Keep it Simple

I spend a lot of time looking at the products that carriers sell and one conclusion I reach is that simpler is better. I have found carriers with a multitude of options, with dozens of data products, many cable TV options and even many voice options. And I think I know where this came from. In the 90’s there was a movement to ‘give the customers more choice’ and I think that led some carriers down the path of customizing products for every customer who asked for something different.

But that does not seem to make sense for a variety of reasons. In probably the most extreme example, I know one carrier who has over forty Internet data products. This leads me to ask if a company really needs to be selling a 10 mbps, a 15 mbps, a 17 mbps and a 20 mbps data product? And the obvious answer is no. There is not enough practical difference between these products to justify having different ones.

It makes a lot more sense to have just a few data products. The companies that I see doing the best at selling data have three of four products, which can be characterized in terms of speed and price as low, medium and high, with maybe a fourth thrown in for a lifeline product. And they will have just a few cable TV options instead of the dozens of packages that I see at some companies. The same with voice, there might be a basic line and a line with unlimited long distance.

There are a number of reasons to keep it simple:

Customer service. It is important that all of your employees, from top to bottom in the company know your products. To some extent every employee in your company is a salesperson when they talk to the general public at or away from work. The basic triple play products are the core of what most carriers sells for a living, and if your employees don’t know what you sell then they can’t talk about your product to the public. As an example, every employee at your company ought to be able to instantly quote the latest prices and speeds for your Internet data product. This is an easy challenge to test – go out today and ask the next few employees you see if they can cite the speeds and prices of your basic residential and business data products. I would venture to say that most companies are going to fail this simple test.

Let’s face it – the success of your business depends on you being able to make a convincing story to customers of why your product is a better deal than the competition. For data products that difference is going to boil down to speed and price. Sales don’t just happen on the customer service lines, the opportunity is there every time one of your technicians is fixing something or an employee is standing in line at a grocery store. So make the products simple and make sure your employees can all cite your products and prices.

Sales, marketing. It’s much easier to market a simple product line. If you can summarize your pricing with a minimum of copy then you can spend your marketing efforts on talking about the benefits of your products and how you are a better deal than the competition.

And it’s certainly a lot easier to take an order from a customer when you don’t have to explain a ton of options. I can’t imagine the effort that is required in a company with dozens of data options when it is time to explain the product to a new customer or to discuss upgrading to an existing customer. Keeping it simple makes the whole sales process easier.

A simple product line also makes it a lot easier to build a customer portal so that customers can change products on their own. I just wrote last week how I recently went to AT&T wireless to change my voice plan and I was a bit overwhelmed by the number of options I had. I’m in the business and if I felt that choosing an option was a lot of work I wonder how somebody unfamiliar with the products in our industry must face these kinds of choices.

Provisioning. Whether you provision manually or have software that allows you to automatically provision products, having a simple product line is going to cut down on errors in provisioning. I talk to employees at carriers all of the time and a common problem I hear is that customers don’t get the products they thought they were signing up for. And when that happens you have started out on a sour note with a customer. With a simple product line, provisioning becomes a lot simpler because there are only a few options that customers can buy.

I do have a number of clients who have simple product lines. But even with those companies I will often see things like a phone product priced at $18.62 and it makes me wonder why it’s not priced at $18.99 or $18.49 or some number that everybody can remember. If you want your own folks to remember the prices, keep them simple as well.

Some companies seem to get this. I look at Google in Kansas City and their product line is downright sparse. They literally only have a tiny handful of products. I have written about them before and I think they have taken simplicity too far. But it’s easy to understand how much easier this has made their launch considering that they are new to the business.

So take a look at your product list with an eye to see if it’s simple and easy to understand. Or better yet, get some people outside of your staff to look at it. If the general public gets your products then you probably have it right.

 

 

Will Telecom Investing Become Sexy Again?

Image representing Google as depicted in Crunc...

Image via CrunchBase

Will the fact that Google is investing in fiber make it sexy again to invest in telecom? The last time that there was a big boom in investing in new telecom ventures was the late 90’s. At that time there were dozens of start-up CLECs, a number of which were able to issue IPOs and go public. Every smart investor had some telecom stocks in their portfolio.

But the new CLECs and telecom firms of that time almost all went bust with only a few of them still around today. There are a number of reasons for the bust. The business plans of many telecom startups depended upon arbitrage – using the facilities of the incumbent rather than making infrastructure investments. And many of the telecom start-ups had bad business plans that expanded into too many markets too quickly to do it well. And somehow the telecoms got tied in with the dot.coms and when those went bust the telecoms followed them down the tubes. And investors lost a lot of money and got soured on telecom. The lasting effect of the bust was that it became unsexy to invest in telecom.

