Monday, September 20. 2010Time Has Run Out For 'Thinking' About Wireless Broadband PricingJohn Linton I 'played around' with the basic figures that relate to the supply of wireless broadband services by Exetel using the revised 'offer' from our current suppler and an alternative offer from another provider. I didn't make any headway in finding a way of offering anything that would have any appeal to the residential market places that we currently sell to and I, yet again, wonder how anyone achieves break even let alone making any profit from offering wireless broadband services in Australia. In the event that they do they must buy at a far lower cost than we have been able to achieve or they have found some 'magic' formula which completely escapes me after juggling with buy pricing and two years of actual customer usage 'patterns'. I have come to two conclusions: 1) If you make the assumption that it MUST be possible not to lose money at the current price points offered by both the carriers and the wholesale customers of the carriers who resell their product at Layer 2 (in other words don't simply get a handsome commission from reselling the carrier's retail products) then the task is easy. All I have to do is make the pricing the same and assume that the various buyers will use less than half of the monthly allowance and.....you don't make much money but you don't lose any.You also have no basis for being in the market because you aren't offering anything that isn't already available from other providers. 2) If you under provision the actual bandwidth you buy to connect your 'customers' to the supplier network you can make a little bit of money and use the general belief that all mobile broadband carrier's networks are unpredictably congested from time to time to explain away poor performance you can make a lot of money.....(relative to option 1). To do this you have to have the sort of personal standards that are the equivalent of offering a new car with a four cylinder engine while stating that it has the power of a turbo V6. What this means is that 1)'s a gamble and 2)'s a sure thing. Doing both 1) and 2) would be be much less of a gamble and pretty much a sure thing. But I have a great deal of trouble with 2). Even if you did both 1) and 2) and sold at the same price as the multiplicity of other sellers in the market places - what have you achieved? A 'me too' scenario - and what's the point of adding no value to a market place? None whatsoever. You also have to lie to every single customer who buys the service. We currently make a derisory amount of profit from wireless broadband which falls each month over the past few months and will make an actual loss either next month or the month after so we have to do something quite significantly different to what we do now....and we've run out of time to 'think' about what we should do. The issues that to me are irresoluble are the fact that the cost of providing the service is around $A4.00 for a monthly 'port' charge and around $A16.50 per gb downloaded. With a marketplace that seems to think that any port charge is unthinkable and anything over $A10.00 is "daylight robbery" it makes it very difficult to offer an "attractive" residential service....without ripping the residential customer off in the ways that have been suggested to me. I am no "saint" - but I can't deliver a service based on lies. I have always seen absolutely no point in 'copying' but I think the time has passed for people like me to make decisions in the Australian communications business - if in fact there ever was a time. Maybe its only the current turmoil that is making everything so difficult but even if that is the case that turmoil will continue for the foreseeable future. So we will have one final meeting this morning and make the decisions required to be able to continue to provide viable wireless broadband offerings without losing money. Business life....not really much of a life at all at the moment....then, as Steve sometimes reminds me.....it never was. Copyright © Exetel Pty Ltd 2010 Trackbacks
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I hope you decide to start marketing your wireless service as a premium, contention free, VOIP optimised, superior (or whatever other appropriate adjective your sales guys like) rather than degrading the service.
If you're going to "me too", then I may as well get the iPhone4 on contract with Optus (never underestimate cash flow or the comfort of having a perceived maximum bill cost as selection criteria) or switch to a cheaper mobile service with TPG. I also value single bills and as my wife's mobile is already on TPG (very low voice usage, SMS usage, no data) if I switch my mobile I may take my ADSL2 as well. While I'm chatting, it's a real shame you needed to reintroduce the admin fee (presumably to support your new bundling discounts). Every time you increase costs you prompt your customers to re-evaluate your product against the rest of the market. With the Telstra welcome back plans and some of TPGs offers you're not looking as competitive as you once were. Simon @ Internode may have made a (whining) series of posts about why he can't drop prices to match Telstra, but at least he didn't raise prices while asking people to consider sticking with Internode. Comments (3)
I think you're almost certainly correct on every point.
