Where are the Verizon Profits?

Verizon Wireless "Rule the Air" Ad C...

Verizon Wireless “Rule the Air” Ad Campaign (Photo credit: Wikipedia)

I’ve been reading over the last few weeks about the controversy surrounding Verizon’s profitability in its wireless versus wireline business. Verizon has been claiming that it is not making very much money from its landline business while critics are charging that Verizon is cooking the books to make the wireline business look bad.

This link is a report on Verizon’s 3rd quarter earnings. In the third quarter Verizon had total revenues of $30.3 billion. This was comprised of $20.4 billion for the wireless segment and $9.7 billion for the wireline businesses. The profit story is quite skewed and they show profits of $6.9 billion for the wireless business but only $155 million for the total wireline business. If you take out depreciation to get operating margins, the wireless business made $8.9 billion for the quarter while the landline business made $2.2 billion.

In looking at these numbers as an outsider I ask myself if they make sense. I probably have more ability to judge these numbers than most people because I am privy to the books of hundreds of telecom companies that are in the same business lines as Verizon.

Verizon claims their losses for landline are so big because of all of their continuing losses of landlines. But all of my clients have been losing landlines and yet many of them are still quite profitable. Let’s look at some of the piece parts of the company to kick the tires on Verizon’s claim of low profitability:

  • Verizon has 5.2 million video subscribers. It’s a pretty well-known industry fact that these are low margin customers.
  • Verizon has 5.9 million FiOS data customers and another 3.0 million DSL customers. And 40% of the FiOS customers were buying the faster speeds of between 50 Mbps and 500 Mbps. Universally, data is a high margin business.
  • Verizon had 4.1 million voice customers on FiOS and 6.8 million voice customers on copper. While voice lines are dropping, and Verizon lost a net 432,000 customers over the last year, the margins on voice should be high.
  • Landline revenues include $3.6 billion in core and strategic services and another $1.7 billion in global wholesale. These product lines include what are the most profitable business lines for most telcos – such things as selling special access circuits, internet backbone connections and fiber connections to cell towers. Most of my clients report these business lines to be very highly profitable.

The overall operating margin for the landline business, at 23% ($2.2 billion of margin compared to $9.7 billion of costs) is very low compared to almost all of my customers. Much smaller telephone companies than Verizon have margins that are somewhere in the 30% – 40% range.

So, is Verizon just very inefficiently operated or are they cooking their books? I consider the following:

  • There is a lot of corporate leeway in assigning costs between operating divisions. I help my clients make these kinds of cost allocations all of the time and there is a wide variety of ways that you can allocate costs that will still fly with an external auditor. So Verizon has a lot of leeway to change the relative profits between the two operating divisions.
  • Verizon publicly has been trying to convince the FCC that they ought to be able to transition customers from copper to wireless. The most visible controversy has been about Fire Island off New York City that got devastated by hurricane Sandy. But Both Verizon and AT&T have made it clear that they would like to find a way to walk away from maintaining older copper.
  • On the surface the profits look too small. This either has to be the result of very inefficient operations or of allocating costs to slew profits. If the wireline business really only has a 20% margin then Verizon would be far better off to spin those businesses off to standalone regional companies who could probably double the margins within a few years.

It’s obviously very hard to know all of the facts within the books of a company as big as Verizon. But my gut tells me that they ought to be making more money on the wireline business. While Verizon claims the poor profitability is due to loss of landlines, that only comprises a small percentage of the landline business. A lot of that business comes from the very profitable business lines of supplying transport for the Internet and for cell sites.

So are they cooking the books? Probably.

Regulatory Alert: Rural Call Completion

Seal of the United States Federal Communicatio...

Seal of the United States Federal Communications Commission. (Photo credit: Wikipedia)

The FCC took action on October 28 to address a growing problem of calls that are not completed to rural areas. The Commission adopted new rules that are aimed to remedy a growing problem of calls that are not completed.

The FCC noted that the situation was “serious and unacceptable” and that every call that is placed should be terminated. The FCC note that “Whatever the reason, the consequences of failed calls can be life-threatening, costly, and frustrating. Rural businesses have reported losing customers who couldn’t call in orders, while families attempting to contact elderly relatives have worried when they hear a ring – but no one picks up on the other end because the call never actually went through.”

