Lifeline Accountability

USAC LogoUSAC, the group that administers the Universal Service Funds, has started testing a program that is designed to stop people from requesting multiple subsidies from the Lifeline program.

The lifeline program provides a discount of $9.95 from telephone bills for low-income consumers. A consumer is eligible for Lifeline if they a earn less than 135% of the federal poverty level or if somebody in the household participates in any of a number of assistance programs such as Medicaid, Food Stamps, Section 8 housing, low income home-energy assistance, Head Start and various tribal and state programs.

The way this works is that the telephone company providing the service gives the discount to the consumer and then collects the funds from USAC out of the Universal Service Fund.

A consumer can elect to get the discount from either a home telephone or a cellular phone account, but cannot collect from both. Apparently there is a lot of concern in Washington that people are collecting the discounts for both a landline and a cell phone, because the FCC has instructed USAC to put together a program to make certain that people don’t collect multiple benefits.

And so USAC is currently implementing the National Lifeline Accountability Database (NLAD). Carriers who participate in the lifeline program are required to input data about each lifeline customer including the last four digits of their social security number or their tribal ID and their date of birth. The carrier also has to provide the full address for each customer and this address will then be verified by USAC using the USPS database of valid addresses. Expect big problems in this area because rural addresses are often very erratic in the USPS databases.

As you might imagine, many carriers don’t ask for things like the date of birth when somebody gets telephone service, so they are now scrambling to get the needed information from their customers.

States are being added to the NLAD in groups. The first group of states now entering data includes Arkansas, Maryland, Louisiana, Oklahoma and Washington. Already some states have opted out of the NLAD database including Puerto Rico, Oregon, Texas, California and Vermont. Those states are going to have to come up with some version of this database of their own or else carriers in those states will lose Lifeline funding.

There is no fee to use the database, but use of it is mandatory if a carrier wants to collect from the Lifeline fund. The real cost is in the effort of each carrier to implement and keep this database current – another unfunded mandate.

I suppose that this process will turn up some cheaters and they will be asked to pare back to just one Lifeline subsidy. But one has to wonder how many customers might have been given the discount by multiple carriers without even knowing that this is not allowed? And one might suspect that there are somewhat shady carriers who are collecting the payments from the Lifeline fund without giving the discount to a customer, or possibly even having a customer. I would not be surprised to find some carriers collecting Lifeline for customers who died years ago.

I hope the FCC publishes the result of what they find through this database. As much as I hate waste and fraud, one has to wonder of the cost of implementing this kind of red-tape process is worth it compared to any savings that will be achieved through eliminating duplicate payments. These kind of processes end up becoming permanent new requirements for carriers and make it just that much harder to do business.

2014 Cyber Threats

Where the Internet is stored

Where the Internet is stored (Photo credit: debs)

Georgia Tech just released its annual Emerging Cyber Threats Report for 2014. They have been publishing reports for several years that looks ahead to security issues with data and devices connected to the Internet. As usual, they have summarized a number of threats that companies should be aware of.

Companies Assume the Cloud is Safer than it is. Most companies store their data in the cloud in exactly the same format as it would be stored on a local LAN. This means there is no additional security other than whatever is provided by the cloud provider.

While companies can add additional encryption to cloud-stored data, there is a trade-off between encryption and the accessibility of data by employees, so few firms add the additional encryption.

Unencrypted data can be compromised as has been seen by some of the attacks by the Chinese on companies like Google. But aside from national cyberwar threats, data in the cloud can be hacked in much easier ways, including the next threat which is

Employees are Accessing Corporate Data with Bring-Your-Own Devices. Many companies are allowing BYOD since it saves them a lot of money from buying every employee smart phones and tablets, and it also lets each employee use devices they are comfortable with meaning a lot less training.

BYO Devices create an easy path to hacking into corporate data. For example, somebody hacking, or just coming into the possession of a phone from an employee might have wide-open access to corporate data.

Very Little Security for the Internet of Things. Today we are already starting to see the proliferation of devices that connect wirelessly to networks. This first generation of devices has not paid a lot of attention to security. I am not sure that I care that much if my coffee maker or smoke alarm or sprinkler system are not encrypted. It’s unlikely that anybody would take the time to hack them, and if they did all I might get are some really wet fruit trees.