And almost nobody has invested in telecom since then. It’s hard to find anybody who doesn’t recognize that the US is falling behind the rest of the world in telecom infrastructure, namely fiber. Since the telecom bust the only ones investing in fiber to whole communities have been Verizon, some municipalities and some smaller independent telephone companies. Verizon’s decision to build fiber was a bold one, but it didn’t drag anybody else along. And Verizon’s fiber build dwarfs all of the rest of the builders collectively. The vast majority of the country does not have fiber but wants it badly.

But now Google comes along and is boldly investing in fiber in large communities – Kansas City and Austin. What they are telling the world is that there is profit in fiber, profit in infrastructure investing. Kansas City was touted as a trial, but by having announced Austin so quickly it is obvious that Google thinks that their experiment is working. And while Google has made an announcement for Provo, Utah, that is a one-off since they were able to pick up an existing fiber network and customers at a very good price.

I keep hearing that there is a lot of money today on the sidelines, meaning money waiting to get invested in good projects. And this is interesting to me since there is such an obvious need in this country today for new and upgraded infrastructure. In addition to a huge need for fiber networks there is a huge demand for clean energy generation plus the usual things like bridges and roads. Perhaps at least to some small degree the Google decision to boldly invest in infrastructure can be the first step towards unleashing the private equity in the country to invest in infrastructure again. Google thinks such investing can be profitable and obviously it is good for the country. Will others follow?

Two Fiber Networks?

Image of Austin, Texas

Image of Austin, Texas (Photo credit: Wikipedia)

The conventional wisdom in the industry is that two companies would never invest in side-by-side fiber networks to serve residential customers. I have had this conversation many times with clients who were planning to build a fiber network and who were worried about the response of the incumbent providers. Everyone has always believed that the first fiber builder wins because there is not enough margin in the residential market to support two fiber networks. AT&T has shown that conventional wisdom to be wrong by announcing that they will build a second fiber network in Austin as a counter to Google’s announcement to do the same.

This is not without precedent, although on a much smaller scale. The City of Monticello, Minnesota built a fiber network to pass every home and business in the City. The municipal fiber build was prompted by the fact that the City had some of the highest telecom rates in the country. Soon after the City built their network, TDS Telecom, the incumbent telephone company built a competing fiber network.

And as expected, both fiber providers are not faring well. After building fiber TDS decided to win back customers with an aggressive price war. Charter, the incumbent cable company also got into the price war fray. And so customers in Monticello are benefitting from a price war while all of the companies are underperforming.

It is fairly easy to understand TDS’s motivation for building the fiber network and for the price war. The company serves numerous other towns like Monticello and I see their response there as a clear warning to anybody else who is planning on overbuilding their serving territory. It is also clear that they are hoping that the City will give up and leave the fiber business.

And now we are going to see this scenario play out in the much bigger market of Austin. Google already overbuilt one AT&T market in Kansas City and one can easily envision Google overbuilding many other large cities. AT&T’s response in Austin is the same as TDS’s response in Monticello. AT&T has made it clear to Google and others that they are not going to side idly by and watch their major markets go to somebody else.

So it will be interesting to see the impact of AT&T’s announcement. It’s possible that the announcement will cause Google to pause and not build in Austin. Certainly they will not do as well as expected if there are two fiber networks. It’s also possible that both companies will build fiber and we will see side-by-side competition with two fiber networks and the cable company – the kind of competition we have never seen in a major city in the US.

But the real impact of AT&T’s announcement is going to be felt everywhere else. One has to wonder what kind of impact AT&T’s announcement will have on any company, Google included, who is contemplating building a fiber network in a large city. Google has very deep pockets and might proceed anyway, but almost any other company would not be able to afford the much lower returns that come with hard competition.

While this announcement might result in real competition for the citizens of Austin, it also might have the effect of stifling anybody else from trying to build fiber in a large City. This announcement could result in killing anybody from building fiber in large cities due to the fear of a similar reaction. While hearing about two companies wanting to provide gigabit fiber sounds like a good thing, the long-term consequence of this might mean less overbuilding, less fiber and less competition.

And I don’t know that AT&T had any choice. Their only other option was to watch their large markets go to an aggressive competitor. Nobody knows what Google plans to do, but some have speculated that they might build in most of the major cities. Now we’ll just have to watch this one play out, so pull up a chair. This should be interesting.