John Linton
....over the past three months they have plastered the back of every bus and goodness knows how many billboards around Sydney with their constantly changing ADSL2 offers:
September - 80 gb (40 + 40)
November - 100gb (50 + 50)
and now less than a month later I guess they are going to have to change them all again to 120 gb (60 +60)..... and I assume the same happens in the other cities around Australia.
It could show that TPG hasn't got a clue as to what is happening in the ADSL marketplace (no-one would believe that a carefully planned quarter would result in three such changes, and such large changes, in three months). But it would be unreasonable to single out TPG as making ad hoc pricing decisions 'on the run'. As anyone with any knowledge of the ADSL marketplace could see as long ago as February this year (and still can see) the 'saturation' of the ADSL marketplace itself, the inroads at the lower end of wireless broadband, the 'unlimited' initiatives of AAPT and now the change in pricing by Telstra have all contributed to a plan re-positioning frenzy caused by only one thing - sales have either stagnated or fallen and look like falling further.
I claim no particular knowledge of these marketplaces - the apochryphal "blind Freddy" could see what was happening for the last eighteen months and particularly the last 12 months. While it's true we do keep a, literally, minute by minute, watch on what happens in every part of our business I have little doubt that other companies use more expensive methods than we do to do similar analyses of what is changing in their results versus their business plans. However - perhaps they don't. I suppose it's possible that several of the ISPs that have made a series of 'knee jerk' changes to their pricing and plan structures over the past six months have been so used to the ADSL market increasing month on month since 2001 that they have lost sight of the fact that EVERY product reaches a market saturation point and every MARKET reaches a point where there are too many providers of products that are too similar.
A fact that every offeror of ADSL services is going to have to deal with is that it may well be the time in the life cycle of ADSL when it has reached its zenith and it will never get any bigger than it is today. All of the larger ISPs used to provide dial up internet services and they would be able to track, from their own direct experience, just how quickly a service that showed no signs of anything but steep, continuing growth suddenly stopped growing and then plunged to effectively zero in a very short space of time. While ADSL hasn't reached it 'plunge point' right now, it may well have reached its zenith and that means that for any ISP to retain any semblance of growth that growth has to come at the expense of a competitor and, almost certainly, at the expense of their own 'bottom line'.
As I said way back in February when I first wrote about this - good news for the customer - not so good news for those ISPs relying on significant growth. TPG's latest move which represents, at least in marketing terms, offering 50% more than it did 2 months ago (via two changes of offer in that time) for the same end user price tells the vaguely aware observer that:
1)TPG's costs didn't suddenly go down, three times, and being the noted philanthropists they are they decided to pass on those benefits to their customers
2) TPG would only have 'reduced' its prices because it had to - not because it wanted to.
3) TPG's cost structures can absorb some portion of the increased offering but not entirely and not if they are 'forced' to continue to match the ongoing reduction in prices of their main competitors.
Of course, the same holds true for all of TPG's competitors.
I have been carefully watching Exetel's daily sales results over the past 6 weeks to see what trends I can see in our own figures and I see nothing that would have caused us to increase our offerings by 50% to our customers - they were/are sufficient to run at a lower churn away rate than for October and have shown an almost 20% increase over November 2008 with December maintaining that growth percentage so far. So clearly Telstra and TPG have both seen things that have caused them to make major changes to their pricing per gb supplied 'models' and in TPG's case they have made three changes in a short space of time to maintain the amount of growth superiority they have enjoyed over their competitors. I wonder if they will make the move to 24 x 7 unlimited access prior to the completion of their Pipe acquisition?
Something the 'NBN2' "research (and I use that word lightly) has 'thrown up' is going to be a barrier to doing that though. Although TPG has quite rightly established $A50.00 a month as a good price point for some market sectors it is still $A10.00 to $A15.00 too high for the vast majority of the market and an ongoing strategy based around that price point may be problematic. I wouldn't know but my view is that below $A40.00 is likely to be a much safer price point in 2010 than $A50.00 is going to be.
I don't think it's going to pleasant to be an ISP that is locked into delivering high ADSL customer growth in 2010.