But the Internet of Things is advancing faster in areas of business automation than it is in the home. The Internet of Things in an industrial setting already includes things like security cameras, devices that sense the presence of various chemicals, thermostats and the equivalent timing devices used during the manufacturing process. And soon the Internet of Things is going to include medical devices and other things that none of us want to see hacked.

And I certainly care if somebody hacks into a heat sensor or water control valve at a nuclear reactor site or hacks into the manufacturing process at an oil refinery.

Mobile Devices Will Become the Focus of Hackers. Until now there has not been a lot of successful malware used against smart phones and other mobile-connected devices. However, these devices are no less susceptible to hacking than are PCs and network servers.

Georgia Tech sees an uptick in attempts to hack into cell phones in various ways. Obviously there be malware that will be distributed in the same manner as with computer spam. But more insidious is the idea of hacking directly into apps so that millions of users download malware with a normal update of a popular application.

And of course, as mentioned above, hacking into cell phones is a lot scarier when those phones have access to work and government networks.

Expect Cyber Attacks Meant to Ruin Corporate Reputations. One thing that has been seen with attacks by foreign governments is that these attacks aren’t always aimed at government sites, but instead at the biggest and most popular companies in the country. The goal is to breach the data and security at big US companies in order to make the general population lose trust in using them. So we have seen attacks leveled at US banks and big companies like Google and Facebook.

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.

Is it Possible to do a Valid Phone Survey?

Telephone surveys have always been a staple of doing research in the business and political arenas. Surveys have been given to random samples of households to find out how the public as a whole feels about various topics. And surveys have been effective. The whole point of a survey is to sample a relatively small number of people and have good faith that the results of the survey represent the opinions of the public as a whole.

But there has been such a large drop in the number of households with landlines that one has to ask if it is possible to any longer do a valid telephone survey. The percentage of households with landlines has declined greatly and nationwide it is estimated to now be below 60%. We recently heard of a community in Colorado that has less than 45% of households with landlines.

The whole point of doing a survey is so that you can rely on the results to tell you something meaningful about the whole population. And there are several aspects to conducting a survey that are mandatory if the results are to be believable. In order to be valid, a survey must be delivered randomly to a sufficient proportion of the universe being sampled.

And therein lies the problem. I think it’s a valid question to ask if households who still use landlines are representative of the universe of all households. I think there is a lot of evidence that they are not representative. Telecom carriers everywhere are reporting that households that drop landlines are younger, more tech savvy and more innovative than households that keep landlines.

And so, in statistical terms, one must ask the hard question if a survey given only to households with landlines is any longer representative of the whole population. And the answer might be sometimes, based upon what is being asked. But for most of the purposes I see surveys used for, my gut tells me that landline households are no longer the same as all households.

For example, say that you wanted to ask how many people in a City wanted to get a gigabit of bandwidth. If you survey households with landlines you are most likely mostly talking to older households and households with kids. You are probably not going to be talking to younger households and tech savvy households who have a lifestyle that eschews landlines. And I think you are going to get a skewed answer that you cannot believe. One would think that a larger percentage of the landline houses would not be interested in gigabit speeds while you didn’t talk to many of the households who would be interested. And so, when you summarize your survey results you are not going to have a believable estimate of the number of people who would be interested in the gigabit speeds – which was the whole point of doing the survey.

There might be a way around this, but it is hard to pull off. If you can find a way to randomly call households in the town that includes landline and cellphone households, then you are again sampling the real universe of households. But this is a problem for several reasons:

  • If you are already in business you are allowed to call any or all of your own customers. But as soon as you try to call in an area of people who are not your customers you must follow the Do Not Call rules, which says that it is illegal to call people who have registered to not get junk calls. You can obtain lists of such people, but it adds expense and cost to the survey.
  • Then you must have access to a database that has a telephone number for everybody, and these rarely exist. Maybe some local government or utility might have such a list, but they can’t share these lists with anybody else due to privacy issues.
  • Even if you have this kind of list it is against FCC rules to call cell phones to conduct a survey. The problem is that there are still plenty of customers on fixed-minute cellular plans and a lot of surveys require 20 minutes or more. If you are going to call cell phones you are strictly breaking the rules, so the first thing you should do is to tell cell phone users they can opt out of the call. But if enough cell phone callers refuse to take the survey, then you are back to having an invalid sample.
  • You can’t solicit cell phone households to give their phone numbers for purposes of conducting a survey. As soon as you do that the sample is not random and we are back to square one.

