himself. And now — after twenty years — the time has come where he wants needs to pass on that burden.
That the several reasons which Hackett has professed for handing over his baby don’t stack up is fairly obvious. As Exetel’s John Linton has pointed out, there is no reason for Internode to need scale to handle the NBN, when the NBN has not yet been built. There is no reason why Internode could not list on the ASX and gain enough funding to expand further, with Hackett remaining a dominant shareholder to prevent takeovers (something Hackett has been discussing as recently as September 2011). There is no reason why Internode could not take private investment from a company such as a major private equity firm.
There is also no reason why Internode couldn’t continue on as it is now, gradually buying wholesale services from NBN Co or one of its burgeoning aggregators as the network is being rolled out. This ‘wait and see’ approach will actually likely result in Internode continuing to gain market share as hundreds of thousands of Telstra and Optus HFC cable customers are unbundled from their broadband network for the first time in a decade.
The only reason why Hackett would want to sell at this time is because he is tired of shouldering the responsibility for his company — the avatar of his vision of great Internet access and the power of technology — alone, and he knows that if he hands over the company’s management to someone else, be that through different ownership or simply a different managing director, the company will change; it will become a more normal part of the capitalist system. It won’t be aligned so strongly with his personality any more.
The Chekhov’s gun in this epic story of Hackett’s is Michael Malone’s decade-old offer — continually renewed over the past ten years — for Internode.
What the iiNet acquisition represents for Hackett is a soft exit from his responsibilities at Internode which makes sense. Not financially — because Hackett is already a rich man — but ethically and idealistically. Although iiNet has taken vastly greater steps towards becoming just another part of the capitalist system than Internode has, Michael Malone’s presence at the company continues to ensure it is somewhat on the side of ‘good’ in the vast ethical scale of the economy; the scale on which companies like Telstra, Optus and TPG sit squarely on the side of ‘evil’ — or at best, ‘neutral’.
The minute Malone made the offer to Hackett a decade ago, Hackett must have seen the inevitability of the deal eventually taking place. As someone who is primarily a technologist, Hackett must have known for years that his personal ideals have been holding back Internode from becoming just another company — but he must also have known that an iiNet acquisition would allow much of the soul of Internode to remain in future — although Hackett himself will no doubt depart from its doors. This opportunity — of exiting Internode gracefully, with most of his integrity intact — must have eaten away at Hackett over the many years — the best of many alternatives — until just before Christmas, he finally decided to pull the trigger.
For Hackett himself, the sale will be a good thing. Many commercial matters will now pass from his hands, and he will be free to focus on what he loves best — better technical outcomes for everyone. I am glad for him, and as a fellow Australian, proud of him. Hackett started Internode to solve a problem — universal Internet access — and has lived to see that problem resolved in Australia. Shortly, it may be resolved in the best possible way, with universal fibre to the home.
For the industry, however — and this is why the iiNet acquisition is already so mourned — the true passing of the Internode torch may not be a good thing. We need more visionaries like Hackett and more remarkable, independent companies like Internode. They are truly few and far between. And for iiNet? Well, iiNet has its own inevitability; its own date with destiny; its own imminent question which needs to be answered.
iiNet’s Chekhov’s gun has but one name, in three syllables: TPG.
Image credit: Carl Malamud, Creative Commons
Epic photo.
+1
Great read too :)
Hehe cheers, it’s been mulling around in my head for a while over Christmas :)
I know some will say “This is all speculation!” but honestly your analogy to parents separating really encapsulation the emotional blow this was to Internode’s most loyal customers. Speculation is all we can do to search for some reason in this seemingly unreasonable turn of events. Did we do something wrong, could we have signed up more friends as customers or upgraded our plans to avoid this?
I don’t know if either of the parties really know how this affected some of us emotionally. That we literally called each other in disbelief, that while everything is the same for now the future seems so uncertain. Much like reading a Murakami work actually :’)
Cheers, your comment means a lot to me! Yeah, I felt like a lot of people were kind of lost for words — Internode has been a founding stone of so many people’s lives for so long. It was a different calibre of emotion from that you see during other acquisitions. Normally, people are interested to hear what new things they’re getting. In this case, it was as though something was being torn out of their lives :(
“Did we do something wrong, could we have signed up more friends as customers or upgraded our plans to avoid this?”
I LOL’d at this sentence :)
I use to work for Internode, did so for years. Things were what you would call ‘golden’ when I started. The older generations told me things were starting to go to pot.