The FCC surmises several reasons for uncompleted calls:

  • They think that some providers are not routing to rural areas to avoid higher than average terminating access charge rates. The access rates in rural areas are still much higher than rates for major metropolitan areas, which reflects the higher cost of doing business in rural areas. Terminating rates can still be as much as two cents per minutes higher. However, the FCC has always said that it insists that every call must go through, and if they ever got evidence of a specific carrier boycotting an area due to high rates I suspect they would levy high fines.
  • They think that much of the problem is due to the fact that calls can be routed through multiple carriers. They note that the best industry practice is to limit to two the number of intermediate carriers involved in routing a call. I know there are a lot of new carriers in the market today, such as multiple new companies marketing voice services like IP Centrex who search for the lowest cost way to route calls. One has to suspect that the long distance carriers beneath some of these carriers have gotten very creative in terms of routing calls to save costs.
  • Some carriers have been sending a ring tone to the calling party before the call has actually been completed. One has to suspect that this is done so that the caller can’t hear all of the intermediate switching going on to get the call completed. The problem with doing this is that the caller will hang up after a few unanswered rings, often before the call has even been completed.

The FCC took several concrete steps to fix the problem. These new rules will be effective in a few weeks once the final rules are published. The new rules are:

  • False audible ringing is prohibited, meaning that a telephone provider cannot send a ringtone to the caller until the call has actually been answered.
  • Carriers with over 100,000 voice lines, and who are the carrier that determines how calls are routed must collect and retain calling data for a six month period.
  • Carriers who can certify that they follow best industry practices, such as not routing calls through more than two intermediate carriers, will be able to get a waiver for some or all of the storage and reporting requirements.
  • Carriers who can demonstrate that they have all of the mechanisms in place to complete rural calls can also ask for a waiver from the storage and reporting requirements.

Do the Cloud Guys Get It?

English: Cloud Computing Image

English: Cloud Computing Image (Photo credit: Wikipedia)

I just read an article this week that cites five reasons why cloud computing isn’t taking off as fast as the companies selling the solution were hoping for. The reasons unfortunately make me feel like the cloud industry folks are out of touch with the real world. This is not an uncommon phenomenon in that high-tech industries are run by innovators. Innovators often don’t understand why the rest of the world doesn’t see things with the same clarity as they do.

Following are the five reasons cited in the article about why cloud computing is not selling as fast as hoped, with my observations after each point.

The Organization. Organizations often are structured in a way that does not make the kind of shift to cloud easy. For instance, IT shops are often organized into separate groups for compute, network and storage.

Changes that affect people are never easy for companies. Going to the cloud is supposed to save a lot of labor costs for larger companies, but that is not necessarily the case for smaller companies.  But even larger companies are going to take a while to make sure they are not walking off a cliff. Every old-timer like me remembers a few examples of where major technology conversions went poorly, and nobody wants to be the one blamed if a big conversion goes wrong.

Security. Companies are afraid that the cloud is not going to be as safe as keeping all of their data in-house.

Everything I have read says that if done right that the cloud can be very secure. However, the fear is that not every conversion is going to be done right. You can place your bets with me now, but sometime in the next year or two there is going to be a major ugly headline about a company that converted to the cloud poorly which led to a major breach of customer records. The problem is that everybody is human and not every cloud company is going to do every conversion perfectly.

Legacy Applications. Cloud companies want you to get rid of legacy systems and upgrade to applications made for the cloud.

This is where cloud companies just don’t get it. First, almost every company uses a few legacy systems that are not upgradable and for which there is no cloud equivalent. Every industry has some quirky homegrown programs and applications that are important for their core business. When you tell a company to kill every legacy application most of them are going to rightfully be scared this is going to create more problems than it solves.

Second, nobody wants to be automatically upgraded with the latest and greatest software. It’s a company nightmare to come in on a Monday and find out that the cloud provider has upgraded everybody to some new Microsoft version of Office that is full of bugs and that everybody hates and that brings productivity to a halt. Companies keep legacy systems because they work. I recently wrote about the huge number of computers still running on Windows XP. That is how the real world works.

Legacy Processes. In addition to legacy software, companies have many legacy processes that they don’t want to change.