A non-statistician might think, “As long as the results are close, I am okay with the survey not being entirely valid”. And they would be wrong. If a survey isn’t done properly, then there is no validity to the results. You do not want to make any important business decision based upon an invalid assumption. There are enough ways to fail in business and you shouldn’t add the sin of relying on false assumptions to the list of reasons why your business plan didn’t succeed.

There are other ways to do surveys such as going door-to-door, but other kinds of surveys are usually costlier and they have their own potential pitfalls. We might be soon be approaching the day when surveys are going to disappear from our lexicon of useful business tools.

Will the Real 4G Please Stand Up?

English: 4G LTE single mode modem by Samsung, ...

English: 4G LTE single mode modem by Samsung, operating in the first commercial 4G network by Telia (Photo credit: Wikipedia)

We are all aware of grade inflation where teachers give out more high grades than are deserved. But US cellular marketers have been doing the same thing to customers and have inflated the performance of their data products by calling every new development the next generation. Earlier this year the International Telecommunications Union (ITU) approved the final standards for 4G cellular data. One of the features of the final standard is that a 4G network must be able to deliver at least 100 Mbps of data to a phone in a moving vehicle and up to 1 Gbps to a stationary phone.

Meanwhile in the US we have had cellular networks marketed as 4G for several years. In the US the earliest deployments of 3G networks happened just after 2001. That technology was built to a standard that had to deliver at least 200 kbps of data, which was more than enough when we were using our flip phones to check sports scores.

But since then there have been a number of incremental improvements in the 3G technology. Improvements like switching to 64-QAM modulation and multi-carrier technologies improved 3G speeds. By 2008 3G networks were pretty reliably delivering speeds up to 3 Mbps download using these kinds of improvement. Around the rest of the world this generation of 3G improvements was generally referred to as 3.5G. But in the US the marketers started calling this 4G. It certainly was a lot faster than the original 3G, but it is still based on the 3G standard and is not close to the 4G standard.

And since then there has been other big improvements in 3G using LTE and HSPA. For example, LTE is an all-packet technology and this allows it to send voice traffic over the data network, gaining efficiency by not having to switch between voice and data. One of the biggest improvements was the introduction of MIMO (multiple input multiple output). This allows LTE to use different frequencies to send and receive data, saving it from switching back and forth between those functions as well.

For a while Wi-max looked like a third competitor to LTE, but it’s pretty obvious now in the US that LTE has won the platform battle. All of the major carriers have deployed significant amounts of LTE and most of them say these deployments will be done by the end of this year in metropolitan markets. Speeds on LTE are certainly much faster than earlier speeds using 3.5G technology. But this is still not 4G and around the rest of the world this technology is being referred to as 3.9G or Pre-4G.

But to date there are very few phones that have been deployed that use the LTE network to its fullest. There have been a few handsets, like the HTC Thunderbolt that have been designed to use the available LTE speeds. And Verizon says it will roll out smartphones in 2014 that will only work on the LTE network.

There is a big trade-off in handsets between power consumption and the ability to switch between multiple cellular technologies. A typical cell phone today needs to be able to work on 3G networks, 3.5G networks and several variations of the latest networks including the different flavors of LTE as well as the HSPA+ used by T-Mobile. So, interestingly, the most popular phones like the iPhone and the Galaxy S4 will work on LTE, but don’t come close to achieving the full speeds available with LTE. And of course, nobody tells this to customers.

Starting in September in South Korea will be a new deployment of another incremental improvement in cellular data speeds using a technology called LTE-A (LTE Advanced). This is achieving data speeds of about twice those achieved on the current US LTE deployments. This is achieved by layering in a technology called carrier aggregation (CA) that links together two different spectrums into one data path.

And the US carriers have talked about deploying the LTE-A technology starting sometime in 2014. No doubt when this is deployed in the US some marketer is going to call it 5G. And yet, it is still not up to the 4G standard. Maybe this is now 3.95G. Probably by the time somebody actually deploys a real 4G phone in the US it is going to have to be called 8G.

Upsell Your Customers – What to Sell

One of the best strategies you can undertake to improve bottom line performance is to increase your average revenue per existing customer by getting those customers to buy more of the services that you already offer. These are customers who already know you and trust you and send you a monthly check, so there is no target market that has a higher potential for successful marketing.