Early on, working at Internode was like being back at Tafe only getting paid for it and it was great. I was young, I needed the money. It wasn’t great money but it was a good learning experience.
As time went on, Node became less lovable and more sterile/detached/corporate. Very shiny on the customer side, not so on the employees side. Our problems were their inability/unwillingness to increase pay for level1 and 2 positions, OH and S violations, cubicles falling on people (literally), cheap chairs and generally bad morale. The morale issue resulted in a few fist fights, screaming matches and having to listen to what would be considered “mentally young” personality types.
The things that stayed reliable were the networks and the engineers that were top notch people. I could waste my time on Whirlpool with this but my post would probably be banned. But at least I can walk away from it knowing how things really played out.
I think the funniest thing is reading articles/forums/threads and comparing it to my real life experiences and noticing a VERY big contrast. I sit back, lol, drink my coffee and wonder why I was never sent a Nodepony.
If any of want a starting point, by all means go to Node. Stay for two years then go to either Military Tech Sectors or Government. Trust me. :)
Alot of people do the same thing. Using Internode as a starting point and jump off into another company once grinding enough work experience until another company offer you a better job.
Unfortunately our NDAs limit our conversation and comments in the public circle. So I must stop there and return to my mobile wireless training
Your truely
Adam
FYI: Pants
hmmm, this is getting a trifle jobsian and the guy aint even dead…
“According to Chekhov, once a gun appears in a story, it has to be fired,”
Obviously, Chekhov never played an Elders Scrolls game. So many useless props it’s not funny…
That’s just because you haven’t got the broom side quest yet.
*spoiler alert*
Just to ruin the gist of the article: the gun never gets fired in 1Q84. Sorry Renai if you’ve read this and still haven’t finished the book. Don’t worry though, the ending is still quite surprising!
Former node staff here. You are drastically underestimating Pat Tapper’s work at Internode. Simon may have steered but Pat made the company work and kept it operating. Simon never got involved in day to day operations – he is the vision guy.
“Where some ISPs have cooperated to a certain extent with the big bad, Telstra, Internode has waged a war against the nation’s biggest telco that has now lasted several decades”
Really? Hackett sure does look good for 70+ years old, and I’m fairly sure Internode hasn’t been around that long either… ;-)
Several doesn’t mean seven.
Several
sev·er·al
Adjective: More than two but not many: “the author of several books”; “Van Gogh was just one of several artists who gathered at Auvers”.
Good read.
Interesting article. Love the moniker of “Australia’s Vint Cerf” – most apt!
I wouldn’t be surprised to hear from Simon that there’s a bit of the ol’ ‘time for a bex and a lie down’ here. He’s been fighting the battle from the front line for so long now and now that the war is all but over, it makes sense to take stock of what remains.
Two aspects I found amiss in this article though…
1) Internode’s strength is their Agile network. It’s a real feather in their cap which allows them to put their ideals in to practice. Yet this means that there’s an awful lot of expensive equipment out there which is no longer needed in an NBN environment. 200 exchanges housing incompatible equipment at $xxxxxx a pop is a bit of a problem.
2) John Linton has pitched his business to service a different market segment. He’s not trying to compete with the likes of Internode. He wants the mum and dad accounts with their lower-than-enthusiast requirements and lower overheads, meaning more profit. He, like them, doesn’t care where the internet comes from so long as it’s on. He’s playing in a different league and I’ve never felt that his comments are born from an industry-wide view, rather just his little corner of the paddock.
— What the iiNet acquisition represents for Hackett is a soft exit from his responsibilities at Internode which makes sense. Not financially — because Hackett is already a rich man — but ethically and idealistically. —
Simon Hackett sold Internode because the value of his franchise as an independent and privately-held entity in the rapidly changing NBN lanscape had reached its peak. as a matter of fact, Michael Malone in his public statements seems to infer that the peak valuation for Internode was two years ago.
it’s purely a business decision driven by economic imperatives, and has nothing to with “tired of shouldering responsibility” (or upholding some bulls–t “visionary ideal”).
Simon Hackett is as much a capitalist as John Rockefeller. if Internode was truly “anti-capitalist”, they would not cherry-pick the metro exchanges in rolling out DSLAMs and settle for lower profit margins.