Honestly this is arrogant. Companies buy software to make what they do easier. To think that you need to change all of your processes to match the software is really amazingly out of touch with what most companies are looking for. Where a cloud salesman sees ‘legacy system’ most companies see something that works well and that they took years to get the way they want it.

Regulatory Compliance. Companies are worried that the cloud is going to violate regulatory requirements. This is especially true for industries such as financial, health and the power industries.  

This is obviously a case-by-case issue, but if you are in one of the heavily regulated industries then this has to be a significant concern.

I hope this doesn’t make me sound anti-cloud, because I am not. But I completely understand why many companies are going to take their time considering this kind of huge change. There is no product ever made that should not be taking their customers into consideration. When I see articles like this I feel annoyed, because the gist of the article is, “Why won’t these dumb customers see that what I have is good for them”. That is never a good way to get people to buy what you are selling.

Make Being Local Work for You

market 1

market 1 (Photo credit: tim caynes)

Today’s guest blog is written by Mindy Jeffries of Stealth Marketing. She will be writing a series of blogs that will appear here occasionally. If you want to contact Mindy you can call her at (314) 880-5570. Tell her you saw her here!

I look at small telephone companies and as a marketer I see tremendous marketing potential due to their advantage of being local. I would have a blast with marketing in these markets. Here are the questions I would ask myself and my team:

  • What is going on local in my community?
  • Can I create something that would be a resource to my community?
  • What could I do to bring my community together in the new virtual world? What could you do that is useful from the customer’s perspective?

I would find something the community needs, such as listing of local events and get it on the web. Then, using social media you have to advertise news of the local application that you have created and the content within.  This will start bringing people to your site to check out the latest news on what to do around town or the weather or whatever you choose.

Once you get your current and potential customers coming to your website or social media site for useful information, then the next step is to ask them for their email addresses. At this point, you don’t care if these people are customers or not, just provide each person with useful information. As you create value, your prospects and potential prospects will give you their information including email addresses because they want to interact with you.

Then you start housing this information in a database application that can automate, score and deliver very customer-specific news and offers to your prospects and current customers.  Your prospects get offers for new services, and your current customers get retention offers, or news on programing or movies or VOD coupons.

Start simple, but there are lots of ways to take a program like this to the next level.  You can incorporate your advertising clients and distribute their offers as well. This could be your retention program!  Some examples might be coupons for the pizza provider in town or coupons for the local theater.

Your imagination can run wild, but today digital environment exists to help you organize and filter messages and marketing.  Social media have changed the world.  Instead of always talking about you and your services, you need to look at the world through a customer/potential customer lens and asking the question from their perspective – what can I do through the resources I have, to make myself useful to them?

It’s an exciting times to be a marketer!

 

The Infrastructure Crisis

infrastructure revealed

infrastructure revealed (Photo credit: nicolasnova)

This country has an infrastructure crisis. A lot of my blog talks about the need for building fiber since I consider fiber as basic infrastructure in the same way that roads, bridges and sewers are infrastructure. Any town without adequate fiber is already starting to get bypassed in terms of opportunities for its citizens and businesses. And this is only going to get worse with the upcoming Internet of Anything, because only fiber is capable of carrying the vast amounts of data that are going to be generated.

But this country has a crisis with every kind of basic infrastructure. We are not spending enough money to keep our roads, bridges, power, water and other basic infrastructure from slowly deteriorating. The backlog of infrastructure upgrades needed just to get the country back to adequate is staggering.

It has historically been the purview of government to take care of a lot of this infrastructure – and while the federal government takes care of interstate highways and some bridges, the obligation for keeping up with infrastructure falls largely on state and local governments.

And those government entities do not have anywhere near the borrowing capacity to begin tackling the cost of fixing everything that needs fixing or updated. And local property and other taxes would have to be increased a huge amount to pay for it all. Even if there was a taste for doing the needed upgrades, the recent economy has brought many local governments up against their borrowing limits. And we are starting to see municipal bankruptcies, small and large, which is a sign that the municipal borrowing system is cracking around the edges.

