How to motivate a big telco to give consumers more value...

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DonGould

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#115920 11-Apr-2013 19:27

Talkiet:
I wasn't just talking about market dynamics, but unless you've worked in a large ISP or a Telco, you just don't understand how hard it is to justify moving before the market is ready to pay what something's worth.

Actually Neil I have every idea, which is one of the reasons I choose to engage in such discussion on line.

One does not have to work for a large provider of anything to understand the dynamics.

I am well aware that it can be extremely hard to build a business case, even getting permission to look at a business case can be complex and meet with questions about why you should be investing time in it while margins are high, investors are happy with returns and customers are not leaving.

I'm well aware that unlike a small business, a technology change or vendor change is insanely more complex, requires an exponential amount more resource and carries a much higher risk.

I'm aware that corporate culture plays a part that doesn't even factor in a small business. In my business, for example, I only have to argue with my wife. In Telecom (just as an example) you have to factor not just individuals but teams of people who can undermine your project if you don't gain real buy in from them.

I only deal with 1 other share holder. You have to deal with massive shareholders who also have interests in other businesses which they also consider before signing off on supporting your technology venture.

I'm also aware you have to consider a very large range of business groups and products. You have to take care, for example, that you don't introduce a new product that then ravages an existing product which is only part way though its business case life cycle and becomes a cost on the business.

You need to consider customer reaction. If you've got customers in a contract who can't take advantage of the new product will they be energised to look for a new supplier when their contract expires?

Can you trust the vendor? Just google "Nortel Shasta Telstra" for a lesson on how the wheels can fall off when a vendor over states their product.

I'm aware that integration issues can be more complex with bigger systems as the size of the systems gets beyond the ability of any single person to have a complete over view of the entire system.

....and I'm quite sure that the few points I've raised here are just the tip of the iceberg.

But as to how we can help?

"Asking for the product." - I'm aware that it's easier to start a business case when someone is actually asking for the product.

"Active discussion" - I'm aware that just discussing value helps consumers to justify in their minds why they should pay more for a new service.

"Understanding your dynamics" - I'm aware that it's easier to work with customers when we try harder to understand your constraints.

"Regulation support" - Sometimes a business case is made easier when everyone has no choice but to do something because of a regulation change. Hence I'm always interested in what the regulators might push.

"Reasonable comparisons" - I've said that comparing us to the US is just unfair and unreasonable, but comparing us to Australia is more in line.

"Consumer education" - getting consumers to understand more about the market dynamics and why they should step away from dated systems helps. eg POTS, FAX, Dialup (anything, including alarms and eftpos).

How am I doing? What did I miss? How can we make your life easier to justify technology upgrades?

D

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#798012 11-Apr-2013 19:45

DonGould wrote:
How am I doing? What did I miss? How can we make your life easier to justify technology upgrades?

First of all Don, you don't understand how things are in a large ISP or Telco. I simply don't believe that. If you have worked in a large ISP or Telco, and been on the end of having to write or justify business cases with lots of zeroes on them then I am prepared to revisit my opinion - but knowing the theory doesn't even come close to actually understanding what happens.

As for what would help? Well, it all comes down to whether the investment can be justified by the return. Speculative investment is not what encumbent suppliers do. If you want someone to massively increase investment then show is that there's a massive revenue increase in it for us. "Build it and they will come" is NOT a valid argument.

It's astoundingly tiring arguing with you because you really don't seem to have a handle on the economics involved. Your vision would be wonderful if technology and time were free, or if we had trillions in the bank and wanted nothing more than to altruistically build a public good - but in the real world investment has to be very carefully balanced against what people want, what we can afford to build and what people are actually prepared to pay for.

I might also take you more seriously if you didn't repeatedly hold to the assertion that any data that doesn't support your views isn't applicable here for one reason or another. The most recent example is where you dismiss any global internet usage figures because, well.. .I'm not sure really why.

Having aspirational views is one thing, but presenting them without any anchor to the reality we live with just makes me tired of reading them.

Cheers - N

Please note all comments are from my own brain and don't necessarily represent the position or opinions of my employer, previous employers, colleagues, friends or pets.

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#798022 11-Apr-2013 20:04

All due respect Don but you are in la la land with how decisions are made in large corporates, especially in the current fiscal environment. For a major corporate to spend a million dollars requires a business case, which usually runs to 30 or 40 pages and a couple of hundred hours work. To spend tens or hundreds of millions, you do the math?

For that business case to be accepted will usually take 12-48 months as it needs to go through multiple levels of approval before budget gets allocated - if there's no budget then it doesn't get done. For significant budget allocations this will need to go to the board.