But a company that has gone out of business is of no use to anyone - nd it we didn't raise prices(from there incredibly low points) then that's where we'd be. I occasionally make the point that Exetel makes NO money providing ADSL services and we have to sell other services and markets to provide residential customers with ADSL services. I have never "whined" to Exetel's customers about anything - I try to tell it as it is. When a customer talks about "punishing me/Exetel" by taking their business elsewhere they don't realise that they only make a positive contribution - we stop subsidising their service. If there are other better/lower cost providers than Exetel is then I don't expect Exetel will have any residential customers over some period of time - we wouldn't expect anyone to pay more for less just because Exetel is in the market. Perhaps Internode woud be a better provider for your needs - if it is then I wouldn't expect you, or anyone else, to stay with Exetel. Comment (1)
I didn't suggest you or Exetel have "whined", the "whining" I was referring to was Simon's lengthy posts on Whirlpool about the Telstra Wholesale / Retail costs (which you also referenced in your blog).
I understand your position although I think encouraging your customers to buy additional products or services (of the non loss making variety) would be better than them making a "positive contribution" by leaving. Every residential user you lose is someone else that can't say how good you are at work. Internode is not a better provider for me (they are too expensive and count uploads) so I have never used their service at home. TPG is the most economical provider for me at my usage, but I had very bad experience with them years ago (excessive dropouts, Completely inept call centre when you finally got through) so I don't really want to go there even though my mates currently using their service are happy with it. Changing providers is a hassle (and, if the exchange is near capacity or the number of decent working copper lines in the area is almost at capacity, a risk). It's not something I personally would ever consider over $10 / month or less. I'm just saying when the price goes up customers go looking again. Exetel is currently my preferred provider (thus I'm still here) due to the call centre, website, automated messaging, service quality and the fact I know the product / services are good first hand. Keep up the good work in pushing into the corporate / small business sector. I nearly made you a virtual PABX sale to a small business but in the end they went with Vonage due to the much smaller upfront outlay. Cash flow, and lower cost to change if the VOIP solution didn't work were the stated reasons for the decision. Comments (3)
Firstly, thanks for the more specific information in this blog. You've previously hinted at (2) - under provisioning - without indicating what particular parameter was being under provisioned.
I'm not clear on who you see as your market. Who are you targeting? I fully understand wanting to provide a fully provisioned wireless service without the risk of underestimating average use. I applaud you wanting to provide a quality service. But it seems to me that you seem to want to do that for more personal or personality based reasons that are not market driven. The question is which customers would care about your choices and why? The reality is you need to charge a premium to provide the service as you currently do. Consumers need a reason for that - such as low latency in busy periods or the ability to run VOIP reliably on wireless. None of that is evident in the product you currently offer and it is indistinguishable from other companies' offerings. Price then becomes the only difference. It seems to me the choice is to differentiate your product, match competitors' lower standards or pull out of that part of the market. Comments (3)
We will re-write the wireless pricing page to make those points (our problem to date has been that we NEVER thought that other companies would actually be that dishonest).
Our decision, made only an hour ago, was to not offer a degraded service and pretend it was what a person would believe it should be. I didn't realise this industry had sunk to the levels it apparently has. Comments (8)
said it before'... all these companies (/cartel) are worth is 39cents/day /or approx.0.5gb/mo for MOIP
( though still worth persevering in my uninformed view) Comment (1)
It's interesting that the cost of bandwidth from Optus's network to yours is significant. I would have assumed (incorrectly) that the capital cost of the cell towers and the fact that spectrum is limited would totally dominate the costs of providing 3G data services.
As a relatively low usage voice/data customer, I'm happy with Exetel's current offerings. The only thing you could do to give me more value would be to enable iPhone tethering on Optus -- as the iPhone appears to ask some Optus system whether it should allow tethering I'm sure there is something Optus could do to whitelist SIMs they have allocated to your customers. Whether it's practical to actually get Optus to do that is of course a different question Comment (1)
The cost of the Layer 2 link between Optus' network and our POIs is the cost of the towers/backhauls/etc and it is very, very expensive per mbps.
Please send the tethering request to: raymondl@exetel.com.au Comments (8)
Hi John,
Just out of interest, does that mean you typically pay a "port" cost per month for every wireless subscriber and a link cost that is based on bandwidth provisioned (mbps). Is there also a data cost or is the costing simply on provisioned bandwidth irrespective of whether it is 100% or 0% utilised? Comments (3)
I have no idea what different 'models' OW may have for different customers.
