Monday, November 15. 2010Is There A Future For 'Naked' ADSL?John Linton I'm a bit bleary this morning (strangely hot and airless night - plus premier league games of more then usual interest making sleep short and difficult) but there is quite a bit to do this week when I checked my diary a few minutes ago. One of the things we need to make a decision on is what we do with the 'naked' ADSL2 plans. Our problem with ADSL2 is that we are charged very, very little less for a 'naked' connection as we are for a connection that includes a telephone line. Given the various slight inconveniences with activating and 'transferring' 'naked' ADSL services it is difficult to 'position' the service against it's 'inc telephone line' counterpart. In this era of having to give away ADSL services at less than their basic cost (let alone their supported cost) wire line calls provide the only profit and in fact, at the sorts of prices that Exetel have to offer today, represent the only way of providing ADSL services at break even. It's hard to think of a good reason to actually offer 'naked' ADSL under the current circumstances that we buy the base service for and we have been thinking of discontinuing the 'naked' version of the Optus service completely but haven't done so because we think it would send the 'wrong signals' to our, quite large, number of customers who use the 'naked' version of Optus ADSL2. However, at a price difference of $2.00 at our buy price it makes little sense in these difficult days to retain a third 'version' of ADSL2. The concept of an end user choosing a 'naked' service so they 'save' the cost of the telephone wire line and use VoIP is not a practical concept for the supplier, or least not for Exetel. The profit we make from the wire line telephony calls (even at the rock bottom prices we charge for calls) provides all the profit we have ever made on ADSL2 services and has been the only reason that has allowed us to continually offer the lowest priced ADSL services of any provider for much of our existence. So, some time this week, we will need to make a decision on whether or not we continue to offer 'naked' services. Which is an odd sort of situation when you consider all that has happened over the past 8 or so years in the gradual acceptance of VoIP services and the extraordinary growth of people using mobile services in their homes instead of wire line telephony. Ironic really that wire line telephony use by the minority is the only reason that low cost ADSL can be provided to the majority. But, unless the figures I have been provided with over the years are completely wrong the simple fact is that the profits on delivering wire line services (even at Exetel's lowest on the market charges) have been the only reason that Exetel has been able to provide ADSL services at all. So there is this quandary. Exetel makes no profit at all on providing the 'naked' services we currently offer. Equally, we make no money on the inc telephony wire line plans but we make up for that by the profits made on the wire line telephone calls. What would you do? Copyright © Exetel Pty Ltd 2010 Trackbacks
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You could always do nothing.
Just leave the pricing making inc phone plans more attractive, with naked plans less attractive (representing your equivalent buy prices). Then offer a viable migration path from naked to inc phone for your existing customers. Then the herd will probably sort themselves out in due course. The question is though, will a naked customer currently happily using cheap VOIP be viable on an inc phone plan when not using the line for outgoing calls? Comment (1)
When I had an option I used a naked service as it was $10 cheaper at the time, without a price advantage I would take a service that included a landline as it would provide a backup solution but I would still be using VoIP for my calls, I would guess that most that use naked services also use VoIP for at least some of their calls and not just mobile phones
If an inc service was a bit dearer but included a number of VoIP calls each month I would likely be inclined to take that service as I'd be spending money on VoIP calls anyway and have the added backup of a landline should the need arise Comment (1)
You could always try a left-field approach like, given the tiny $2 cost difference, offering naked and wireline plans at the same cost to the user. This way you keep faith with the current naked plan users, but make it clear to new and current users that naked plans make no sense since you get a 'free' wireline...(there's that word again)...
Comments (3)
We have no plans to not offer 'naked' plans.
We are in the process of seeing how we could increase their 'value'. Comments (5)
Understood, of course - but what happens if you can't do this to as significant a degree as you would wish?
Comments (3)
How about this, rename Naked to Budget like Telstra Homeline Budget, include a landline with more expensive calls and hope people use it.
Also have a small data allowance and no offpeak data. A pure budget product. Comment (1)
At the heart of this issue is whether Exetel can provide "Naked" plans that are of better value to someone not wanting PSTN than the "with telephone" plans.
There is an inherent problem with "Naked". These plans attract people who at the heart of it are after a simple IP connection. "Value" for them is simply how much their connection and data costs. But from what you've said, you make no money at current prices. Just taking a quick look at the Exetel website, on a new connection, there is no cost saving for "Naked" and "Naked" plans actually are worse value for money over the "With Telephone" plans due to lower included data. It seems a person wanting a new "Naked" connection would be better off with the "With Telephone" plan and simply not connecting a telephone. Perhaps I've overlooked something, but that seems to be a problem. What would I do? I really don't have enough information. If your supplier's pricing forces the above situation on you, you may as well drop "Naked". But in my ignorance I'll give some suggestions. I don't think the problem is providing "value" to the "naked" plans. There is no scope to do that. The problem is the pricing of the "with telephone" plans. If the wire line calls are the only profitable bit, then they are in effect subsidising other areas of your business. So get rid of that subsidy. Lower call costs, up the ADSL monthly base charge. Then it doesn't matter whether someone on the "with telephone" plan makes calls or not. Otherwise the you could differentiate the "with phone" plans by having a minimum call component - say $5. So all the plans would go up $5 per month with $5 included calls. Then the "naked" is differentiated from the "with telephone" by that $5. I would also then lower the call costs. Lastly, I would sell the benefits of PSTN over VOIP at least as backup as value to the "with telephone" plans - and to counteract the issues with the VOIP based TPG "ADSL2+ with Home Phone Bundles". Comment (1)
I largely agree with Paul T's analysis While there is cross-subsidisation between products there is of course the risk of loss making customers similar to that you recently addressed with very heavy downloaders.