Then the hard work starts on the business case as someone has to put their neck on the line as to the result and the return. Typical hurdle rates are 3 year payback for an investment, if it can't hit the hurdle rate then it doesn't happen. End of story.

Customer satisfaction is all very nice but at the end of the day it's about maximum return, for minimum investment and minimum risk.

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#798029 11-Apr-2013 20:19

Handle9: All due respect Don but you are in la la land with how decisions are made in large corporates, especially in the current fiscal environment. For a major corporate to spend a million dollars requires a business case, which usually runs to 30 or 40 pages and a couple of hundred hours work. To spend tens or hundreds of millions, you do the math?

For that business case to be accepted will usually take 12-48 months as it needs to go through multiple levels of approval before budget gets allocated - if there's no budget then it doesn't get done. For significant budget allocations this will need to go to the board.

Then the hard work starts on the business case as someone has to put their neck on the line as to the result and the return. Typical hurdle rates are 3 year payback for an investment, if it can't hit the hurdle rate then it doesn't happen. End of story.

Customer satisfaction is all very nice but at the end of the day it's about maximum return, for minimum investment and minimum risk.

This equates quite well with my experience, unless you are the CEO and have a pet project.

Jon

plambrechtsen

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#798076 11-Apr-2013 21:03

Talkiet:
DonGould wrote:
How am I doing? What did I miss? How can we make your life easier to justify technology upgrades?

First of all Don, you don't understand how things are in a large ISP or Telco.

The saddest thing is I can only click +1 once on your post Neil.

DonGould

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#798084 11-Apr-2013 21:17

Talkiet:
As for what would help? Well, it all comes down to whether the investment can be justified by the return. Speculative investment is not what encumbent suppliers do. If you want someone to massively increase investment then show is that there's a massive revenue increase in it for us. "Build it and they will come" is NOT a valid argument.

I fully agree with the 'build it and they will come' argument. We saw that done overseas with some very large failures.

With respect to 'a massive revenue increase' for Telecom (and now I suspect Vodafone more and more), I accept just how hard that is.

I can see that revenue loss might now be a bigger driver than revenue increase.

This is why I've spent the last 18 months investing some of my time in 2Talk and VoIP technology. To me, it seems that pulling customers off POTS and moving them into VoIP should actually help guys like you build a business case to move your companies into VoIP as it becomes visible that you will loose POTS customers to VoIP and the only question becomes your VoIP or someone elses.

Talkiet:
It's astoundingly tiring arguing with you because you really don't seem to have a handle on the economics involved. Your vision would be wonderful if technology and time were free, or if we had trillions in the bank and wanted nothing more than to altruistically build a public good - but in the real world investment has to be very carefully balanced against what people want, what we can afford to build and what people are actually prepared to pay for.

That's an interesting presentation of my view on the technology world.... not really how I see it, but thanks for sharing your view of me.

I might just have to think about that for a while.

Talkiet:
I might also take you more seriously if you didn't repeatedly hold to the assertion that any data that doesn't support your views isn't applicable here for one reason or another. The most recent example is where you dismiss any global internet usage figures because, well.. .I'm not sure really why.

There are lots of different reasons why different markets have different value. So, looking at what's happening in the US or Europe or even the UK as a point of reference is not good.

I've read people comparing us to the US for over a decade, with many of those people not seeming to understand that consumer value in that market was based on massive amounts of written off value as a result of some very large companies going out of business and their assets being snapped up and fire sale prices.

Europe has language issues which cause more data interest to be localised. Japan is the same,

The UK has a much higher population density in some parts and distance to Europe is different and there have been undersea cable wars which have driven down carrier costs enabling carriers to spend more on core networks because they didn't have to give as much gold to the cable operators.

Australia on the other hand has many of the same dynamics that do impact us in New Zealand, so it does make much more sense to compare the issues.

We also have very similar life style choices as Australia, our housing standards are closer aligned, the list goes on and on.

It doesn't make sense to me to consider global markets. It does make sense to consider our closes neighbours and ask why they have more value than we do.

D

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DonGould

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#798096 11-Apr-2013 21:29

plambrechtsen:
Talkiet:
DonGould wrote:
How am I doing? What did I miss? How can we make your life easier to justify technology upgrades?

First of all Don, you don't understand how things are in a large ISP or Telco.

The saddest thing is I can only click +1 once on your post Neil.

I shouldn't worry about that Peter, many others, including myself, voted on it too.