Many of my clients have been very happy to sell basic packages to customers for years. But as I have discussed in other blog posts, the traditional products that many carriers sell are becoming commodities and now have market alternatives available. Households have been dropping voice lines for a decade and are starting to drop cable connections. Many of my clients are seeing significant customer losses in their traditional products and things like long distance have withered away. These same clients have a number of products and services available to them that they are not selling. If they are going to stay profitable and remain relevant to their customers for the coming decades they are going to have to find new products to replace the ones they are losing.

If you want to undertake an upsell program you need goals. Do the math, but most of my clients would be very happy if they could increase margins per existing customer by a few dollars a year. So set a specific goal each year and then develop a plan to get there. I will have some future blogs discussing the best ways to upsell, and in this first blog on the topic I will look at the products you can sell as part of this process.

So, what are some of the products you can be selling today? The following is just a partial list that is intended to show you some of the possibilities. I have clients successfully selling all of these products:

Voice. Today, anybody with a softswitch has a score of communications tools that hardly anybody is selling. This includes such things as:

  • Unified Messaging. Almost everybody has this available on their switches and yet hardly anybody sells it. This allows customers to seamlessly move communications across all devices and once customers see how this works many want it. We are no longer talking about the ability to toggle between a cell phone and home phone, but also to tablets, laptops and any other device capable of receiving an Ethernet stream.
  • IP Centrex. Again, anybody with a softswitch can probably offer this service, and if not you can partner with somebody who offers it. This is becoming the new standard product for businesses and many home businesses will also be interested because it can allow them to act like a larger company.
  • Cheap Second Lines. Second lines today can be little more than a number of you deliver the service over Ethernet. So sell $5 or $10 second lines for teens or home businesses.
  • Other Advanced Features. Softswitches come with dozens of features that almost nobody sells. These include features like seamlessly integrating emails and voice mail; integrating voice with computers; advanced screening and call control. I have a few customers who have figured out how to sell these features and they are almost 100% margin if you have already bought them with an existing switch.

Wireless. As long as there is good cell phone coverage in your area, you can now be in the cell phone business through an MVNO program where you resell somebody else’s wireless minutes. This is very different from the resale in the past where you resold a large carrier’s products with little margins. With MVNO you can repackage minutes into your own products, and if you match this up with household Wifi you can have very good margins.

Cable TV. And on the cable TV side of the product line

  • OTT Access. Add over-the-top programming to your channel line-up. Rather than risk losing customer to OTT, let them easily get OTT directly on your video line-up without needing to buy a Roku or Apple TV box. There are numerous vendors around who have created channel line-ups for OTT programming.
  • Cable Portability. Enable your customers to watch the TV programming you sell to them on portable devices around their home like computers, cell phones and pads. If you buy programming from the NCTC coop this is now becoming available.
  • DVR Services. Provide whole-house DVRs, or even better offer centralized DVR where you do the recording on servers at your hub. Centralized DVR greatly reduces the bandwidth you have to send to customers while allowing them to easily record multiple shows at the same time. Centralized DVR also means you don’t have to invest in expensive set-top boxes.

Security. Many of my clients are doing well with security products:

  • Cameras. The simplest product is to sell and install security cameras and then set customers up to monitor these themselves from any ethernet device.
  • Safety Monitoring. Sell, set-up and monitor safety monitors for things like fire, radon and CO2.
  • Burglar Alarms. I have many clients selling ‘traditional’ burglar alarms. This is now easier than ever to do since there are a number of vendors who offer the police monitoring and as a carrier you supply the equipment and get a monthly line rental.
  • Advanced Security. Many business customers will be interested in advanced security systems that can monitor all sorts of things in addition to traditional security.

Cloud Service. Everybody is talking about things moving to the cloud but very few smaller carriers are marketing any cloud services yet. This is an area where a small carrier is going to have to break the mindset that you have to own and control the back office system behind the product. Instead, you need to find partners who offer cloud services and then repackage them to your customers. This will not be a static transaction since these products are going to change a lot over the next decade. But you can’t wait for this market to ‘stabilize’ because it may never do that. So you should start looking for cloud partners today.  Some of these services include:

  • Data Backup and Storage. While there is free back-up available on the web, many customers still prefer the safety of backing up for a fee and there are many for-pay back-up services. We are seeing is that many people would prefer to back-up their data with somebody local rather into the ‘cloud’.
  • Centralized Software A lot of software like Windows, Microsoft Office and other popular products are now available at the cloud level, saving customers from having to keep buying these for every machine they want to operate.
  • Medical Monitoring. This will eventually be a huge business and most people will elect to get monitored. It’s just starting, but worth getting into early.
  • PC Replacement. Let customers use your storage in place of their hard drives, meaning they can get to their data from any device capable of using the software.

