Layer 8

The Core Problem

In the post before, I mentioned the core problem facing the ILECs, but didn't identify what that is. It's this: How do you upgrade your infrastructure without cannibalizing your existing business?

12:20:30 PM # Google It!
categories: Industry, Layer 8

Missing the Upsell

McKinsey, known for increasing the amount of trash visible at DisneyWorld, asserts that the RBOCs are about to hit the shitter. We all know that. What's different in their analysis is the observation that growth is slowing in high-margin call-management services. That is, in network-based services like call waiting and caller ID.

Our analysis shows that profits from call-management services come almost entirely from call waiting and caller ID, each with a national penetration rate of more than 40 percent. Getting customers to sign up for additional services—even undeniably useful ones such as voice mail, call forwarding and three-way calling—has proved far more difficult.

This is the problem with placing services in the network itself, instead of at the edges. Which services will be worth the cost of implementation? Which will be popular? Voice mail works remarkably well at the edge of the network: it's called the answering machine. There's no real incentive to centralize that service. Call forwarding and three-way calling are stymied by incomprehensible user interfaces.

Restarting growth in call-management services would surely help stabilize the finances of the Baby Bells, but it won’t halt the erosion of their traditional markets.

No, it won't. And trying to figure out how to increase growth in that segment will distract from solving the core problem.

But once you've sold the customer the basic package of wires and telephony routing, what's the upsell? Just because you're not placing services in the network anymore doesn't mean that you can't sell additional services to that account. Take SBC Yahoo! for example — or even Microsoft's arrangements with Qwest and Verizon. For all of my issues with this agreement, it is a good example of a bundle that increases the value of the line to the customer, and, one would hope, increases profit and reduces costs.

10:20:30 AM # Google It!
categories: Industry, Layer 8