I fully agree Neil raises some very good points. Sure, I don't agree with them all, but he does make a really good argument and one that I think people should take the time to read.

To me a key thing Neil is indicating is that if people actually want more value from the industry as a whole then they have to gear up to change and move.

It's clearly much easier for Neil to build a business case if there's a revenue opportunity there and impossible if there's no concrete market to be had.

This is exactly what someone from Internet NZ commented to me about last week...

"when telecom is offering 75Gb for the same price Voda is offering 12gb and there is no mass transfer between the two it prob means that most voda customers are happy with 12."

You'll recall that last year I wrote a 45 point thread on how to get more value which included not being a customer of a carrier.

However right now I'm looking at Vodafone customers and thinking that they should be moving to Telecom in droves to inspire move value from Vodafone.

If you follow the Internet NZ discussion list then you'll also know that I've suggested we need to do some public education around WiFi in homes as the carriers have done an amazing job of creating false expectations of wifi performance by suggesting with visual advertising that wifi will just reach though New Zealand homes in ways that we know it just won't.

I wonder if people are using less data because the performance of their wifi is just so poor that they're just getting a poor experience on their mobile devices in their homes.

D

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Talkiet

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#798108 11-Apr-2013 21:44

DonGould: [snip]
You'll recall that last year I wrote a 45 point thread on how to get more value which included not being a customer of a carrier.
[snip]
I wonder if people are using less data because the performance of their wifi is just so poor that they're just getting a poor experience on their mobile devices in their homes.

First point. I read it and cringed at most of the points. I don't think I managed to force myself to read to the end.

Second point. I highly doubt that's a significant reason.

Cheers - N

Please note all comments are from my own brain and don't necessarily represent the position or opinions of my employer, previous employers, colleagues, friends or pets.

jonherries

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#798115 11-Apr-2013 21:54

DonGould:
plambrechtsen:
Talkiet:
DonGould wrote:
How am I doing? What did I miss? How can we make your life easier to justify technology upgrades?

First of all Don, you don't understand how things are in a large ISP or Telco.

The saddest thing is I can only click +1 once on your post Neil.

I shouldn't worry about that Peter, many others, including myself, voted on it too.

I fully agree Neil raises some very good points. Sure, I don't agree with them all, but he does make a really good argument and one that I think people should take the time to read.

To me a key thing Neil is indicating is that if people actually want more value from the industry as a whole then they have to gear up to change and move.

It's clearly much easier for Neil to build a business case if there's a revenue opportunity there and impossible if there's no concrete market to be had.

This is exactly what someone from Internet NZ commented to me about last week...

"when telecom is offering 75Gb for the same price Voda is offering 12gb and there is no mass transfer between the two it prob means that most voda customers are happy with 12."

You'll recall that last year I wrote a 45 point thread on how to get more value which included not being a customer of a carrier.

However right now I'm looking at Vodafone customers and thinking that they should be moving to Telecom in droves to inspire move value from Vodafone.

If you follow the Internet NZ discussion list then you'll also know that I've suggested we need to do some public education around WiFi in homes as the carriers have done an amazing job of creating false expectations of wifi performance by suggesting with visual advertising that wifi will just reach though New Zealand homes in ways that we know it just won't.

I wonder if people are using less data because the performance of their wifi is just so poor that they're just getting a poor experience on their mobile devices in their homes.

D

Without entering into a too serious discourse, I think you have identified the fault in your comment above and it relates to your values.

You value more faster internet for a better price, most people don't. They are happy with their 12GB cap, if they can do with their connection what they want, which may run as far as skype, but likely not youtube, they are not interested in this conversation. My nana is a classic example, has the internet cause the telecom guy told her to, but she doesnt value it.

If this was something worth talking about, you would be on tv telling John Campbell about it, but at this point we can barely get people to stop smoking, or get the government/us to protect the environment, or figure out how to create more wealth for the country to pay our debts, or come up with a better plan for the boat people.

You are not wrong, but attributing your own values to others doesn't result in the answer you are seeking.

On a more positive note, convincing people that they need more internet and it needs to be faster is what you should be working on. If you convince enough people that this is a good thing, the ISPs will change. The people will demand change.

Jon

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#798130 11-Apr-2013 22:25

I would like to use a classic example I have had over the last month or two. Master Filters.

If you visit Facebook many people on there complain about poor speeds. When I run a line test for them and say they need a master filter because their internal wiring is poor the vast majority of them agree with me since I provide a wealth of information to backup my argument.

