Oh good, informed debate

MHO (aka MKS0) said ”I'd say they [Kingston Internet and Karoo] are what are called 'cash cows' in MBA speak”

“The SBU (Strategic Business Unit) is typically forced into short-term profit making (rather than long term development), eventually sapping its vitality.” Jae K Shim and Randy McGlade in 'The Use of Corporate Planning Models: past, present and future.'

Or in other words – they end up ripping-off their customers - that's 'ull speak.

The BCG (Boston Consulting Group) product portfolio or growth share matrix is a useful model for a doing a foundation level Business Studies presentation, but I would hope Steve Maine isn't running the company on it.

I would say that KI & Karoo have low market share, although that depends on how you define the market, KI covers Hull but as it has been maintaining artificial barriers to competition, the natural level has not been established, I doubt whether, even with the barriers, KI has the lion's share of the Hull area ISP market. Karoo is supposed to compete as a national business ISP, but I have never even seen mention of it in the lists of national ISPs. The market growth for internet service provision is now fairly low, I think I even saw a news item that for the first time ever, internet use in the UK declined recently. Whatever, I think you could only reasonably describe the growth rate as low. In my version of the BCG matrix, low/low makes it a 'Dog' – sounds about right.

The East Yorkshire 'plain old telephones' business is the cash cow, low growth but high market share, without it KC would have been bust long ago. That's the advantage KC has over all the other alternative telcos.

“What makes you believe this [re BBC bailing kit out] is necessary”

“Revenue grew to #1.2 million from #0.2 million. EBITDA losses narrowed to #2.7 million, from #3.3 million. Quarter on quarter the EBITDA loss fell to #1.0 million from #1.7 million.” Q2 Interims. The figures are improving, but those are big negative figures for a small business with limited prospects.

“solid loyal customer base”

That would read a lot better if KC actually allowed it's customers a choice. Don't get too carried away by average 50% penetration rates in the adjacent villages that can now choose between BT and KC, that's not much of a choice. There are also many special factors at work, the untimed local call remains attractive in the natural travel to work area of Hull, but that advantage is being eroded. Even BT offers similar deals for off-peak, and some of the cable companies offer even better deals, including free untimed national calls between subs at off-peak. The two suppliers will have total penetration greater than 100% I suspect. It would make sense to take up a second line from KC but maintain a line with BT. Many of the villages are fairly affluent and include people who work from home.

“strong backing from majority share holder”

Yes, I seem to remember they provided solid backing to the Director of Education that managed to score 4 years at the bottom of the education league tables, until the inevitable happened and she slung her hook. Hull's already moving up, and the same councillors have the cheek to claim the credit! Let's get real here, Hull CC provided the KC chairman that never attended a Torch board meeting despite claiming expenses. If the auditors hadn't noticed and got him sent to prison, he would probably still be at it, and the majority share holder would have carried on looking the other way. BTW, big John is my MP, he lives nearby, not that I ever see him. The Labour councillors are getting a bit jittery about next May's 'all-out' local elections. With one less seat and the uncertainties due to the extensive boundary changes, a few are starting to do the chicken run from wards vulnerable to the Lib Dems and the 'alternative Labour party' splinter group.

”I've had KIT from the beginning and I think it's brilliant, the HDM claims are complete B.S. (well just consider the source!)…”

You're either KC's most satisfied customer, or KC's Product Manager for KIT! I quite agree about the HDM, I only get it on a Friday for the adverts and 'what's on'. I think the HDM have given KC a very easy ride, until this story KC have largely got away with the internet rip-off. I have previously commented about the animosity between KC and the HDM, but I don't think Northcliffe Group feels threatened by KIT. The demise of the paper medium has been often forecast but so far it is the new media that have struggled to survive. KC partly fell-out with the HDM because KC had a useless PR office, I still chuckle at them selecting 666 as their extension number because it was nice and memorable! The 'one man band' guy who did the PR in the days of the Hull Telephone Department, was a many talented chap, he even used to write the Christmas Stories for the kid's dial-a-story line. He wouldn't have made a mistake of such biblical proportion, but then he was one of the first casualties of the new corporate culture.

”You're definitely wrong about VOD, it's the best part of KIT.”

Sorry to read you are pinning your hopes on VOD. My analysis is that the video market has fundamentally changed since VOD services where first mooted. Videos were then expensive and few people bought outright, the video stores were a bit seedy and it was difficult to get hold of a new release. How times have changed. We often pick up a video with the weekly shop, although I am now trying to shift over to DVDs for the quality, resistance to wear, and extra features. Although DVDs currently cost more to buy than tapes, as is obvious from the stack of free CDs I have waiting for artistic inspiration, the manufacturing cost of CDs and DVDs is tiny. Disney or the like could sell DVDs of their back catalogue for pennies and still make a profit. Remember when it was years before a film was out on video? I think Harry Potter is due out on DVD in the Spring. People buy movies now, they rent block busters (with a 'if it's out of stock, you get it free' guarantee) if they missed them at the cinema. Unless KIT suddenly start offering hard core porn, I think the VOD service will limp along. (No pun intended!)

