Thursday, July 27, 2017

Underestimating Demand is as Bad as Excessive Optimism

The launch of AT&T’s DirecTV Now streaming service reminds me of its launch of the Apple iPhone. As you will recall, the iPhone launch appeared to have caught AT&T somewhat by surprise, in terms of the added usage of its data network.

Roughly the same thing seems to have happened with the DirecTV Now launch. In both cases, customers complained about quality issues that appear related to capacity to support the new services.

You can guess what comes next. AT&T took steps to fix the capacity problems related to iPhone customer behavior patterns, and likely has spent the last few months figuring out how to better support scaling of its DirecTV Now service as well.

You might well expect a renewed growth spurt, as a result. It’s just a reminder of how networks are dimensioned: you have to make assumptions about consumer behavior. Overprovision and you waste capital. Underprovision and consumers will have a troubled experience. It is hard to get it right, for new services that prove quite popular.

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