However, I understand that Exetel like to keep the ADSL plan part of the fee low for marketing purposes (to the extent of offering "FREE ADSL" bundles recently). From a marketing perspective bundling VOIP with naked (especially if you were to offer unlimited local and national calls as part of the bundle) makes sense and may be attractive to users. Those that don't use voip probably have large mobile plans (or just don't call people). In effect, you already have Naked ADSL plus mobile bundles but maybe you could strengthen the appearance of them as bundles. Otherwise, maybe just leave as is or stop selling naked to new users. Not much point working hard to promote a product that doesn't make you any money. For the record, I'm a current Exetel Naked ADSL user who buys voip and mobile services from other companies. As I spend little on voip I personally would be unlikely to change that over but had there been an attractive offer at the time I would have considered it. I have some questions in one of the forums about costs to change from naked to clothed given recent changes to pricing differentials. Comment (1)
Is there any possibility of offering a ULL-based DSL service using AAPT ports?
I know some people would favour a service that is provided via an AAPT port over one provided via an Optus port (for various reasons, of debatable factuality) and would prefer a "naked" service. I have had a "naked" service for 3 years now, and I actually wouldn't make use of a conventional wireline service as I've become accustomed to not having one. I fall into the group who is well serviced by their mobile phone for all voice needs, which results in me looking at "naked" offers whenever a comparison is done. For instance, no Telstra or AAPT offering would attract my interest due to their insistence of maintaining a PSTN voice service. I admit that my mindset is possibly not typical, but perhaps my explanation will be of some use in the thought process you're currently undertaking with regard to your "naked" ADSL2+ considerations. Comments (3)
Chris,
I don't think there is any chance of AAPT providing a ULL based service but I will enquire. Comments (5)
The current Naked DSL offers are not better value for me than the NF/23NOTEL that I'm currently paying $63 / month for. I'd rather have 70Gb Peak / 60Gb offpeak on a 12 hour / 12 hour split than only 60Gb spread over 18 hours (with a huge offpeak I wouldn't use). NF/23NOTEL suits my data usage much patterns much better.
Do other competitors offer better value? It's not important I'm okay with what I'm paying now and value Exetel's service and support. Anyone who churns away to TPG or Telstra will likely begin to question their decision the very first call they make to either's support or billing department. They'll probably have anywhere from 8 to 30 minutes on (my last two calls for friends to Telstra) to ponder that move. Many, many years ago I had a two hour call to Telstra, 90 minutes of which was on hold... And No, I obviously don't give up easily. Comment (1)
As a naked user of your services, I've put a request in to changed to a bundled package. This will cost be $98, but provide a $10 per month saving.
I choose a naked service, because at the time it was cheaper than the bundled. I'm an occasional VOIP user but mainly use a mobile for phone calls (due to cap plan allowance and subsidised handset). However, having a PTSN line is attractive as it gives a backup to the VOIP service (if the phone is needed in an emergancy). For me I can see no attraction to having a naked plan if it does not offer a significant discount to a bundled product. Naked plans always cost more to set up and move do to activation/deactivation of phone lines. I see no point in the exetel continuing to offer naked with the current pricing differentiation. However, as always my concern is if many naked users swap to the bundled price, is this going to change your price structure. Effectively you'll have a similar amount of phone calls being made, but spread of more connections. Surely, this will reduce the income per connection and hence change the break even point and result in price changes. But in a way, this would be a fairly standard overshoot pricing changes that I've seen with exetel over the 12 months I've been with them. While I do recommend the service to all (I've found my service to be extremely reliable and stable), I always to with the caveat of people needing to put up this. Comments (2)
I will also had to the above. I was recently recommended exetel to my brother (with the usual caveat), as he was currently paying for a landline just so he could send and receive faxes. I told him my current provider could do that with out a landline and gave him the details.
The week after that, I had to send him an email to inform him that naked was dead. Exetel was know offering a cheaper price to keep the landline, which would give him more flexibility (I've heard some not so good reviews of your email to fax service, so I would have had to test this for him first). Comments (2)
Some 600,000+ faxes are sent using our fax service - a figure that increases each month.
Comments (5)
Hmmm
This post prompted me to check the OTL plan prices (I had been distracted by the free bundles lately and neglected the changes to these plans). I am currently on ONA, and notice that OTL-A is same monthly cost with more peak allowance (I'm not a big downloader by any stretch - I am normally within 5 gb per month, but kids are growing up and usage changes are inevitable...) The family is also a low user of "landline" calls - mainly the spouse during the day. I tend to use my (non exetel) mobile. A switch to OTL-A is tempting, but as mentioned above, I would unlikely switch from using VoIP calls to wireline calls, unless internet was down or some call quality issue with VoIP. So I wonder, would I become a "burden" to the business if I change to a product that costs $2/month more for Exetel to provide, yet the revenue does not change (I would continue to use Exetel VoIP and primary number - I would not "Port" by VoIP number to PSTN...)? Comment (1)
No price we offer to any user constitutes them becoming a 'burden'.
Sometime customers exceed all expectations of use and lose us money - that is a tiny percentage of users. Comments (5)
Im currently on exetel naked, used to be on the $60 plan, but decided that if i moved to the $40 plan i would be paying the same ammount or less as long as i didnt use more than 50gb on peak.
Im 21 and have my own place, i am on a virgin $59 mobile plan of which all my calls and sms are made, do i do not need a home number. Spending $30 on a line that i do not use seems stupid and thus i went naked because all i needed was internet. I have seen the new plan changes and wondered why i was still stuck with 10gb peak when the new ones have much higher, its interesting they are so much more and you dont make any profit. How come it costs so much more? Comment (1)
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