”multiple that [£12 VOD bill] by 10K customers”

9,570 actually at the last count, so that makes £114,840pa., against Q2 losses of £2.7million, or £282 per sub in Q2. All a bit simplistic, and “every little helps” as the old lady said, but I am not sure you exactly fill me with confidence.

”There are loads on Kingston vans on the street in both the new and old livery, I cannot say I've seen that many Sky van's in Hull”

Yes, I see plenty of KC vans, and I like the new livery, I noticed the K in the style of a dish is very like the k of Renault's kango, probably just a co-incidence. Sky vans are a rarity, but then that is probably because the service is sold through resellers such as Comet and Dixons. It's a simple product that any aerial fixer can install, but then that's why I wrote “Sky satellite dishes”, not “Sky vans”.

I estimate that there are about 150k homes in the KC area, knocking off 20k as homes that are never likely to join the multi media revaluation and you are left with a target market of about 130k. I think KIT have done well to get about 8%. I haven't kept up with the figures for Sky, but I am fairly sure that nationally it is higher than that, and I might even punt a bob or two that it beats KIT in Hull. I don't personally know anyone with KIT, but lots of my daughter's friends have Sky.

”Sky is obsolete! No Internet! No VOD! No future!”

I think I will wait for you to justify that. Although I have myself made the point that a full cable service with a good back path is technically superior to satellite, but then the technically best doesn't always win, as was the case with the video tape systems VHS and Video2000, as I think it was called. You might like to clarify the internet access in particular. My understanding of the KIT internet access is that with no computer or hard disk, the options are very limited. Are you using KIT for your TMF access and posts?

”the slash and burn school of company growth went out with the Yuppies” and ”Where are ICI now ? Do they even exist any more”

Hey, don't you start having a go at good old John (kipper tie) Harvey-Jones, he was a Troubleshooter you know!

I think his tale of his biggest mistake is somewhere in his autobiography “Getting it together” which I am not about to re-read to find the anecdote, but to characterise it as “slash and burn” management would be an extreme distortion. The business was a chemical plant that had been his first business as the boss, later on as group Chairman he held on to that plant even when it no longer fitted into the overall business. He didn't “slash and burn” by “closing factories and sacking everybody”, he just sold it to another chemical company that could provide more synergy to make the business more profitable and the jobs more secure. Holding onto and badly managing a business because the managers can't accept they made a mistake is not responsible or considerate management, it's just ego or incompetence. Although I will admit I can't see who would buy KIT.

“Where are ICI now ? Do they even exist any more”

Last time I looked (the current chairman was interviewed on Working Lunch last week), making good profits as the international leader in high value specialist chemicals, having seen the writing on the wall for commodity chemical producers, and re-positioned in good time.

"If you read regularly you would know that two thirds of the ADSL lines in this country belong to Kingston."

If you can provide some figures, that would be nice. In the absence of hard facts I would surmise that the 9,570 KIT lines represent the two-thirds, I don't think there are many ADSL internet lines in Hull, and I hadn't noticed ADSL being a product KC supplied outside the Hull area. If that's a reasonable analysis then what you are saying is that KC is investing big in a technology that most other companies are lukewarm about. Could be that others have learned from the example of things like TV, where none of the pioneers of TV manufacture survived to make the big profits. It may be unfair that the big bucks tend to go to the big companies that sit on the side lines until all the problems have been sorted out, then use their muscle to move in and clean up, but that is the way the system tends to work.

”Actually this [my assertion that KC's best chance is the national network] shows astounding ignorance of the backbone business, there is no money in backbones, they a phenomenally expensive to build, have cut throat competition, take decades to pay back the capital spend and halve in value every 18 months.”

Maybe you misunderstand me. I was contrasting all the national stuff, including the business customers, with the local stuff such as KIT and internet. But if we go with the view that the national network has been a monumental strategic mistake, then why on earth do you write that “I want a chairman [Maine] with some vision and commitment”. Steve Maine is the guy who has piled money into building the national network from the Torch seedling he inherited.

”The future is value added services. Services like KIT, like Video on Demand”

The future usually belongs to those with the biggest guns in my experience. KC has built up a nice network supplying the business end of the national market, the Q2 report says that exposure to the wholesale trunk market is minimal, so the competitiveness of the backbone market is not important. Hopefully, something we can agree on!

Thanks for the reply, it got the old grey matter stirred.

rik