February 29, 2008 Wireline Carrier Product Idea

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Wireless Carrier Idea

Low Hanging Fruit

Wireline carriers have suffered declines in their established telephone line services, attributed to the rapid growth of mobile wireless telephony as well as Voice over IP (VoIP) services which serve as replacements of existing wireline services. This phenomenon has made itself felt in the investment community, who consider that wireline carriers will continue to see their cash flow erode, and have made forecasted earnings predictions for carriers based on that premise.

What would happen if the wireline carriers found a new way to package this tried-and-true service? It is a familiar service that still delivers the best voice call quality and reliability (in excess of 99.999%), and the carrier that finds a way to slow down or eliminate the shrinkage will find themselves in an excellent competitive position. I’m mooting a humble concept that I would buy immediately (and keep), if it were offered in the marketplace.

So what is this concept? It springs from a combination of two issues, first the emergence of the "Do-Not-Call" list to slow down the avalanche of telemarketers, and second, the need for marketers to have more granular data about consumers.

The "Do-Not-Call" list was an instant success, from a consumer perspective, evidenced by the huge participation of the public. More than 50% of the phone lines in the US were registered in the first 90 days of the program. Clearly, the public does not want to be marketed to on a service that they have to pay for. This is illustrated by the relative lack of concern when it comes to junk mail. The consumer doesn’t have to pay for the mail delivery.

The "Do-Not-Call" list failed to stop all solicitations, however, due to Congress writing themselves an exemption for political solicitations, plus the one they wrote for charity solicitations. As a result, during a political year, you can get hundreds of automated message calls to your wireline service. Most consumers who signed up for Do-Not-Call, I suspect, are not happy with that situation. I know I am not.

The second issue stems from the fragmentation and proliferation of media channels in the age of the Internet. Twenty years ago, marketers had fewer options when it came to advertising, and media content was concentrated onto a small number of networks. This means that justifying media advertising has become much more difficult, as the audience is much smaller for each content source. Thus, understanding the audience demographic has become critical to success with marketing campaigns.

To Summarize:

  1. Consumers don’t want solicitation calls (any type) on a service that they pay for
  2. Marketers are prepared to pay for better information about consumers

The product model is the following:

The phone service would act like any regular wireline circuit except:

  • Calls made to the service could be charged against the originator by the minute, similar to the 1-900 services of the past, at the discretion of the consumer. The revenue from the charge would be shared by the consumer and the carrier.
  • Callers would be advised that charges may be levied, and how much per charging interval, prior to ringing through to the consumer. The consumer never gets a ring unless the caller accepts the rate.
  • The consumer can set the rate on-line
  • The consumer can identify callers who would never be charged on-line (friends or family, apologies MCI!)
  • Consumers could participate in an extensive "demographic" questionnaire (or choose not to), which the carrier could make available to marketers for an additional fee.
  • Marketers could identify consumers that would be receptive to a product or service, as well as the cost of making the contact.

The carriers would see increased revenues from the standard service charge, incremental revenue for the minutes charged, and revenues from a completely new source, the marketing firms themselves. This service would also be very difficult for non-wireline competitors to duplicate, but more on that later.

Several examples of possible permutations:

A person such as myself would want the additional privacy, so I would set the call rates high, identify within the demographic questionnaire that I never buy/pay/support those who call unasked and will always charge for any call. I suspect that I would receive very few unwanted calls with that approach. The ones I did receive would be paying a high price, which would definitely improve my disposition as well.

A person who wants to receive "free" telephone service (or as an income generator) would set a lower rate, participate extensively in the questionnaire and welcome marketer calls.

I firmly believe that this kind of product would stop wireline erosion in its tracks, as much of the erosion is based on cost of the service. This approach allows for an increase in line rate recurring revenue, as well as other incremental revenue from callers and marketers.

The competitors to wireline have never provided a 1-900 service and lack the CRM hooks within their systems to duplicate the functionality. In order for them to provide a similar service, huge investment in back office infrastructure would be required. The VoIP providers would have the best shot at duplicating the service on the cheap, however, their product margins are very low (very few are cash flow positive), and do not have the scale/depth to compete with a traditional wireline carrier on a fairly complex product offering such as this.

The technology to provide the described functionality already exists within the signaling systems that supported 1-900 in the past. Significant changes would be necessary to the CRM back office systems to support billing and customer care. Furthermore, a new business unit would make sense as well, to market and collate questionnaire data in ways to facilitate the uptake of the service by marketers.

Sure, it is a lot of work, but isn’t the installed wireline base worth saving?

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