And the ability for municipal entities to borrow could get much harder. The recent Detroit bankruptcy is just the tip of the iceberg in terms of large cities that are buckling under accumulated pension costs. And the nonsense going on in nonsense going on in nonsense going on in Washington with the federal debt ceiling might drive up interest rates.

Given all of these factors one has to ask if government financing is the best way to build infrastructure. There certainly are mountains of evidence that municipally funded projects cost more than similar projects constructed by private firms. And while municipal bond interest rates sound cheap, bond money is extremely expensive money due to the additives to bond borrowing such as capitalized interest and debt service reserve funds.

If this country has any hope of putting a dent in the huge infrastructure hole we find ourselves it is going to have to come from bringing private capital to bear on the problem. Where there is a financial crush in the public sector today we are looking at huge amount of private equity on the sidelines today just waiting to be invested in good projects.

The trick to attracting private money for infrastructure is to find a good way to forge public / private partnerships. Unfortunately, there is one key missing component that is making it hard to bring private money into infrastructure deals. And that is development capital.

Development capital is the money that is spent up front in a project to take it from concept to working plan. This includes such things as creating business plans, doing basic engineering, identifying hurdles and solutions – all of those early steps that private equity expects to be done before they will consider a project. In layman’s terms, private equity investors expect somebody else to have done the legwork to prove the feasibility of a project before they will consider it.

We have a development capital gap in this country. There are very few entities today that are willing to tackle spending the development capital needed to prove infrastructure projects. And so hundreds, even thousands of worthy projects are going undone because nobody is willing to spend that first 1% of a project needed to get it started.

What we need is a person or a group of people to step up to provide development capital. This could be government. For instance, for the cost of building one bridge they could instead provide the public development capital to build one hundred bridges. So state governments might be a great place to get this done.

It could also be done privately, meaning that somebody needs to create funds that strictly are development capital. Such funds could produce fantastic returns. But this is a concept that is alien to US investors.

But somebody needs to figure out how we get development capital or our infrastructure is going to continue to deteriorate until we have no choice but to fix it directly with tax dollars.

A New Model for B2B Sales

Earlier this year the team of Google and CEB published a report that shows that over the last decade that business customers have drastically changed the way they work with vendors. Historically there was a very classic sales model that defined how vendors sold things to businesses, but with the Internet the entire sales process has changed.

Historically sales have been done by the book, and there literally shelves full of books about sales that laid forth the classic sales process. These books preached that the sales process involved the following steps:

  • Identifying the sales opportunity
  • Qualifying the opportunity
  • Making a proposal
  • Closing the sale
  • Post sale implementation and follow-up

But the Google and CEB report says that businesses, on average, are already 57% through the historic sales cycle before they first talk to a vendor today. And this is all due to the Internet. A customer is able to do now fully research the products and solutions they are interested in. They can read reviews from other similar companies who have already bought what they are looking for. They can compare prices and service from alternate vendors without talking to any salespeople. And by the time they contact a vendor they are mentally much of the way through the sales process and generally are ready to make a choice.

So how does this change the way that companies sell telecom services? I would suggest it means some of the following.

  • Listen to Your Customers. First, it means that your salespeople need to become adept at listening, something that is not always a salesperson strength. If a potential customer has already done their research then they want to discuss the nuances of the products they are interested in and they want to ask questions. They do not want to start at the beginning of the above sales process. So ask your customers how much they already know about what you are selling to save you both time.
  • It’s Harder to Sell on Price Alone. Customers who have done their research are already going to have a price in mind, and this makes it hard to sell on price. So instead you need to be able to define the value proposition of why a customer should buy from you and not one of your competitors. Telecom companies are famous on selling by price alone since we inherited a world with many services greatly overpriced by the incumbents. But web research is beginning to kill price as a differentiator and so you better have other reasons why a customer should pick you.
  • Be Knowledgeable. If customers are doing their homework then your salespeople need to really understand the products. Again, this is another reason you can’t just send out salespeople who are just going to offer a discount from the current monthly telecom bill. It means sending out somebody who really understands the nuances of what you are selling.
  • Master Consultative Selling. The most effective sales technique to use with a knowledgeable customer is consultative sales. This means that you are not there to sell them a product, but instead there to find them the solution that best fits their telecom needs. This is the one advantage that a good salesperson can have with a customer who has done their homework. Such a customer will understand only so much about telecom products and is usually going to be willing to listen to creative solutions that might be different from what they thought they needed.

