Thoughts On The Tech Industry

The Telecom Wallet or “How I learned to live with the Bomb”

A funny thing happened in the communication industry about 10 years ago.  A bunch of fancy guys decided that what the country needs is for all telecommunication services to come from each of them: as a single supplier to the consumer.  Why fight for a bigger piece of pie when you can fight for the whole pie?  In my last blog posting, I spoke about the Quadruple Play, in which Cable Companies and Telco’s, each want to provide all of a households communications services.  However, it took mergers, takeovers, buyouts, changes in the Telecom Acts, changes in administrations and many years for policy to allow these companies into a greater diversity of communication businesses.  Then the ability to combine those offerings efficiently took billing and customer care advances.  But we are there now.

A long time ago, a great friend and mentor of mine, Brad Hughes, introduced me to the concept of the Telecom Wallet.  He explained that phone companies were very interested in how much a family spends on all communications within a household each month. The sum of their telecom services was the Telecom Wallet.  Since I worked at Telephia (now Nielsen Mobile), this was a great concept to dive into with our survey tools.

One of my epiphanies (while sober) was that when I graduated from undergrad and got my first place, my telecom bill was $30/mo.  This covered a residential line and half a dozen LD calls.  When I got a steady check, I got basic cable for another $20/mo.  My Telecom Wallet was now $50 in 1985.  Currently, for my family of 4:  its $400/mo.  (In 23 years it has increased TWENTY-FOLD!) Believe it or not, I try to be frugal (no Satellite radio, no Onstar, only 1 premium cable channel, no GPS subscription, and TiVo was paid for years ago).  My Telecom Wallet could easily grow by another $200/mo. if I took my foot off the brakes this holiday season.

 

While this is my industry and passion, there is ticking bomb.  It lies in the essence of the Quadruple Play strategy.  I believe most people in America don’t know what their total Telecom Wallet (monthly cost) is.  They never lump all the elements into one pool and really look at it.  If they did, they would freak out.  An offering of a Quadruple Play forces a focus on the total Telecom costs which do add up fast.  This almost always forces the consumer to see the “$300 or $400 light” and do one of the following:  1) Reassess their expenses for Telecom and make cuts, 2) Shop for the best bundle once  there is an awareness of bundled offers, 3)  Do nothing at all (which is what most people are doing), or 4) Sign on because it will simplify thier life (the path least chosen).

In the end, writing one big check to your Cable or Telephone Company for $400/mo. will negatively alter consumers’ buying behavior away from communication services in the short term.  I suggest that the Quadruple play go back in the closet for now.  One day soon, all the elements of the Quad Play will flow through a fat wireless pipe; each seperate service morphing into mere applications.  At that time, we will pay the meter for what flows through our pipe regardless of the device or location.

What is the power of the Quadruple Play?

The first I heard of the Triple Play (Telephone, Broadband-cable modem, Cable TV) was in 1999.  I was with SBC sitting in a market-wide (San Diego) meeting discussing our strategic levers across all product lines.  I represented the cellular/pcs business unit and the discussion centered on “how to combat the cable company’s Triple Play threat”.  Our solution was to have our own “bundle” to compete against theirs.  We would use the Telecom Triple Play: Telephone, Broadband-DSL, Cellular as our bundled offering. 

Seemed like a reasonable idea.  When consumers subscribed to all three services, we would give them a discount, and someday combine it all onto 1 bill.  By throwing cellular into the mix, we thought we would trounce those cable guys.  The program sunk like a lead weight.

It is 8 years later and I don’t bundle, do you?  Qwest Communications (formerly US West, where I got my start) has been clinging to a telecom Triple Play for nearly 6 years, AT&T sends high gloss/high fashion collateral to my house quarterly to pool my services and Verizon has been pushing bundled offering in its Telephone markets forever.  In offering a single bill & @10% discounts the Telco’s have not attracted many new takers relative to their total bases over time.  While the bundle has proven to be a good retention tool, it is not a net revenue generator at all.

Now we are entering the world of the Quadruple Play!  Cable Companies have added cellular to their offerings, while Telco’s have been getting into the Media space, both through a variety of partnerships.  Did you know AT&T has had this going for 2+ years and some of the cable companies have been offering cellular for about a year?

