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.