Monday, September 8, 2014

When your business model requires minimal competition

There is a point we've made in passing in a couple of threads: the telecom industry relies heavily on models and strategies that only work in markets with limited competition. These include high fees, opaque and complicated pricing schemes, bundling, bad customer service and explicit policies that makes closing accounts as inconvenient as possible.

There's a quote that Joseph and I tried to credit each other with for years before deciding it came from a business analyst we both knew: "sometimes, it's bad for a company not to be able to lose money." In a competitive market, idiots tend to be culled out. It's not a perfect process but it's a healthy one and it helps maintain the competence level of a business.

The corollary to that quote is "Eventually, all companies can lose money." There will come a point where a company will have to perform competently. I think we may be reaching that point with the telecoms and I don't know that they're up to it. Faced with an increasingly unstable business model, they have dug themselves into a brand and PR nightmare. Worse still, they have managed to hand major victories to the very competitors that threaten  that model. Over-the-air television has a much higher profile and is much more viable since TWC's disastrous showdown with CBS. TWC also managed to give a major boost to the municipal internet movement by so mishandling customers in places like Wilson, North Carolina.

From Dominic Rushe writing for the Guardian
USTelecom, which represents telecoms giants Verizon, AT&T and others, wants the FCC to block expansion of two popular municipally owned high-speed internet networks, one in Chattanooga, Tennessee, and the other in Wilson, North Carolina.

“The success of public broadband is a mixed record, with numerous examples of failures,” USTelecom said in a blogpost. “With state taxpayers on the financial hook when a municipal broadband network goes under, it is entirely reasonable for state legislatures to be cautious in limiting or even prohibiting that activity.”

Chattanooga has the largest high-speed internet service in the US, offering customers access to speeds of 1 gigabit per second – about 50 times faster than the US average. The service, provided by municipally owned EPB, has sparked a tech boom in the city and attracted international attention. EPB is now petitioning the FCC to expand its territory. Comcast and other companies have previously sued unsuccessfully to stop EPB’s fibre optic roll out.

Wilson, a town of a little more than 49,000 people, launched Greenlight, its own service offering high-speed internet, after complaints about the cost and quality of Time Warner cable’s service. Time Warner lobbied the North Carolina senate to outlaw the service and similar municipal efforts.

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