John Linton
I read, with great amusement, this article in the WSJ today:
http://online.wsj.com/article/SB123248760842899491.html
My amusement was at the concept of Telstra giving 30% to 50% discounts to residential and small business users who call up and say times are tough for them and they want cheaper phone and internet services and the sophistication of an inbound telemarketing team that would be empowered to 'negotiate' such large discounts over the telephone. Perhaps all that was being done was to offer a 'win back' deal that had all the pricing listed - more likely scenario.
Having given it a few minutes thought over a cup of coffee I realised that it wasn't so difficult and that Telstra has been doing something very similar for at least two years via its 'out bound' "special offers" where it approaches other ISP's customers with bundled telephone line rental, low call costs and internet that are around 50% cheaper than its 'list prices'. It seems that Optus have re-started (did they ever stop?) their door knock campaigns with pushy back packers making all kinds of absurd (just plain illegal if the reports are to be believed) claims to 'win back' customers of other carriers.So very similar things happen in Australia and have for a very long time.
However the point that really struck me was exemplified by this:
"The representative sat down with me and told me what the new cost could be, and my mind was made up," says Mr. Christie, who now pays Cablevision about $120 a month, down from the $226 a month he was paying Verizon for the three services."
Just how much margin is there in a communications service that allows a company (in a relatively competitive marketplace) to undercut a major competitor by over 40% AND bear the cost of employing someone to go to the prospective customer's home to discuss and sign up the deal?
Obviously a lot more than Exetel makes.
But I was encouraged that the 'classic' scenario that it's only when times get tough that people look at just how much too much they are paying for 'basic services' of which internet and telephone are as basic as they get these days. Hopefully this scenario will begin to happen in Australia later this year when more people realize just how ripped off they are paying the prices for internet and telephony that are charged by some of the more price gouging suppliers in Australia - and these gouging prices aren't only being charged by Telstra.
You also have to wonder how those US companies are going to cope with the loss of gross profit caused by doing such deals if they become widespread rather than 'anecdotal'? It seems they do what Telstra does based on this:
"On the surface of it, the country's biggest carriers continue to boost prices despite the downturn. In January, Comcast and Time Warner Cable raised year-over-year prices by 6% for TV services,"........"Behind the scenes, however, the companies are much more accommodating."
.......they simply raise their 'list' prices relying on the dumbness and inertia of the majority of their customers not to move away and try and grab their competitor's customers with their "special deals" - punishing the stupid for being "loyal" (in the terms the customer would put it) and (too dumb to understand they are being ripped off) as the supplier probably regards it.
We had our best January day yesterday with applications for most services recording their highest level for the new year to date and already today that trend looks set to continue. I do think that we are seeing some plus as being the lowest cost provider to the residential market and I also see signs of that beginning to, finally, work in our favour in the business markets in which we operate (its only taken five years!). I also continue to 'sense' that the market, overall, for communications services is 'softening' at least in one or two areas so I'm taking nothing for granted.
Overall that WSJ article cheered me in that it's nice to see some external evidence, even if it is anecdotal, that 'classic' scenarios are alive and well in a recession coming to a suburb near you - soon. Perhaps a minor upside of that terrible event is that many people will re-think what they have been paying for all sorts of services and products (including communications) and they will free up more disposable income for themselves instead of lavishing it on overpaid communication's company personnel life styles.