Thursday, July 19, 2007

Lessons About Price from CLEC, DSL, VoIP


TeleGeography projects that nearly 30 million consumer VoIP lines will be in service across Europe by end of 2007, up from 6.5 million at the beginning of 2006. In France and some other countries, though growth is low, penetration is high. In others, penetration is low but growth high. Compare that to the U.S. market, where growth is slow and penetration relatively low.

So here's a drop-dead simple observation from what has happened in the U.S. market for new communication services: if you operate in a market with relatively affordable communications, then competing on "lower price" doesn't get you very far. If you compete in a market with expensive communications, "lower price" is just about all you need.

In markets where communications are affordable, blunting the attractiveness of the "lower price" platform, price still can be made to work if there are other attributes are emphasized, such as "pay the same price as you used to, but get free broadband."

"Pay the same price you used to, but get mobility." "Turn a variable cost into a fixed cost." "Make the whole cost more transparent." "Reduce real estate costs." "Work with people you actually know."

In the U.S. market, attackers have not yet succeeded when the incumbents decided they wanted to play; when lower prices were the primary marketing platform and the offering wasn't highly differentiated from what an incumbent offers.

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