I only referenced our cost types. I have no idea what/how much any other wholesale customer pays. Comments (8)
interested to know if they can allow tethering also, this has been a stumbling block for a while now
Comments (2)
question answered (very quickly), tethering still not possible which was the answer I was expecting I guess, was hoping something may have changed but I guess it's hard to get around the politics of it all unfortunately
Comments (2)
You should be to enable the tethering option via iPhone configuration profiles. If you work for a company and are connected to Exchange you can ask your admins to setup a config and push it out.
If not, browsing to this site (http://www.unlockit.co.nz/) from your iphone will generate a config file which you can accept / apply to enable tethering. Note: This is not "jailbreaking", "cracking" etc, just changing some config settings that are normally not visible to the end user. Comments (3)
Optus now agree with you.
We will provide tethering in the not too distant future. Comments (8)
hi john,
the difference between 7 years ago for exetel, was you would do anything to gain market share, because you had less to lose. You sold a service that residential customers felt was a bargain and at a service quality level that was equivent to your competitors. your caught in two minds now - do you want residential customers or business customers - you cant please both under your current company structure. Ask yourself what business plan you want to follow - and -- "just do it ". cheers bill Comment (1)
Bill, I think this is a bit harsh and from my reading it is incorrect. Exetel didn't set out to "gain market share" but rather to provide a low cost broadband (ADSL mostly) option to consumers. Any market share gained was because of the position they took in the market.
Your also seem to assumes that the position Exetel took in the market 7 years ago still exists. I don't think it does. The place Exetel sat in was the low cost ADSL market. Most other players were charging a bit less than Telstra. While Telstra didn't respond, a place remained for Exetel that sat below Teltra and most other player's premiums. That place in the market has gone as the owners of infrastructure price squeeze. I doubt they are caught in two minds. They have a legacy and are planning a way forward without completely dumping that legacy. I applaud them for that. Their brand is far better off if they don't dump that legacy. Comments (3)
Bill,
You must think I am a complete fool.....and of course you may well be correct. We have a very, very detailed business plan and we have been putting great efforts into building our corporate revenues for almost two years (we have had a growing business customer base for only two months less than we have had a residential revenue base). I am not "caught in two minds" at all. We are growing our business customer base while trying to retain our residential customer base from the offers of Telstra with which we cannot compete. Nothing has changed very much since January 2004....except that Telstra can now offer services, in some ways, at better pricing than we can. Comments (8)
John, A little while ago you won an award from a PC magazine for your ADSL plans (and your more colourful blog entries are often reported).
Perhaps you could arrange some of these people to test your wireless service against other optus providers and get some publicity that way given you have only ever had positive results from your own tests. Alternatively, you could just try and get included in the next wireless broadband roundup. Though that may be a tough ask as it seems there are many Optus providers. Comment (1)
We will try and do what ever is possible to make the difference, should there be one, more obvious to the sort of buyers who regard that as being important.
We will certainly try and make the difference known as widely as possible. Comments (8)
I think you already have the best wireless plan in Australia that just needs to be promoted.
Your HSPA WI E plan is the best deal out there for iPad and laptop owners who have small data needs away from home (which would be most of them). I have recommended it to quite a few people who had been looking for a data plan but did not want to pay $20+ every month on an expiring data plan. The problem now is that, from your figures, it appears you may be losing money with many of those people if they only use a few hundred MB a month. Comment (1)
Much to my surprise, I have found that HSPA has improved significantly. This may, in part, be due to the modem in use. My new Samsung Galaxy S mobile regularly does far better than my older Nokia or my old Huawei E169 modem. Latency is still highish and speeds whilst often very good, are still sometimes (but rarely) low now. Upload speeds are very much higher consistently too.
I'm sure that many customers whom wanted higher gigabyte plans might have been less interested if their experiences mirrored my own; those same users might really want an ADSL1 replacement now in wireless and there needs to be suitable options for them, including multi-gigabyte plans. Comment (1)
John
I have been a supporter of your mobile broadband services ever since you launched them and as I recall you were one of the first to do so. I can't say I have an answer to your pricing predicament. The discounting that is going on will only continue from what I can see. At some stage I expect that USB sticks will be offered for free. They have already gone from $99 to under $50 in 12 months. And pricing of 1GB has also come down significantly. Personally I think the promotion of sims with data for smart phones has enormous potential, particularly for no contract plans (TPG are doing big things here). Keep working through it, I am sure you will make the right decision for your business. Comment (1)
The cost of wireless modems has now dropped to less than $US10.00 from the manufacturers.
Comments (8)
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