To sell in a consultative way rather than on price alone means you are going to need a well-trained sales staff, and probably are going to have to pay them more than the traditional salesperson. But the upside is that customers become very loyal to a vendor who helps them solve problems. For many telecom firms, that kind of loyalty is going to be a refreshing change.

Are Telephone Features Still a Product?

English: Original Caller Identification receiv...

English: Original Caller Identification receiver installed at Boeing/PEC facility in Huntsville Alabama (Photo credit: Wikipedia)

I just read another blog that asked why businesses bother paying for voice mail any longer. And it got me to thinking. Why are companies still offering and charging a lot for telephone features in general?

Let’s face it, traditional TDM voice is dying. It may take a few decades for people like my mother to give up her home phone but, but residential voice is going to continue to shrink and shrink until it becomes a pretty marginal product. Don’t get me wrong about the need to still offer voice – 60% of homes and most businesses still have voice – so a full-service carrier needs to have a voice product.

But a lot of homes only carry a phone line to have a 911 phone or to be able to fax. And more and more businesses are going mobile instead of pouring big dollars into fixed phone systems.

What no longer makes sense is to have a large pile of very expensive features and options that people must add to basic telephone service. You are going to drive your voice customers away even faster than they are already leaving if you are still selling voice mail and caller ID as expensive additives to a voice line.

The blog I read asks why any businessman even bothers to use voice mail today, and it’s a great question. The people who know you can always find you some other way to reach you like text or email. I know for myself that the very last and worst way to find me is to leave me a voice mail. And when I get somebody else’s voice mail I rarely leave a message any more, but instead hang up and send them an email or sometimes a text (I am slow with my thumbs). And so voice mail is turning into the way that you communicate with strangers. Unless you are a salesperson, you are not going to find this all that useful.

The cell phone companies have it right. They don’t even offer features and everything they have is included in the basic phone. Granted they have convinced people to pay a huge dollar premium for mobility, but the line they sell you includes all the features. And with smart phones people can easily customize their calling all they want by adding phone apps.

I have been advising for over a decade for my clients to include most features automatically in their base product. Telephone carriers are competing against cell phones or the cable company, both of which give away most features.  The goal today with a voice product is to keep your customers as long as possible – not to nickel and dime them to death with features prices from $1 to $5 each per month. So look at your product line in terms of being customer friendly and competitive – and stop thinking that features are a way to make money.

There might be one feature package that might still make sense as a standalone product – a robust unified messaging platform. But this can’t just be glorified voice mail or nobody is going to pay extra for it. It needs to include the whole suite of tools that make voice usable across all platforms – follow-me service, voice to text, text to voice.

And rather than charge extra for features for your business customers you should be offering them IP Centrex that has all of the traditional features plus all of the features of cell phones built-in. If you can’t give your customers a business line that will do everything they want they will eventually bypass you in favor of somebody who will give them what they want. Note that there are now a few dozen companies that are selling IP Centrex lines over any web connection. So you cannot count on keeping your business customers just because they have always used you.

Opportunity Abounds

English: colorful fiber light

English: colorful fiber light (Photo credit: Wikipedia)

I am often asked about ideas for building a fiber network that can make money. Right now in this country there is a huge opportunity that almost nobody is taking advantage of. There have been tens of thousands of miles of middle mile fiber built in the last five years using federal stimulus grants. Additionally there are other networks around the country that have been built by state or other kinds of grants. And there has also been fiber built to thousands of rural cell phone towers.

These networks are largely rural and in most cases the networks have only been used to connect small rural towns and to serve anchor institutions, or built to go only to cell towers. If you look at these networks closely you will see miles and miles of fiber that goes from county seat to small town to county seat with a few spurs serving schools, health facilities, junior colleges, city halls and cell towers. But for the most part the fiber has not been used to serve anything else.

The whole stimulus grant was cooked up quickly and was not a well-planned affair. They tried to make awards in every state and we ended up with a true hodge-podge of networks being built. In some cases it looks to me like networks to nowhere were built, but a large percentage of the stimulus grants went through rural areas where there are nice pockets of customers.

