Sunday, October 25. 2009HSPA Pricing Continues To Defy Logic....John Linton ..........at least as demonstrated by Optus latest "sweeping changes". I re-read the various press releases about the latest Optus HSPA pricing perambulations for the third time earlier this morning, a summary of which can be found here: http://apcmag.com/optus-pulls-a-swifty-with-new-mobile-broadband-plans.htm Despite the pointless and misleading headline (there is no attempt to deceive the prospective buyer) the facts appear to be a '12 month' promotion rather that an 'up front' heavy discount of modem hardware and 'free' months - so nothing different for a carrier that follows Telstra in trying to sell at high prices with 'sweeteners' to ameliorate the high costs. In this instance there are no high costs because, despite the 'bleating' in this and other articles there is no 'deception' the prices are fixed for twelve months and after that (November 2010) who knows what will happen in terms of what will be available to HSPA users and who cares about something so far in the future? It has absolutely no relevance. What is important, of course, is the impact on today's HSPA buyers and current users and what Optus has really done and, if you're into that sort of analysis - why are they pricing as they now are. The first thing is that the modems have 'fallen' in terms of the retail prices they are 'apparently' offered at. They 'appear' lower in cost but really they are at an even higher profit than they were before the new plans were announced. Ex factory price of the E160 is less than $US15.00 and its landed cost in Optus warehouse would barely be $A20.00 (if that) as an example. So much of the 'new lower' pricing is being recovered 'up front'. The monthly plan prices themselves are a little, not a lot, more attractive than Optus Retail's previous prices but only now match the prices from Vodafone and '3' and aren't any sort of major 'break through' in either pricing or delivery terms. What they are is probably only relevant to Exetel and the one or two other Optus Wholesale customers who buy Layer 2 HSPA services at whatever prices have been negotiated and then 'package' the end user plans based on those wholesale prices. We have always struggled to offer a sensibly priced product in this market and Optus Retail's latest end user price decreases will just make that even harder. No change there then.....we will do what we always do and negotiate a set of price reductions and find new value to add to the end user service that is not possible for a carrier to provide.....the reason that wholesale customers exist for big retail oriented carriers. So, we will now have to have a chat with Optus to see what we can do about modifying our current contracted buy costs and then what we can do about repositioning our HSPA offerings to the different markets we address. As a very small customer we have no real 'bargaining position' and will therefore have to find, as all small companies always have to, some other way of delivering an HSPA service better than the large providers. We have one or two good ideas, or at least what I consider to be good ideas, and we are used to dealing with this scenario which has, of course, existed since we started in business. Sourcing the modems from a non-Optus source would be something that might help and finally getting the 'magic box' in to deliverable form and eliminating the need for a separate modem is still the major thing to be done in developing an HSPA product set. Putting a lot more effort in to selling only the sim to be used in a mobile telephone is an obvious 'additional path' and interestingly our sales of mobile phone services using Vodafone have shown small but growing signs that more of those users are buying them for their data services which are at much lower cost (to us at least) than the ways Optus insist on charging for data usage on a mobile telephone service. We also need to find a way to deal with using two mobile telephone providers (if we do go ahead with using Optus for mobile services which is, at least in my opinion, highly problematical because of their pricing 'models' based on volume resellers of their retail plans). Vodafone offer far more flexibility and far easier to deal with data costs and we have more than five years of building a relationship with dealing them which has built a very strong mutual trust plus the fact we have always paid our bills on time and without the deceptive quibbles that lead to all the undesirable outcomes of mobile telephone relationships between suppliers and resellers. We have found an 'adequate' solution and were expecting to release Optus based mobile plans on November 1st but I am coming to the conclusion (due to two recent 'events' and now the latest Optus Retail HSPA prices) that there is some doubt in continuing to try to maintain a 'strategic' relationship with Optus - I don't think, after almost six years of trying, that Exetel will ever become a company that "does things the Optus way" and that it may, after all this time, result in a 'parting of the ways' at some future time. I believe that we have outgrown all of the other start ups that existed shortly before or after we started Exetel because we have adhered to the only unbeatable long term business philosophy that relates to our industry and marketplaces - have the lowest end user pricing and have the lowest operating cost....everything else doesn't matter. Even as a start up we managed to get 'decent' supplier pricing (except from Telstra of course) and because we paid our bills in full and on time and always bought more each quarter we have a gilt edged relationship with all our major providers (except from Telstra of course) which enables us to get some sort of 'preferential pricing in most instances. Good pricing from our suppliers plus exceptionally low cost internal processes and procedures means our cost of delivery to an end user always allows us to d better than less well managed competitors. It is an exhausting management regimen but it has allowed us to first survive and then grow faster than any other start up in the last 8 years. What would life be without constantly looking at costings and pricing and trying to work out how to address an ever changing set of marketplaces and supplier ramifications? More enjoyable for everyone concerned? Trackbacks
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Hi John,
If you ditched optus as your HSPA supplier in favour of Vodafone, wouldnt you be also ditching your previous years work in regards to establishing a country user base. Vodafone just doesnt have the coverage when you move inland 100kms from our beautiful coastline.. cheers bill. Comment (1)
You're quite right.
However there are always multiple markets and Vodafone is as good as Optus in some of those markets. Comments (3)
As long-standing Optus small business mobile voice customers (but maybe not for long, depending on Exetel's forthcoming offers) we have noticed a change in Optus's approaches to us in the past year. Whereas previously, Optus would let us rot and we'd never hear from them (well, maybe once a year), now we (and our clients who are on similar old Optus plans) are receiving multiple calls and mailing with a different focus.
My impression is that Optus has moved from customer acquisition mode into defensive customer retention mode, and their just-announced HSDPA plans where the benefit halves when one is no longer on contract fits in with that. They are trying hard to get existing customers to commit to fixed periods. I infer that either Optus is seeing customer leakage to a competitor, or they are seeing a coming price crash and want to lock customers into existing prices as Optus's costs fall. Unfortunately Optus' marketing money is being spent in a dumb way, being poorly targeted. Their telemarketers don't seem to have access to our current account or handset details, and they make offers that don't make sense for the customer (like offering a month of trial data on handsets that can't use it). Each caller has offered to "try to provide whatever we need" to retain our business, but when we tell them what we want (particular handsets, data at the right tarif) they either can't do it or say they'll check and never call back. Optus are spending the money to just talk, but management flexibility is lacking. Comments (2)
I would think that Optus, like other companies, have felt some sort of pressure of falling demand in mobile sales and the ability to wring the last dollar out of the gullible over the past 9 or so months.
There are only so many dozen mobile handsets and dizzyingly confusing new plans every single Australian can adapt to. I rad somewhere in the not too distant past that more mobile hand sets have been sold in Australia in the past three years than there are Australian citizens and that includes the new born in that period. Frankly I don't count myself an idiot but I can seldom understand what is being offered by a mobile phone advertisement - other than to know it isn't what it appears to be. I did a rough count of the mobile phone hand sets that are lying around this house which has four residents at the moment and I could locate 15 handsets. What a disgraceful waste of money. Comments (3)
John,
On the Optus vs Vodafone plans, rather than Exetel essentially offering Vodafone voice with a touch of data and Optus data with a touch of voice, would it be too fragmenting of your offering to offer a full matrix of VF voice plans and VF data plans, and Optus voice plans and Optus data plans, and let the customers vote with their feet depending on prices and quality of coverage ? Comments (2)
At the moment we are trying to simplify our plan options.
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