However, I have so far met a number of folks who refuse to invest the one off $200 cost to get it installed typically. Or even less if I point them to CoffeeBaron or Cyril7 depending on if they are in Auckland or Wellington. Even when the facts far outweigh any arguments, and the customer has been complaining of poor speeds or dropouts and such like. They just refuse to pay for the installation and expect that it is done for free by their provider.

I was quite shocked when I met the first person, but now after doing at least 100+ line tests and having a few more I am less surprised.

When the internet is viewed as a scarce resource which requires quite costly infrastructure to run it properly with staff that don't work for the love of it not as something "that just exists" and "is free". Then I think we will all be better off. But really most people just want it to work, and if it goes slow it's ok... They will get there. Since the expectation of the internet since "its free" isn't high by the vast majority of people. So thus the quandary continues.

DonGould

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#798139 11-Apr-2013 22:42

plambrechtsen: I would like to use a classic example I have had over the last month or two. Master Filters.

If you visit Facebook many people on there complain about poor speeds. When I run a line test for them and say they need a master filter because their internal wiring is poor the vast majority of them agree with me since I provide a wealth of information to backup my argument.

However, I have so far met a number of folks who refuse to invest the one off $200 cost to get it installed typically. Or even less if I point them to CoffeeBaron or Cyril7 depending on if they are in Auckland or Wellington. Even when the facts far outweigh any arguments, and the customer has been complaining of poor speeds or dropouts and such like. They just refuse to pay for the installation and expect that it is done for free by their provider.

I was quite shocked when I met the first person, but now after doing at least 100+ line tests and having a few more I am less surprised.

When the internet is viewed as a scarce resource which requires quite costly infrastructure to run it properly with staff that don't work for the love of it not as something "that just exists" and "is free". Then I think we will all be better off. But really most people just want it to work, and if it goes slow it's ok... They will get there. Since the expectation of the internet since "its free" isn't high by the vast majority of people. So thus the quandary continues.

Yes, I'd like to know why Telcom and Vodafone haven't built a package around that, for example, $9.95 a month for 2 years with 10Gb more data thrown in.

Many many folk just don't see value in capital investment but will drip feed something.

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surfisup1000

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#798164 12-Apr-2013 00:19

DonGould:
Yes, I'd like to know why Telcom and Vodafone haven't built a package around that, for example, $9.95 a month for 2 years with 10Gb more data thrown in.

Many many folk just don't see value in capital investment but will drip feed something.

Because it doesn't benefit telecom directly? It is to the customers advantage only.

I can just see too many provisioning and billing hassles with something like you suggest. Telecom would likely end up out of pocket.

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NZCrusader

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#798247 12-Apr-2013 09:52

plambrechtsen: I would like to use a classic example I have had over the last month or two. Master Filters.

If you visit Facebook many people on there complain about poor speeds. When I run a line test for them and say they need a master filter because their internal wiring is poor the vast majority of them agree with me since I provide a wealth of information to backup my argument.

However, I have so far met a number of folks who refuse to invest the one off $200 cost to get it installed typically. Or even less if I point them to CoffeeBaron or Cyril7 depending on if they are in Auckland or Wellington. Even when the facts far outweigh any arguments, and the customer has been complaining of poor speeds or dropouts and such like. They just refuse to pay for the installation and expect that it is done for free by their provider.

I was quite shocked when I met the first person, but now after doing at least 100+ line tests and having a few more I am less surprised.

When the internet is viewed as a scarce resource which requires quite costly infrastructure to run it properly with staff that don't work for the love of it not as something "that just exists" and "is free". Then I think we will all be better off. But really most people just want it to work, and if it goes slow it's ok... They will get there. Since the expectation of the internet since "its free" isn't high by the vast majority of people. So thus the quandary continues.

This is bang on. Every time I have come across a home with bad wiring / need for a master filter, the occupants always decline on the investment.

As far as they are concerned they do not want to spend money to make the internet "faster".

As long as the dsl and the phone works (even if both services are a bit dicey), it is good enough for them.

In fact I have difficulty trying to get people to invest in decent modem / router / wireless hardware. Again their view is that their nasty old belkin or d-link does the job, and even though performance is balls, they don't care as they don't want to spend the money to upgrade.

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cr250bromo

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#798259 12-Apr-2013 10:05

I think the smaller ISPs such as Snap!, XNet, Inspire and so on are able to innovate and offer new/interesting services and better value to customers quickly due to their smaller size. Another good example is Fyx (sister ISP to Maxnet), $0.30/GB is amazing value if your usage varies hugely from month to month.