For years I have advocated a business plan that builds fiber in short spurs in situations where there is guaranteed success. For example, one might build to one large business whose revenue will pay for the fiber route. Or these days that is most likely going to be a cell tower. And so building to that single guaranteed customer can be a successful business plan.

However, any carrier who stops with that one customer is missing the real profit opportunity in such a build. The best business plan I can find today is to build to an anchor tenant and then doing everything possible to sign every customer that is passed to get to that new tenant customer. In economic terms you can think of the cost of the fiber build as a sunk cost. Generally in any business when you make a sunk-cost investment the goal is then to maximize the revenue that can be generated by the sunk cost.

And so, if the anchor tenant you have found can justify the fiber build and pay for the sunk-cost investment, then adding additional customers to that same fiber investment becomes a no-brainer in economic terms. The extra customers can be added for the cost of a drop and fiber terminal device, and in terms of return, adding a home or small business might have a higher margin than the original anchor tenant.

They key to making this business plan work is to keep it simple. You don’t need to be in the triple play business to add residential customers. Offering a very high-speed data connection for a bargain price is good enough to get a good long-term customer with very little effort required by the carrier. If you happen to already be in the triple play business and have all of the back-office support for such customers then you can consider this as an option, but offering only data is a profitable business.

And so the business plan is to look around you and see where there are facilities built but underutilized. The key to making this work is to get cheap transport to reach the new pocket of customers. By law the stimulus grants need to give cheap access to somebody willing to build the last mile. But commercial network owners are going to make you a good offer also for transport if you can bring them a new revenue opportunity in a place they didn’t expect it. So the key is to first work with the network providers and then look at specific opportunities.

And you possibly don’t even need much, if any staff to do this. There is already somebody maintaining the backbone fibers and they will probably be willing to support your fiber spurs. And it’s quite easy today to completely outsource the whole ISP function. The only thing that is really needed is the cash needed to build fiber spurs and connect customers. The more you have the better you can do, but you could build a respectable little business with only a few hundred thousand dollars.

If you are in a rural area there are probably dozens, and maybe hundreds of these opportunities around you if you look for them with the right eye. As the header of this blog says, opportunities abound.

The Latest in Home Security

Home security

Home security (Photo credit: Wikipedia)

Anybody following this blog knows that I have been promoting the ideas of telecom providers getting into the home security business. I see this as one of the ways that you are going to keep yourself relevant with the advent of the internet of things.

Modern Home security centers in the homes are already a lot more than that, and they can also be the platform used for home automation and energy management. There are numerous devices being made that function as the gateway to any ethernet device in your home that can be connected with wires or with wireless technologies. These main consuls then can interface with the user through smart phones or other such devices.

Of course home security still does the basic stuff. You can set up your house with monitors on doors and windows that will tell you when something changes. But modern security systems can do so much more. Here are some examples:

  • Everything can be tied into your smart phone so that you have access to your security system at all times. You can use your phone to change settings, to peek in on any of the cameras or even to speak with somebody who is at your front door even if you are not at home.
  • You can tie normal security features in with motion detectors. This will tell you if something is moving in a room that ought to be empty. But it can also do cool stuff like alert you when anybody approaches the external doors in your house. So rather than wait until somebody has broken in you can be alerted when somebody is at one of your doors. It’s not all that useful to know when the mailman comes every day, but it’s very comforting to know that you can be alerted when somebody is at your back door at 2:00 in the morning.
  • The systems can be tied into a number of other kinds of monitors. Certainly you can tie this into smoke detectors, but you can also monitor if the temperature changes drastically in any room. You can monitor for carbon monoxide levels (and if you are really paranoid, for many other kinds of chemicals and gases).
  • New systems include voice recognition and you can talk to your system. This allows you to change settings on the fly. For example, you can just tell your system that you will be working in a certain room and to ignore monitoring that room for a while. But your security system can then help with those absent-minded people like me. If you turn off the security in an area for a while, you can set it to ask you later if you still want it off.
  • Your system can get to know you. Sophisticated systems are starting to use things like face recognition and gait sensors so that your security system will know it’s you walking around on the lawn at midnight and not a stranger.
  • And it’s all cloud based, meaning that you can get an alert if the power goes out on your system while you are not at home. Turning off the power to a home has always been a common burglar technique for confounding a security system, but the system can be set to alert your smart phone every time the power goes out.
  • And of course, there are cameras to view or record everything. You can set your cameras up with some smarts to only view unusual events or events of a certain kind so that you are only storing views of things that matter. But the cameras give you the ability to monitor pets or babysitters while you are not at home. With cheap cloud storage you can record a lot of video.
  • There are now smart door locks that are tied to the security systems. These can use some combination of proximity to cell phone, voice or face recognition to allow keyless entry.
  • For those times when you drive away from home and can’t remember if you set the alarm a certain way, your system can be tied into your smart phone’s GPS and it can ask you if you want the alarms on once it senses you away from the home. Side benefit – you are always tracking the location of your cell phones if you want to see where your kids really are.
  • You customers can monitor it all themselves. It’s no longer necessary to have the security system tied into some center that will alert the police. A customer who is never without their smart phone can take a more active role and get all of the alerts if they so choose.