— Although iiNet has taken vastly greater steps towards becoming just another part of the capitalist system than Internode has, Michael Malone’s presence at the company continues to ensure it is somewhat on the side of ‘good’ in the vast ethical scale of the economy; the scale on which companies like Telstra, Optus and TPG sit squarely on the side of ‘evil’ — or at best, ‘neutral’. —
since you hate capitalism so much and proudly label companies such as Telstra, Optus and TPG as “evil” — here’s my CHALLENGE to you:
banish all advertising by these major telcos from your website forever.
Your premise is incorrect.
Complaining about companies who focus more on profit than on customers does not mean one hates capitalism. Customers are the backbone of any company – putting a focus on keeping them happy is a very viable way to run your business.
— Complaining about companies who focus more on profit than on customers does not mean one hates capitalism. Customers are the backbone of any company – putting a focus on keeping them happy is a very viable way to run your business. —
every company has its own business (or profit) model and its own target market.
to suggest that a premium provider like Internode “puts customers ahead of profits” while other ISPs like TPG put “profits ahead of customers” and then proceed to make ethical judgments about the nature of the companies and the individuals running them merely displays a lack of understanding about how markets function.
it’s like arguing the Westin Hotel is anti-capitalist and prides itself over technical excellence in hospitality standards over “profits”, while the Five Flags Inn is a dirty capitalist operation only concerned with market share and marshalling high volume traffic through its “shabby” guestrooms.
Internode provides a certain level and type of customer service to its target market because that is how it makes money. other ISPs also tailor their product according to the requirements of their own target segments. just because you happen to prefer the service Internode offers does not make Internode “holy” and other ISPs “evil”. not everybody shopping for an ISP is looking for the same type of service and pricing. that is why we have a “market”.
there is no evidence whatsoever that Internode’s market conduct as a retail ISP makes it any more “altruistic” than other ISPs. Simon Hackett is essentially a very successful cherry-picker just like David Teoh.
just because the senior managers at Internode converse directly with their customer constituents on an internet forum on a regular basis does not mean they have a different business objective to every other player in the market (i.e. profit maximisation). all it really demonstrates is that Internode, as a company, does not shy away from publicly trolling their main infrastructure provider to make itself look good always and protect its own selfish financial interests. (a rather successful strategy given the large numbers of people who swallow their holier than thou propaganda.)
in fact, any canny observer following the stream of comments and criticisms about the NBN emanating from Internode over the past year will immediately realise that every suggestion from Simon Hackett is made solely from the selfish vantage-point of protecting Internode’s profit margins as an infrastructure access-seeker and internet retailer. just like any other businessman, Simon Hackett had his eyes solely on positioning his business in as attractive a position as possible to extract maximum value from an imminent “cash-out” transaction.
“if Internode was truly “anti-capitalist”, they would not cherry-pick the metro exchanges in rolling out DSLAMs and settle for lower profit margins.”
You do know that Internode/Agile installed backhaul and DSLAMs to some remote exchanges in SA before even Telstra?
— You do know that Internode/Agile installed backhaul and DSLAMs to some remote exchanges in SA before even Telstra? —
funded by taxpayer subsidies.
And Telstra don’t get government subsidies? What about the USO?
That is a weak line of attack.
the USO is not funded by government subsidies. there is a modest industry levy in existence; but according to an ACMA report, the revenue raised from this measure only covers a small fraction of the higher costs of providing fixed-line services in the bush.
I understand the USO is not a gov subsidy, I could have worded that better.
I don’t believe that the USO was such a drag on TLS, others had offered to take on the responsibility and they declined.
TLS crying over the USO while underspending on maintenance by 10’s of billions, all while knowing the NBN (or something like it) was coming doesn’t strike me as a victim.
Truth be told, I am sick of the arguments about TLS vs other ISPs, cherry picking and the rest. The real victims of the BS of the last ten or more years is the Australian public.
I suspect NBN can be justified on productivity gains alone. It is time there is more focus on how the NBN will improve things for users and not what the RSPs will get from it. Screw them, they will find a way to make a dollar.
Your historical revisionism would make Stalin and Mao blush at its effrontery.
John, I presume you are referring to one Renai’s article, not a comment?
I’ll take that as a compliment :)
Maybe Simon really does think size will be important with the NBN and that if Internode grows to the necessary size it won’t be as much fun for him. Just guessing.
Whatever the reasons, I hope he enjoys whatever he chooses to do next and I hope we don’t lose his voice from the debate. Perhaps we’ll see more of him on Whirlpool outside of the Internode forum. I value his opinions on the NBN.
