Sunday, December 13. 2009TPG Must Be The Poster 'Putter Upper's' Santa Claus.....John Linton ....over the past three months they have plastered the back of every bus and goodness knows how many billboards around Sydney with their constantly changing ADSL2 offers: September - 80 gb (40 + 40) November - 100gb (50 + 50) and now less than a month later I guess they are going to have to change them all again to 120 gb (60 +60)..... and I assume the same happens in the other cities around Australia. It could show that TPG hasn't got a clue as to what is happening in the ADSL marketplace (no-one would believe that a carefully planned quarter would result in three such changes, and such large changes, in three months). But it would be unreasonable to single out TPG as making ad hoc pricing decisions 'on the run'. As anyone with any knowledge of the ADSL marketplace could see as long ago as February this year (and still can see) the 'saturation' of the ADSL marketplace itself, the inroads at the lower end of wireless broadband, the 'unlimited' initiatives of AAPT and now the change in pricing by Telstra have all contributed to a plan re-positioning frenzy caused by only one thing - sales have either stagnated or fallen and look like falling further. I claim no particular knowledge of these marketplaces - the apochryphal "blind Freddy" could see what was happening for the last eighteen months and particularly the last 12 months. While it's true we do keep a, literally, minute by minute, watch on what happens in every part of our business I have little doubt that other companies use more expensive methods than we do to do similar analyses of what is changing in their results versus their business plans. However - perhaps they don't. I suppose it's possible that several of the ISPs that have made a series of 'knee jerk' changes to their pricing and plan structures over the past six months have been so used to the ADSL market increasing month on month since 2001 that they have lost sight of the fact that EVERY product reaches a market saturation point and every MARKET reaches a point where there are too many providers of products that are too similar. A fact that every offeror of ADSL services is going to have to deal with is that it may well be the time in the life cycle of ADSL when it has reached its zenith and it will never get any bigger than it is today. All of the larger ISPs used to provide dial up internet services and they would be able to track, from their own direct experience, just how quickly a service that showed no signs of anything but steep, continuing growth suddenly stopped growing and then plunged to effectively zero in a very short space of time. While ADSL hasn't reached it 'plunge point' right now, it may well have reached its zenith and that means that for any ISP to retain any semblance of growth that growth has to come at the expense of a competitor and, almost certainly, at the expense of their own 'bottom line'. As I said way back in February when I first wrote about this - good news for the customer - not so good news for those ISPs relying on significant growth. TPG's latest move which represents, at least in marketing terms, offering 50% more than it did 2 months ago (via two changes of offer in that time) for the same end user price tells the vaguely aware observer that: 1)TPG's costs didn't suddenly go down, three times, and being the noted philanthropists they are they decided to pass on those benefits to their customers 2) TPG would only have 'reduced' its prices because it had to - not because it wanted to. 3) TPG's cost structures can absorb some portion of the increased offering but not entirely and not if they are 'forced' to continue to match the ongoing reduction in prices of their main competitors. Of course, the same holds true for all of TPG's competitors. I have been carefully watching Exetel's daily sales results over the past 6 weeks to see what trends I can see in our own figures and I see nothing that would have caused us to increase our offerings by 50% to our customers - they were/are sufficient to run at a lower churn away rate than for October and have shown an almost 20% increase over November 2008 with December maintaining that growth percentage so far. So clearly Telstra and TPG have both seen things that have caused them to make major changes to their pricing per gb supplied 'models' and in TPG's case they have made three changes in a short space of time to maintain the amount of growth superiority they have enjoyed over their competitors. I wonder if they will make the move to 24 x 7 unlimited access prior to the completion of their Pipe acquisition? Something the 'NBN2' "research (and I use that word lightly) has 'thrown up' is going to be a barrier to doing that though. Although TPG has quite rightly established $A50.00 a month as a good price point for some market sectors it is still $A10.00 to $A15.00 too high for the vast majority of the market and an ongoing strategy based around that price point may be problematic. I wouldn't know but my view is that below $A40.00 is likely to be a much safer price point in 2010 than $A50.00 is going to be. I don't think it's going to pleasant to be an ISP that is locked into delivering high ADSL customer growth in 2010. Trackbacks
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Don't forget TPG has an aggressive transparent proxy strategy, so a lot of the data a customer requests never really hits the net. I wonder how that factors into their ability to offer ludicrously high download limits.
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You are almost certainly correct - but that has been the case for a very long time.
Nothing has suddenly changed (and certainly not three times in a few months) to make TPG suddenly more cost effective. Even with Pipe fibre the cost of DELIVERING that data to end users isn't zero and while you may have an overabundance rifgt now to the point you can offer more at no new cost right now there is a limit to doing that. Interesting days. Comments (5)
TPG's proxy farm was retired a while ago. They're probably still caching a lot of things, but it's not as detectable.
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They seem to have got rid of the HTTP proxys about a year ago - at least I haven't seen any evidence to suggest that
there is one at the moment. The other curious thing is that since changing my plan a few months ago my quota is not being properly metered - Almost none of it shows up. I wonder if they are just testing the waters? Comment (1)
As a very small residential consumer of ADSL1 services, I get the "gut feel" that it will be the extras which will provide the long term economic benefits for ISPs.