Most of these changes have been introduced within the last few years and one can imagine that many more changes will be coming in the next decade. So the best platform is one that is software driven and that can be upgraded to accept new devices and new features as they hit the market.

Finding the Right Partner

Yesterday I talked about public / private partnerships since that seems to be one of the more common partnerships in telecom these days. Today I am going to talk about how you find a partner that you can co-exist with to make a viable long-term venture.

It’s not as easy as it sounds. I had a partner once who said that finding a good business partner was as hard as finding a good marriage partner, and I think he was probably right. I have seen hundreds of telecom partnerships and a lot of them become totally fractious and contentious over time due to the partners growing apart over time in terms of goals, personalities or vision.

But I have been a part of some very good partnerships and I have seen other good ones, and having also seen unsuccessful partnerships I can talk about what seems to work and not work. Here are some things to consider when forming a partnership:

  • Power and ownership share needs to be equitable based upon up front contributions and ongoing contributions. I have seen partnerships who decide up front to split things 50/50 but then resentment grows over time if one of the partners is doing most of the work to make the business successful. It’s okay for the partnership to be disparate and have one partner contribute more than the other, but this ought to then be recognized in terms of ownership and profit distribution.
  • You must share the same goals. This is one of the biggest problems that I see in public / private partnerships in that a commercial company and a municipality have very fundamentally different ideas of the way that things can work. As an example, a municipal venture is considered successful when it is cash flow positive, but a commercial venture needs to make more than that to meet return expectations. If both partners don’t have the same goals, then one partner is going to be disappointed with any outcome.
  • Make sure everybody understands their roles. In a business not everybody can be the boss. Partners need to decide up front will be responsible for what and then insist that partners fulfill their obligations.
  • You must be able to communicate with your partner. Partners must be able to tell each other the whole unvarnished truth. It takes both partners to make a business work, and failure to communicate is always going to lead to trouble down the line.
  • You must be able to resolve differences. In a more traditional business the owners or the Board is ultimately in charge and they can resolve disputes by fiat. But if a two-partner firm can’t resolve an issue the business can become paralyzed. Being able to iron out differences is probably the single most important requirement for a good partnership.
  • You must trust each other. This goes back the statement that a business partner needs to be like your wife or husband in some aspect. Generally all of the partners in the firm can spend the firm’s money, can commit resources, can make decision. If you don’t trust your partner fully – trust them to be honest, to not cheat you, to do what they say they will do, to tell you the truth – then the business is eventually going to get in trouble. Partners shouldn’t be spending their time watching each other, but in furthering the goals of the business.
  • Finally, partners have to be flexible. In telecom a business rarely goes the same as the original business plan and so the partners must be flexible to change as the world changes around them. I have seen too many partnerships that end up quibbling over goals, processes or procedures that were spelled out in the original partnership agreement rather than making the needed changes to make the actual business a success.

I would hope that this list makes it obvious that you have to spend a lot of time up front talking through these issues before leaping into a partnership. For example, you should talk up front how you will go about resolving your first impasse when it pops up. Far too often I see businesses partnering with somebody because they have the same general goal, but if they can’t meet the kinds of goals I have discussed above they are going to have to have a very hard time sustaining a business.