Home Automation. I have several clients who are successfully selling and installing home automation systems. These systems are commercially available, but only really geeky customers feel comfortable making this work on their own. So the product is selling / leasing the systems, making it work, and continuing to integrate future customer devices into the systems.

Geek Squad. I have a number of customers, particularly in rural markets that are doing well offering the same sorts of services that the Geek Squad sells. They will go into customers’ homes and help customers manage make their computers, TVs, energy management, and anything else that is electronics based. All this is sold on an hourly or an insurance-type basis.

Voice – Still Relevant

A landline telephone

A landline telephone (Photo credit: Wikipedia)

At the beginning of this year the Center For Disease Control issued a report called Wireless Substitution: Early Release of Estimates From the National Health Survey, January – June 2012. The summary of that report is attached here as Wireless Substitution 2012.

The CDC asks over 20,000 households each year a number of questions associated with health issues, and starting a few years ago they started asking about basic telephone coverage. In 2012 they expanded the telephony questions to include questions about landline and cellphone usage.

The results of the study are statistically reliable. They worked hard to get the sample they use to look like America as a whole and the results are 95% accurate, plus or minus 5%. This means that if they asked everybody in the country these same questions, the results would be within 5% of the results of the survey, which is very accurate for a survey.

Some of what they found was very interesting. The most interesting statistic to me is that 65% of all households still have a landline telephone. As late as 2000 the industry had about a 98% penetration of households. As the chart on the first page of the report shows (showing wireless-only households), landline subscribers dropped slowly until about 2005 and have dropped at a steady pace since then due to migration to cell phone usage.

I have heard for years from experts who have declared the voice business dead. Many new telecom ventures are launching without a voice offering, because they believe it is irrelevant. The most visible of these is Google in Kansas City, who offers only data and cable TV. But I look at a product that is still in 65% of households as something that is still very attractive from the carrier perspective. Cable TV only has a nationwide penetration of just over 75% and even after all of the years of decline, voice is still not that far behind cable.

Voice is a very profitable business. If Google wanted to offer voice in Kansas City they would need to buy a softswitch, which might cost $1 million for a market that large. And they would have to interconnect with the existing PSTN. They would have to cover some one-time costs for each customer like number portability. After covering those costs everything else is profit. Voice can be auto-provisioned so that it doesn’t take any people to activate it. And it can be sold in a very simple package so that there are not a lot of options. Voice doesn’t need to be a complicated product.

From a business plan perspective, not offering voice is leaving a lot of low-hanging fruit on the table. For Google in Kansas City, the breakeven on paying for the voice investment could be measured in terms of a handful of months. After that it would add significantly to the margin per customer and to bottom line.

I have a hard time understanding why Google or anybody would not offer voice. With residential customers it is low-hanging fruit. And voice is still mandatory to get many business customers. Businesses bore the brunt of the competitive CLEC push a decade ago and many of them were burned by having one vendor for voice and another for data. When something went wrong both vendors would point at each other rather than fix the problem. And so a lot of businesses insist on buying all of their telecom products from a single vendor. Further, most businesses care more about reliability for voice than they do price. Voice is the lifeline of many businesses and they want it to be served by a capable vendor on a reliable network.

When Google approaches a business and wants them to buy a 1 Gigabit data pipe they are basically telling that business to keep their voice on copper or relegate it to somebody selling VoIP on the Internet. There are many companies selling VoIP this way and the quality of the connections vary widely. There are good products sold this way, but also some really sketchy stuff, so a business has to be very wary. Most businesses are just not willing to take a chance buying voice from a vendor they don’t know and who doesn’t have people in their market. They have been down that path before.

Most of my clients still offer voice services and all of them do pretty well doing so. My clients who sell to business customers report that voice is still the way to get into the door. Many of these clients are now selling IP Centrex, but that is still a voice product.

And so I look at Google and other providers who have elected to not sell voice and just scratch my head. Are they afraid of being regulated? In most states regulation of competitive voice providers is very light. Do they think voice is just obsolete and not worth the effort? This survey and all of my clients who sell voice demonstrate that this is just not the case. Voice is still very relevant and still very profitable.

Is Wireless a Substitute for Wireline?

English: A cell phone tower in Palatine, Illin...