Something like petrol stations, where there is only a little profit made on fuel and the "real" profit is made on the small goods (chocolates, ice, drinks, chips, groceries, parts, fast food, etc). Regards, Harry. Comment (1)
Harry,
You are quite right and that has always been the case in terms of the 'bundled' telephone line and especially telephone call charges. Latterly, and TPG is an example, bundling mobile telephone services has been a profit increaser. Doubtless you will see more of that but...... .....it is a tough way to make a business work. Comments (5)
Personally I think the quota change is not news, the big news story is the change in TPG shaping speeds.
http://www.tpg.com.au/products_services/adsl2plus_pricing.php The entry level plans ($29-$39) are shaped to 128/128kbps The mid level plans ($49-$69) are shaped to 512/512kbps The heavy plans ($89-$129) are shaped to an amazing 1Mbps symmetrical. For some people, especially those with lower sync speeds, such high shaping levels may actually not be that far from their unshaped speeds. This turns the product into a "virtually" unlimited plan. In my opinion this is a test of what the network impact would be of truly unlimited and we will see unlimited plans from TPG in the next 6 months. Comment (1)
TPG are also about to launch the home phone for $9.99 per month, when bundling to a adsl2+ plan.
The monthly figures of subscriber growth is currently close to 10,000 per month. I guess TPG are trying to build as many customers before NBN to have scale in the negiotations. Comment (1)
Undoubtedly true.
Whether the concept of using the old Comindico network collection points to deliver cut price Telstra style telephony at $A10.00 a month can be made a reality remains to be seen. Comindico couldn't do that, Soul couldn't do that so perhaps it isn't as easy as it was originally justified in that lost investment....only Cisco would know? Comments (5)
Whilst your comments about TPG's marketing and internal costs are undoubtably true, from a consumer's point of view it's the best thing to happen since sliced bread.
We're finally getting some stiff competition that's delivering good value to the consumer - something to celebrate I would think, especially in this festive season! Comment (1)
Not being a PTB victim my points were really aimed at pointing out that the various protagonists had/were running out of room to differentiate their offerings and were building a 'house of cards' predicated on always being able to get $A50 per customer minimum to support their business plans.
Haven't you notiiced that the prices from TPG et alia NEVER reduce? Comments (5)
If contemplating a Five Hundred (500) gbytes residential service in 2008 doesn't make apparent their go-to-market strategy well..where else could they be headed but unlimited gigabytes in the future. . /hehehe
http://forums.whirlpool.net.au/forum/?action=threads_search&q=500gb&f= Thank God we have an innovator, besides good Exetel (and very recently AAPt joins the fray-but not without significant gotcha's in its ToS; contract length; bundling combined with the high use plans' traffic management..) who IS NOT relaxed, cosy in accepting the status quo 'data caps' -- i.e. this way of Metooism thinking that permeates down from Telstra/Optus: yeah, the rabbits will start on $49.95 get offered 005gb maybe some offpeak value, then a degraded service and pay*pay*pay to get un-blocked. To me, that hardly seems creative^ or helpful to our advancement. *Now*, what TPG have realised in moving on with the 500-gig cap (a plan envisaged circa 2008) is just how infinitely more sensible and popular it will be to structure it in the form of shaping, making the iiNet/internode/Optusnet/BigPond' SHAPE SPEED look the sub-broadband me-tooist cheesy-omeletta crap they all seem bent to deliver. TPG's shaping to 1'Mbps' and 512Kbps,commonly, will allow those more settled 'customer bases' a feeling of 'being ripped off' - as its advertisement points out on the radio - which should shake things up in OZ. So The big news is not so much TPG add 10GB to a $50 plan repeatedly (although it is good to see) it is that Soon customers may expect to be able to Double or Quadruple the value in their plans by use of a 'shaped connection' loophole which continusly supplies broadband - and this goes against the norm of the industry. Opportunity well spotted by TPG. It is pure genius TPG's gift to savvy BB consumers that it can supply up to 500 gb's for them nowadays by skillfully manipulating bandwidth in ways that its product appear unlimited. take their $A89 plan with 100 GB to use 'anytime' (if you can get it at your exchange), for example: The first 100 GB could downloaded in a burst of 10 Mbps - meaning in as little as 24 hours; so the next '300GB@1Mbps' could then round out the month through a plethora of applications not otherwise attainable at '64Kbps' - It fetches 400 GB+ because the plan 'allowed multi-speeds' and yet remained usable throughout the month. - Given ADSL2 can upload 100 GB, this plan may be deemed to be a 500 GB per month value plan. - $50 / 500 GB is just 10cents to the consumer ~$20 per Mbps to an ISP--which is where pricing should be headed. 'David Teoh says he won't stuff it up.' In my view, the ISPs can either draw from TPG's strength and brilliance (and Exetel's for ADSL1 best practice) as we see rubbing off on some players lately - or they fall into the abyss of the clones-would-be-Telstra on those fearful paths they tread. Comment (1)
Now that you have bumped up your $50 plans to match TPG it has made the NF/24 plans more expensive than the NF/23 plans plus excess. For the $30 price difference you can get 20GB @ $1.50/GB, meaning 80GB total compared to NF/24's 75GB.
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