John Linton
.......and by that I don't mean that Naomi Campbell is short of lucrative engagements in 2008.
There were two short articles in this morning's 'electonic press' that were relevant to the changes that will inevitably occur in the ADSL business this year and also relate to some actions that Exetel has been taking for over two years and that we expect to complete, all going to plan, by early 2009. The articles separately commented on AAPT's ongoing downsizing of its 'call centres':
"AAPT has slashed more than 600 jobs - more than a quarter of its workforce - at three call centres in Victoria and Queensland, as it centralised its call centre operations in the inner-Sydney suburb of Glebe."
http://business.smh.com.au/no-relief-in-sight-for-dangling-aapt-callers/20080118-1mso.html
and the demise of EMI and the parallels to the communications indutries:
""In communications, voice has been the cash-cow product, but prices have collapsed - just as in the music industry with CDs. On technology, just as vinyl was replaced by the CD and now MP3 files, so in communications traditional PSTN has been superseded (although not replaced) by GSM and now VOIP. Turning to delivery channels, just as retailers no longer stock CDs (you buy them on-line today, if at all) communications channels to market are changing too (telecoms services are now bought in the high street), with the internet growing in importance too. And finally, business models are changing. Per unit (minutes or megabytes) billing is a thing of the past."
http://www.itwire.com/content/view/16172/127/
There seems to me to be little doubt that most of today's ADSL suppliers have business models that are exact replicas of BigPond's original model when they introduced ADSL to Australian users when it was an iffy and complex service. They have large call centres (far too large for their respective customer bases) and hierachical management structures and still spend more money on advertising and marketing thn can ever be recovered in profits from the customers attracted by that marketing.
For the non-BigPond ADSL providers they are still, almost overwhelmingly it seems to me, living in the past in that their call centre/management/advertising structures were built based on the fact that margins on ADSL and its associated services were 'fat' enough to cover those costs due to BigPond's ridiculously high priced ADSL price structures - the 'price umbrella' they 'sheltered' under.
Today's realities are:
1) BigPond "selectively" sells broadband services at prices BELOW those offered by the majority of 'independent' ISPs.
2) ADSL modems are plug in and work and don't need complex installation procedures.
3) Something like 35% of all 'new' users to an ISP have previously had broadband previously and are familiar with how it's set up and how to do minor trouble shooting.
4) 70% of 'adult' broadband buyers rely on a friend, relative or colleague's recommendation to select an ISP and almost all of those rely on the same friend/relative/colleague to help them with any problem with setting up and trouble shooting their service.
For an ISP selling broadband and related services to grow, or even remain where it is, in 2008 is going to mean that it will, almost certainly, have to contend with lower ARPU for broadband resulting, for most, in lower nett profit per user and any thought of bundling lucrative telephone line rental and associated call charges will only lead to tears before bed time (or ceasing to exist by the end of the calendar year).
THe brutal reality of 2008 is that no 'independent' ISP is going to be able to offer either a 'real' lower price for 'broadband services' than BigPond (even if the 'real' price in fact continues to turn out to be an 'apparent' price) and that no 'independent' ISP is going to be able to outspend BigPond on advertising or activation give aways.
It seems to me that to succeed in 2008 an 'independent' ISP is going to have to offer a better 'product' than BigPond and justify its 'higher' cost on the additional benefits rather than relying on BigPond (as in the past) being so expensive that no-one with the slightest knowledge of what's on offer would ever consider buying from them.
This will have to be done with, for most 'independent' ISPs, lower prices than in the past and, almost certainly for those few ISPs that actually make them, much lower profit per user.
I think, as with AAPT over the past 18 months or so, there will be a lot of current ISP 'middle management' looking for new career directions in 2008 and, probably, a fair number of 'senior' ISP management too - along with around 60% of the personnel currently employed in ISP Australian call centres.
....but that could never happen.......could it?