Guess what?  People aren’t biting.  Rich people don’t care about a single bill or a paltry discount.  Poor people can’t and won’t spend that much money on communications.  The middle class is shopping for the best value for the 4 services and saving more money by sending 2 to 4 checks a month to 2 to 4 communications suppliers.  They are saving more than the 10% by truly matching services to their needs. The Triple and Quadruple Plays are interesting and logical for the operators, but they don’t seem to get it from the consumer’s perspective.  For the rest of the story: Tune in next time to: “The Telecom Wallet” or “How I learned to live with the Bomb”

My Best Flight Ever (with wireless access)

When working for Birdstep Technology I needed to travel to Oslo and Stockholm often.  Since United’s partners were SAS and Lufthansa, I had to use them for at least the Nordic portions of my journey.  I hated this arrangement, because I could never get upgraded and because the Scandinavian airline food, thought tasty to Swedes and other low spice peoples, was horrible to me.  Pickled fish and hard boiled eggs with cabbage is Devil’s Island food.  However, the cure for my businessman blues was soon discovered.

I digress:  on flight to Europe, I could be the spokesman for Ambien.  If it were legal to do so, I would set up a kiosk in the SFO International terminal pushing $10 pills that guarantee no jet lag going over.  I always dozed perfectly and never remember the long trip east.  But on the flight back, I am always wide awake, bored, restless and anxious to get home. 

The exception was when I took a magical flight that had high speed internet access.  Connexion by Boeing was awesome.  I was in a zone of productivity and connectedness that I had never experienced.  Since I had my Skype and headset with me, I was making calls all over the world from my airplane seat (seemingly for free: $30/flight) and closing out e-mail threads from the past 3 months.  I as amazed by my new capabilities and freaked out all those around me who gazed upon my total bliss.  Business Class from Europe on United, became less of a premium than flying a wi-fi plane across the Atlantic in coach.  Sadly though, it all went away in an instant.

At the end of 2006 Boeing shuttered the operation due to huge losses to keep the satellite operation going.  Too few planes were retrofit with the $650K package, too few airlines signed up and too few people shelled out the $30.  It doesn’t seem that my $150 (over 5 flights) to the cause helped.

Yesterday JetBlue introduced limited in plane wireless through a company called LiveTV.  They started with only one plane in the fleet, but that should grow in deployment and wireless capabilities.  Several other US airlines (but not United) are in talks with Live TV, Aircell and Row 44 for in flight wireless offerings next year.  It is all good news.  While the general public has never liked the idea of listening to an annoying “loud talker” yak away on their cellphone in the row behind them, seeing a workaholic like me pounding away on a laptop or typing my micro messages into a handheld doesn’t seem to ruffle their feathers while they watch reruns of The Office and savor their 1 ounce of pretzels.

In Fight Club, Ed Norton says: “Business travelers have had disposable experiences when they reach their destination on a business flight.” With an ability to ‘opt-in’ to the world 30,000 feet below, you might view your experience differently when seated in rows 14-46 on a 4+ hour jaunt.

Year of Wireless Data

This is finally the “year of wireless data!”  As an attendee of every major CTIA show for the past 12 years, I heard that announcement from the podium at every keynote speech since 1999.  Eight years later, it has finally come to fruition.  But why the seven years of false claims by the sages who supposedly knew the industry inside and out?

Some of it was self-promotion, some it was a true lack of reality, and most of it was wishful thinking.  However in all cases, the vision was dead on.  The actual turning point was in late 2005 when wireless convergence occurred after 6 year incubation.  The availability of:  High speed wireless data networks (WWAN’s), Devices (Smartphones, data cards & music phones) capable of operating on such networks that could be provisioned and updated over the air (OTA), and lastly, user friendly and robust applications for consumer and enterprise users.  It has taken another two years for most of the network operators to deploy their upgraded 3G networks.  In most of the top North American cities (with pops over 250,000) the roll-outs are complete.

In a recent CTIA study, for the first 6 months of 2007, US Wireless Data Revenues grew by 63% to $10.5B over the same period a year earlier.  That represents 15.5% of ARPU and nearly double from a year earlier.  These numbers are just the “the carrier take” of the pie.  When you factor in all the related businesses that also produced revenue off of this evolutionary step (Device Manufacturers, Software, Applications, Infrastructure, Tower and Content), I would estimate that the total ancillary revenue doubles that number just in the US alone for the period.

Is there a “gold rush” to this sector?  Absolutely!  Have the investments been justified? Most have!  Is it too late to get into this game?  No.  We are only seeing the tip of the iceberg in terms of “the relationship people will develop with their phones.”