Given the size of Telecom and Vodafone they will always move slower, but they are appealing to the mass market, if they can give (say) 75% of NZ what they want at a reasonable price and make a profit so it's sustainable and supportable in the long term I think they are doing pretty well. As geeks we are probably not their primary target market.

/ben

TwoSeven

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#798382 12-Apr-2013 13:53

I suspect there are two different discussions occurring here.

The first is around strategic planning which occurs at the organisational board level. Roughly we could consider two basic strategies, consumer oriented or revenue oriented. Both might use the formula total revenue = ARPU x # subscribers.

Given the revenue and accounting for shareholders, the question is, how to we grow the business in terms of capability or service offering, versus how to we maintain and grow our subscriber base.

Putting new equipment in or modernising existing equipment I think is just a standard economics question. But it can be used to create product differentiation which can be attractive to consumers. One needs to offer at least the same functionality as one competitors as well as offering new products and services to provide the difference from the competitors.

THe other arguement would be around ARPU itself. Each customer or subscriber has an amount of money they are willing to spend on a certain market segment (such as telecommunications, entertainment etc) the total of all can be referred to as their maximum spend. If the maximum spend is paid to one provider, then ARPU = maximum spend (in the case where there is convergance of services and single billing for example), or it could be split over multiple providers - in which case ARPU not = maximum spend.

Some people have a bigger maximum spend than others which can mean that the part they are willing to spend on a particular product or service may be larger - so we can split services up into basic or common, intermediate and premium each targeted at a different demographic. It would be logical to think that there would be more basic subscribers than premium subscribers. So a service that has matured might be low cost and be provisioned as a common service. However, a new service might be high cost and may need to be a premium service until it has paid back the initial cost (matured) and can then be reduced to an intermediate or basic service.

I guess what we the consumer sometimes ask for is that the business take a strategy where they pitch key new products and services at a lower than normal demographic rather than using it as a premium serivce. Or to put it another way, is it more important to enable the customer with key new products and services and build a relationship with them returning ARPU over the longer term, or is it better to maximise the ARPU over the shorter term and build a better retention policy for catching those that would churn to a competitor that may be offering a substitute product or service (or even a mixture of both)?

Perhaps it might be important to balance the above with the consideration that if subscribers are not educated in a technology - in that they are not aware that it exists (it might exist but has not been provisioned due to the perceived lack of demand argument) or don't see an advantage to having it (why would I have a typewriter when a pencil and paper works just fine). I guess, how do we sell someone a product or a service they are not aware they yet have a need for?

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#798531 12-Apr-2013 17:14

TwoSeven: I suspect there are two different discussions occurring here.

I fully agree.

I think there are a range of issues here.

I've been giving a lot more consideration to Neils comments though the day and I think Peter has touched on some quite critical points as well.

Neil - You seemed to accept that I have 'some' grasp on the theory of the corporate issues.

Thinking about it a bit more, I would fully accept the suggestion that I don't have much empathy for many of those issues or the people, such as your self, who are involved. For that I do apologize.

While I am of the view that people such as yourself are generally well paid, and this stuff is your job, I do accept that I tend to just ride rough shod over the issues in my pursuit for technology and forget that you guys are actually humans as well!

I think this is easy to do when we see companies like Telecom as a faceless corporate, or even worse, as some guy with a fishing poll on a river claiming your networks will do stuff we all know they just won't.

Again, Neil I apologize for showing a lack of personal empathy for the issues that face you and your teams in designing these business cases.

Peter - I thought it might be quite funny to do a parody of your comments from the point of view of a grumpy system admin (perhaps BOFH style) but decided it might end up looking a bit dumb.

I think yours is one of the most important points that I've seen in some time. What I read into what you're saying is that we simply haven't taken anything like full advantage of the investment that your company (and now Chorus) have just finished putting into the network.

I agree with the suggestion that it's just rude to be asking for more investment when consumers haven't even bothered to fix issues on our side of the demarcation point or installed halfway reasonable CPE.

We have to lift the average...

The other big take home message I take from this discussion so far is that we have to raise the average network usage and also raise the minimum usage of all users.

Let's remember that this thread was kicked off as a follow on from debate about VF Warp plans and ongoing comments from higher end VF users that Warp data limits are low.

It seems to me that the high end users are not getting the message that if we want more high end data then we need to get the low end guys using (and paying for) more.

Raise APRU

If we want more data at the high end, without it costing us a fortune, then we have to drive the APRU up by energizing those low end subscribers to spend and use more.

We clearly need to do more to inspire them with content and technology that will use more.

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