Last week in GN Docket 13-5 the FCC issued an update that asked additional questions about its planned transition of the historic TDM telephone network to all-IP network. This docket asked for comments on several topics like having a trial for transitioning the TDM telephone network to all-IP, for having a trial to go to enhanced 911 and for making sure that a switch to IP would not adversely affect the nationwide telephone databases.

But the docket also asks for comments on whether the FCC should grant telephone companies the right to substitute wireless phones for wireline phones and abandon their copper network. The docket mentioned two companies that wanted to do this. For example, Verizon said they intend to put wireless on Fire Island off New York City as they rebuild it from the devastation of hurricane Sandy. But AT&T has told the FCC that they are going to request permission to replace “millions of current wireline customers, mostly in rural areas, with a wireless-only product”.

Let me explain what this means. There are now traditional-looking telephone sets that include a cellular receiver. To replace a wireline phone, the telephone company would cut the copper wires, and in place of your existing phones they would put one of these cellular handsets. They would not be making every family member get a cell phone and there would still be a telephone in the house that works on the cellular network.

This make good sense to me for Fire Island. It is mostly a summer resort and there are not many residents there in the winter. It’s a relatively small place and with one or two cell phone towers the whole island could have very good coverage. And if the cell phone tower is upgraded to 4G there would be pretty decent Internet speeds available, certainly much faster than DSL. One would have to also believe that the vast majority of visitors to the island bring along a cell phone when they visit and that there is not a giant demand for fixed phones any longer.

It is AT&T’s intentions, though, that bother me a lot. AT&T wants to go into the rural areas it serves and cut the copper and instead put in these same cellular-based phones. This is an entirely different situation than Fire Island.

Anybody who has spent time in rural areas like I do knows the frustration of walking around trying to find one bar of cellular service to make or receive a call. Cell phone coverage is so good today in urban areas that one forgets that this is not true in many places. I have a client, a consortium of towns and the rural areas of Sibley and Renville Counties in Minnesota. Let me talk about my experience in working with them as an example of why this is a bad idea.

My primary contact works in the small town of Winthrop. I have AT&T cellular service and when I visit him my cellphone basically will not work. I sometimes can move around and find one bar and get a call through, but I can’t coax the phone to get a data connection so that I can check email. And if you go west from Winthrop the coverage gets even worse. AT&T’s coverage maps show that they serve this area, but they really don’t. There are places in the east end of Sibley County that have decent coverage. But there are also plenty of farms where you can get coverage outdoors, but you can’t get coverage in the house.

The traditional cellular network was not built to serve people, but rather cars. Cell phone coverage is so ubiquitous now that we already forget that cellular minutes used to be very expensive, particularly when you roamed away from your home area. The cell phone network was mostly built along roads to take advantage of that roaming revenue stream. If you happen to live near to a tower you have pretty decent coverage. But you only need to go a few miles off the main highway to find zero bars.

And I use the Renville / Sibley County client as an example for a second reason. The people there want fiber – badly. They have been working on a plan for several years to get fiber to everybody in the area. The area is a typical farming community with small hub towns surrounded by farms. The towns have older cable systems and DSL and get broadband, although much slower than is available in the Twin Cities an hour to the east. But you don’t have to go very far outside of a town to get to where there is no broadband. Many people have tried satellite and found it too expensive and too slow. There are any homes still using dial-up, and this is not nearly as good as the dial-up most of you probably remember. This is dial-up delivered to farms on old long copper pairs. And it is to get access to an Internet that has migrated to video and heavy graphics. Dial-up is practically useless for anything other than reading email, as long as you don’t send or receive attachments.

Over 60% of the people in the rural areas in Renville and Sibley Counties have signed pledge cards to say that they would take service if fiber can be built to them. One would expect this would translate to at least a 70% penetration if fiber is built. They refer to the project locally as fiber-to-the farm. There has been a cooperative formed to look at ways to get fiber financed. And any financing is going to require local equity, meaning the people in the County are going to have to invest millions of their own dollars in the project – and they are certain they can raise that money. That is how much they want the fiber. And this same thing is true in rural areas all over the country. Most of rural America has been left behind and does not have the same access to the Internet that the rest of us take for granted.

AT&T’s idea is only going to work if they make a big investment in new rural cell towers. The current cell phone network in rural areas is not designed to do what they are proposing, even for delivering voice. And even if the existing rural cell phone towers are upgraded to 3G or 4G data (which almost none have been), most people live too far from the existing towers to get any practical use from cellular data. Cellular data speeds are a function of how close one is to the tower and, just like with DSL, the speeds drop off quickly as you get away from the hub.