>the Russian physicist and author Anthon Chekov.
That would be “physician” and “Anton Chekhov”.
>there is no reason for Internode to need scale to handle the NBN, when the NBN has not yet been built
You position for where you are going, not where you are.
>solve a problem — universal Internet access — and has lived to see that problem resolved in >Australia. Shortly, it may be resolved in the best possible way, with universal fibre to the home.
Universal? Tell that to the people, mostly in rural and regional areas, who will *not* get fibre to the premises.
“That would be “physician” and “Anton Chekhov”.”
Argh. N00b mistake. My apologies — fixed!
Still not right … “physicianand author Anthon Chekhov. ”
(missing space, Anthon)
Perfectionist :) Fixed.
Still wrong. It’s Anton, not Anthon. :)
lol I will never win :)
You are confusing universal internet with universal FTTH.
Australia’s Vint Cerf? Oh please, this is really too much! I think even Simon himself would be embarrassed by that comparison.
Guys like Geoff Huston are Australia’s Vint Cerf, not Simon Hackett.
Great article.
+1
+ another 1
Great to read some history of the inspiration of SH.
We are fortunate to have had him take the fight to the big T.
you’ve cut your comments on this article to buggery.
I used to enjoy your articles especially for the caliber of poster however with the censorship going on who knows what your deleting.
cya later
huh? I don’t remember deleting any comments from this article.
Nicely written fantasy.
1. Chekov was a playwright. That’s what he was talking about – plays. Simon is not writing a play about Internode, it’s real life, which is messy and contains many incidental things.
2. Simon did explain why the buyout occurred – Internode would be unable to compete in the NBN world. You may not understand the reason, but it makes sense to me. You describe the reasons well yourself later on, including lack of capital and lack of marketing. What’s the problem here?
3. You assert that Internode would have been able to compete. This is your view, however, and not Simon’s. He had to make a decision based on his understanding. Surely it’s better to sell now while the value of Internode is high rather that wait a few years until the value has declined due to the well identified issues. He’s effectively taken it public via the Iinet buyout without all of the pain and risk associated.
4. All users did not cry “Nooo” when the announcement happened. Most of the 200,000 won’t mind either way. I have a very long and technical IT background and business experience. I’m happy that this buyout has occurred in a well controlled way without impact to service levels and to a provider who will continue to deliver good service. Internode has many “mum and dad” subscribers will probably be happy with this too. A few “tech heads” just don’t get it and some whingers will always whinge. So be it.
5. Your suggestion that private equity is a viable solution is interesting given the “anti capitalist” tone of the rest of the article. Do you know what private equity firms do? The buy a company, take out the free capital, cut operating cost to the bone to demonstrate short term efficiency and then sell it on. The most recent :”successful” private equity operation in Australia was Myers, whose owners left the county owing the tax department many millions of dollars in unpaid tax. Perhaps you meant “sugar daddy”?
6. Simon really is a capitalist. You can tell because he’s been running a company that makes profits in a capitalist society for over 20 years. Why wouldn’t he be interested in the money. Show me another entrepreneur who thinks he has enough?
7. The assertion that Patrick Tapper is not really running the company because he’s not talking to the media every 5 minutes is just absurd. Not only is it insulting to everyone who sees the media as something to be avoided (or is even slightly introverted), talking to the media is Simon’s job. Presumably that’s why he split his role in the first place. You need to get out of your media bubble a bit more.
4/10 Must try harder. Very neat writing though.
Who writes this shit, of course he sold for money, business is business no matter where you are. Stop idolising people that are in business they are there for the money, no matter how much they love the technology they love money more and it was time to sell, so he sold.
Done and Done it was all for the money and not for shit excuses ;)
“no matter how much they love the technology they love money more and it was time to sell, so he sold”
The biggest pile of shit which has ever been written on Delimiter.
That statement could be true Renai – I mean the one you’re criticising. The biggest pile of shit written on delimiter is this article. People state the truth, you don’t believe it, write something else, don’t talk directly to the people you’re writing about, and just make it up as you go along. Armchair journalism at it’s best.
“…the company will change; it will become a more normal part of the capitalist system”
Internode represented the true capitalist system by offering excellent service at the best price. All the other ISPs you mentioned practice some form of corporatism: misleading marketing, government lobbying and not thinking beyond the next earnings report. No true engineer or entrepreneur would want to be part ot that.
It’s annoying to see journalists writing about capitalism when they don’t even know what it is.
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