John Linton ....leave the debts to your children.
I attended an 'exclusive seminar' yesterday to discuss new concepts of providing lower cost residential ADSL services, or for that matter any sort of services, to residential users. It was slickly done and had a good set of 'persuasions' in the ways that only American presenters seem able to 'put across' that almost completely conceal the gaping holes in the logic being applied to the 'sell'. From long custom I paid little attention to the smoke and mirrors which left very little to actually concentrate on other than the inane and annoying fellow attendees who disrupted the smoothness of the presentation with meaningless questions and statements. Of the 17 other people attending one was someone I recognised from a Victorian based ISP and one from a hardware distributor. Two other people seemed to recognise me but I couldn't recall them, a perennial failing of mine that is both very rude and very annoying for all concerned.
In essence it appeared to me to be some sort of version of the Harvey Norman "no payments until the 22 century" type financing offer applied to the future abilities of a residential customer to pay more for less in the future by offering serious lengths of "pay nothing now" financing. The concept has obviously worked for Harvey Norman, and others, for a very long time and I suppose it was only time before it would be extended to other parts of consumer purchasing. In essence I suppose it's no different to the current multiplicity of credit card offers. In fact, with not too much of a stretch, it isn't that much different to Telstra Retail's 'win back' campaigns. When you think about it the concept is identical to Telstra's, and others, campaigns in the past and is basically the basis of the 'free handset' offers that have built the mobile business of carriers around the world.
It was interesting in some respects and, I said previously, it was very competently put across.....one day you will be able to get something for nothing? It was simply substituting the indigent residential customer's loan collateral with the supplying company's ability to take the obligation for that debt using a company's much better credit rating and capacity to pay and, doubtless if I looked in any depth, horrendously onerous, sign your life away, financial commitments on behalf of the supplier. However, briefly, and if you didn't look too closely, it was a pretty appealing concept and it did seem to make some sort of sense......until you think about how any residential customer that would take up such an offer would ever find the capability of paying back 12 months of 'free' ADSL costs. Maybe I've missed something key to the use of this sort of financing. I suppose Exetel's residential business base could be rapidly grown using a "no payment for the first 12 months" approach but the nightmare scenario at the end of twelve months prevents me even contemplating such an approach. Maybe that's just one more sign that I am not the right person to make such decisions within our business - come to think of it I almost certainly never was.
I can't see, for one moment, how a company like Exetel could use those concepts but clearly they are working, at least for the moment, in the USA and I would think that they will start to be offered here in the not too distant future - especially by companies like Harvey Norman who are already very familiar with using extended credit to make sales. I can also see the attraction to some of the more 'daring' ADSL providers as a quick fix to their falling residential user bases and as a way of getting better discounts from their suppliers. Free ADSL for the first three, six or twelve months would do it in quite a big way.
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