I hope rural America notices this action at the FCC and files comments. Because as crappy as the rural copper wires are today, when the wireline network disappears many rural households are going to find themselves without telephone service. And forget about fast rural data. The AT&T plan is really just a plan for them to abandon and stop investing in rural communities.

Should You Become an MVNO?

This article compares the price of US cell phone plans to those around the world. It shows that the basic packages from the large US providers are in some cases twice as expensive as in other countries.

The small oligopoly of nationwide carriers, being AT&T, Verizon, Sprint and T-Mobile, have no incentive to lower prices. The only thing that will get them to come down in price would be competition or some sort of regulatory action.

The large carriers have created an opportunity for some competition against their products by selling bulk minutes, data and messaging. Companies that buy these bulk minutes are known as MVNOs (Mobile Virtual Network Operators). There are scores of MVNO providers in the country with the largest ones listed here.

The three original MVNOs are TracPhone, Virgin and Boost and who still had over half of the pre-paid cellular phone business in 2012. However, note that Sprint recently bought Virgin and Boost, so perhaps part of their strategy is to create sub-markets and then gobble them up to make more profit.

MVNOs have various marketing strategies:

  • Republic relies on shunting a lot of traffic to WiFi which greatly lowers their costs.
  • Ting lets customers design their own rate plan.
  • Kajeet has plans for kids that are parent-controlled.
  • Solavei uses multi-level marketing similar to Amway.
  • Voyager Mobile competes on price and is selling very low-cost plans.

If your carrier business already has a loyal customer base you should consider becoming an MVNO. Your loyalty will bring you customers, and your existing customers will appreciate being able to save money on cell phones while buying from somebody they trust. As long as you do it smartly there are significant profits to be made in the MVNO business. All that is really needed is having good existing cell phone coverage in your area and the desire to expand your product line.

CCG can help you get into the MVNO business. We can assist you with finding a good deal on bulk minutes, help you design products and prices, help you create a business plan, and help you with technical strategies such as a handphone strategy, and using WiFi to lower costs.

What Do Households Want?

The telecom industry has spent decades bringing residential customers the products we think they want. This has resulted in the ubiquitous triple-play bundle of telephone, data and cable TV. But one has to only spend a little time with a Millenial to know that customers are no longer satisfied with what we have been selling them. While many customers are still buying the traditional products, more and more people are actively looking for alternatives.

And alternatives are showing up. I have one client who has been serving over 20,000 cable TV customers for many years. But for the last year they have been steadily losing 200 customers each month and it doesn’t take a lot of math to see that in a decade they won’t have any cable customers left.

So I am advising clients to start looking at delivering products that people want today and into the future. To help figure out what those products might be, I think you have to start by understanding what customers want today.  I offer the following list of I have made a list of what I think households want today from their telecom provider:

The ability to use multiple devices shared across multiple networks. Customers want to a variety of devices to access the web. They want to seamlessly move from desk top to cell phone to pad to TV to game box. Customers want to be able to move back and forth between the cellular and home WiFi network for voice. Anyone who can facilitate this ability will have an edge.

Faster download and upload speeds. Households want to ability to operate multiple devices at the same time. This requires faster speeds and in some cases QOS.

Mobility. Customers want mobility in both directions, both into and out of the house. They want to be able to start a phone conversation on a cell phone and seamlessly transfer it to a landline when they get home or to the office. They want to be able to access data and do work at home or wherever they are.

Choice of video. Customers want the option to buy only the video they want to watch. And they want to watch it on multiple devices.  

Security and alarm services. Many households want reliable alarm services. They also want to easily operate cameras they can watch remotely.

Integrated entertainment. Customers want to share entertainment content. They want to watch what they want in different rooms and on different devices. They want to be able to move seamlessly from TV to PC to pad to phone. 

Use of cloud-based services. As more and more data is stored in the cloud, customers want an easy way to access and manage the cloud.

The ability to make impulse purchases. Customers want to be able to buy a TV show, a movie, a song and then experience it immediately. People are shifting from buying large monthly subscriptions (cable TV packages) to buying entertainment in small doses.

Help making things work. Households are faced with a confusing array of possible technical solutions and they will value anybody who can make their video, computers, wireless networks and other devices work seamlessly together.