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Telcos should eat their own dogfood

07 Aug

Dinner TimeOne of my favourite technology columnists is fellow Canadian Clive Thompson, who writes regularly for Wired magazine among others. In his latest column (which doesn’t appear to be online yet, otherwise I’d link to it), he writes about how American politicians should be forced “to eat their own dogfood.”

It’s a phrase often used within software companies in reference to how employees must use their own products, because doing so lets them quickly discover ingrained problems.

The concept ties in with something I’ve been thinking about lately in regards to the telecommunications industry. A few weeks ago, I joked on Twitter about how the only people who were defending Canada’s high prices were individuals – executives, consultants, Bay Street analysts and the odd newspaper columnist – who fall into considerably higher tax brackets than the vast majority of service users. I called this crew the Wireless One Per Cent, although really, it applies to wired services too.

I was mostly kidding, but there is actually an element of class-ism here. When you’re making six figures-plus, as many of these people do, prices on incidentals such as cellphone and broadband service really don’t seem all that high. Dogfooding, or forcing them to pay full freight for those services, really wouldn’t do much to sway their attitudes because many probably don’t ever trifle with their own bills.

There is, however, another group of people who may also believe that prices aren’t high – the rank-and-file telecom company employees. They typically get big discounts, often half-off, of their employer’s services and may therefore be insulated from what the rest of the country already knows. From what I understand, the companies are recruiting and rallying their own employees to lobby their respective politicians to stop Verizon’s entry into Canada.

So, how about this as a challenge to the telecom companies – why don’t they force their own employees to pay the full cost of their own services?

I saw a comment on a friend’s Facebook page the other day to this effect. She said, “If I didn’t have a discount from [redacted], I’d still be on a rotary phone.”

Just as in the software business, dogfooding their own workers would lead to telecom companies quickly discovering just how big their problems are.

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7 Comments

Posted by on August 7, 2013 in telecommunications

 

7 responses to “Telcos should eat their own dogfood

  1. jvanl

    August 7, 2013 at 12:15 am

    That would be courageous.

    SO not going to happen.

     
  2. Marc Venot

    August 7, 2013 at 1:15 am

    Honda and the Telcos, in particular on the French speaking side, have among the best advertisements and in particular a few years ago with Cossette using dogs (which talk with sarcastic humour).

     
  3. Kibbles N Bits

    August 7, 2013 at 10:24 am

    I’m sure the Big 3’s employees get an earful from their family and friends who can’t get the discount so it’s not like these people are isolated from the effects of high prices and poor service. It’s only natural for people to protect their own jobs and base their opinions of pricing on that. The vast majority of employees are in no position to influence policy anyway.

    I have no issue with employees getting discounts. But those same employees ethically should not be lobbying politicians. Either pay full freight, or keep quiet.

    It would be nice if everybody paid a percentage of their net worth towards their monthly telecom bill. Pick any values you like but as a thought experiment let’s say someone with a $50,000 yearly income pays $50 per month in wireless fees. That’s 0.1% of their gross income. Let’s neglect their net worth since that would vary wildly.

    The Telus CEO in 2012 earned $11,000,000 so he would need to pay $11,000 a month to feel the same pinch. That’s about 17 text messages at Telus’ current à la carte rate.

     
    • Doug Penner

      August 8, 2013 at 8:43 pm

      That system very quickly falls flat on its face. If the price of everything was dependent on your income, there would be no incentive to get better jobs, become educated or advance in your career. Soon the world would be full of minimum wage employees and the economy would collapse.

       
      • Kibbles N Bits

        August 9, 2013 at 9:37 am

        Let’s leave the “pay what you can afford to pay” to those items where consumers are being gouged.

        Those on prepaid plans are usually people who are cost sensitive so why are they being charged 50¢/minute with another 50¢/minute for long distance, and 25¢ per text message when it’s clear that monthly plans can offer a much lower rate with nation-wide calling? The catch is that you have to pay $50/month, which is far too much for many people who would never use 1000 minutes or unlimited texting.

        I’d like to see the telecom CEOs paying $250/minute long distance, $50/text message, and $100/MB of data. They’d soon understand what their rates mean to the little guy. Pricing, particularly at the low-usage end, is designed to penalize the very users who put the least load on the network and is nothing short of gouging. They want all their customers to pay a minimum rate. That’s why even prepaid plans expire after 30 to 60 days so, in effect, they’re just less expensive monthly plans with vastly lower value.

        That’s paying for caviar and getting dog kibble in value.

         
  4. Michael Elling (@Infostack)

    August 9, 2013 at 10:20 am

    In competitive markets pricing reflects marginal cost at every layer and boundary point. But that marginal cost is driven not by fixed variables, but rather highly fluid and declining capex/opex (technology, operating and marketing efficiencies) and rapidly changing and infinitely growing demand variables. Demand is truly unlimited when we contemplate “n” sessions/applications and “n” devices per person in an HD, full-duplex, mobile world. Just think about the implications of the latter and what type of industry model will be necessary.

    The “average cost” approach/mentality is is the real failure of the monopoly/duopoly vertical integration service model. It is simply inefficient and unsustainable. The result is negative price elasticities and network effects, retarding of new service/application creation, and a shift from public to private consumption models. The pricing differential between vertical fiber/broadband and wireless (4G) (monopoly, vertical and closed) and Google Gpbs and 802.11 (competitive, horizontal and open….somewhat for Google; see my blog 2 weeks ago http://bit.ly/1670oOx) is 20-150x.

    As we saw with competitive digital pricing models in the 1980s-90s in the WAN, data/internet, and wireless (Oh Canada! thanks to MicroCell’s 10 cent pricing in 1996), the demand elasticities were enormous and ARPU grew 6-25% even as ARPu declined 99% over a 10 year period. This was a result of the positive network effect driven by normal price elasticity (yummy more dog food for less money), private back to public consumption, and new application elasticity driven by third parties. Number 1 is big, 2 is bigger (because the low marginal cost high volume user generates tremendous scale), but #3 has always provided the largest impact.

    Instead of complaining about it, we need to 1) coalesce around a common analytical and semantic framework, 2) push for a very simple objective of equal/open access in layer 1 for any and all providers granted a ROW or frequency (with a quid pro quo that end-users should have open and unhindered rights to access those networks within economic and aesthetic reason, reducing landlords and local govts as undo barriers), and 3) foster market driven balanced (2-sided) settlements in the middle layers whose pricing and fees reflect competitive marginal cost and not the inefficient monopoly or govt mandated access charges of old.

    The latter, which most internet NNr’s abhor, is necessary to 1) clear supply and demand rapidly and bilaterarally between upper and lower layers and between networks/service providers, 2) foster/generate investment and new service creation, and, most importantly, 3) facilitate centralized procurement/subsidization. Much like with the above 3 elasticities, the latter effect will be the largest as corporations will willing reduce their physical, financial and time costs with transactions and commerce conducted over HD VPNs. It’s also a better model in the long-run than the ad-driven and insecure internet model today where bill and keep stifles competition and results in WAN-side crowding out and “monopolization” of the internet.

    All aboard!

     
  5. KL

    August 9, 2013 at 3:58 pm

    This is very true. I know lots of people that worked retail for the telcos or at head office. They all defend their employers. But how easily they forget that they don’t get the treatment that the rest of us do.

     
 
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