Paul Wallbank – Brilliant Communications

Category: telcos

  • Signing off voicemail

    Signing off voicemail

    A survey by US phone company Vonage reports cellphone users are ditching voicemail and moving to alternatives.

    Messages left on user accounts in July fell 8% while retrievals fell 14% compared to last year.

    While those figures may have something to do with the billing practices of US carriers, it shows a much bigger trend in the telecommunications sector away from products which have been very profitable over the last two decades.

    Voicemail, like SMS text messaging, has been a lucrative earner for telcos since the arrival of mobile phones.

    Users get billed for calling a number then for leaving a message – often with a few delaying menu items to make sure callers get hit with a couple of billing units. In turn the receiver is charged for being notified they have a message, billed again for retrieving it and then pays a monthly fee for the privilege for all of this.

    Five bites of the cherry for one phone call – nice work if you can get it.

    This entire revenue stream is now dwindling as customers start using Internet based services to send messages. While the telcos charge extortionate rates for mobile data it is still far cheaper per message than the alternatives.

    In many ways the profits from voicemail and SMS were a classic transition effect – a profitable window of opportunity opened for a short period when a new technology was introduced. Now those windows are closing.

    For telcos, they have to find some profitable new channels. Even if they achieve their dreams of becoming media distributors or even content creators they’ll find both of those fields are far less lucrative than the mobile phone networks of a decade ago.

    While telephone companies aren’t going to grow broke soon, today’s data networks aren’t the golden goose many people expect from telcos.

    The smart telcos will adapt and survive, the ones who think the good times of a decade ago are coming back soon are in for a miserable future.

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  • A world of criminal sheep

    A world of criminal sheep

    Notorious unpaid blogger Michael Arrington recently described his battle with a bank over direct debit charges.

    To overcome a fraudulent recurring charge on his credit card, Arrington cancelled his account only to find the bank moved the recurring charges to the new card, a ‘service’ designed to avoid fraud and save customers the hassle of re-establishing legitimate direct debits after a new card is issued.

    Both of those are noble reasons but the core of this philosophy lies in a contempt for customers which can be summarised in two principles.

    A customer is;

    1. A sheep to shorn of any available cash through sneaky fees and shady business practices
    2. A criminal

    In the 1980s business school view of the world, customers are criminally inclined sheep who have to be regularly shorn to enhance profits and controlled so they don’t go anywhere else.

    Only businesses operating in protected environments can get away with this today and the two obvious sectors are banking and telecommunications.

    The telco industry long soiled its nest with consumers with dodgy charges and a contempt for customers which reached a peak (nadir?) with the ring tone scams where kids had their phone credits pillaged by fees they never knew they had signed up for.

    While those dodgy charges paid the handsome bonuses of telco executives, it proved to another generation of consumers that these companies see their customers as sheep to fleeced on a regular basis.

    Ironically it’s that lack of trust that dooms the telcos in the battle to control the online payment markets – their practices of the 1980s, 90s and early 2000s mean few merchants or consumers will trust them as payment gateways.

    One of the strengths banks bring to that market is trust. Like cheques, credit cards succeeded as a payment mechanism because people could trust them.

    In screwing customers over direct debit authorisations, the banks are damaging that trust as Arrington says “I really don’t think I’m going to be giving out my credit card so freely in the future.”

    That’s a problem for businesses as direct debiting customers have been a good way to ensure cash flow and reduce bad debts but when clients perceive there is a high risk of being ripped off they will stop using them.

    Businesses that insist on direct debits will be perceived as potentially dodgy operators who rely on locking customers into unfair contracts rather than providing a decent service for a fair price.

    So the banks’ position of legal power works in their short term interest and against them – and the merchants using their services – in the longer term.

    While bank and telco executives with safe, government guaranteed market positions will continue to treat customers like criminal sheep it’s something the rest of us can’t get away with.

    The winners in the new economy are those who deserve to be trusted by their customers and users, if you’re abusing your market and legal powers then you better hope politicians and judges can protect your management bonuses.

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  • Eating the Old Man’s lunch

    Eating the Old Man’s lunch

    Optus today announced the purchase of restaurant review site Eatability for $6 million.

    Eatability is one of the services that’s destroyed the business models of both the phone directory business and that of newspapers.

    Thirty years ago the Sydney Morning Herald launched its Good Living section and it became the way people went found where the good places were to eat.

    Diners wanting to make a reservation at the hip eating places being reviewed in Good Living picked up the phone book.

    Now they do neither, they go to web sites like Eatabilty or Yelp where they get reviews, contact details and everything else they need about the venue.

    Which killed the advertising revenues that newspapers and phone directories depended upon.

    The sad thing is both the newspapers and Yellow Pages could have owned this space. Citysearch was setup by Fairfax to address the online market and it was sold to Telstra when the newspaper chain struggled to make it work.

    Citysearch today languishes neglected and nearly forgotten under the Sensis umbrella. Optus now owning Citysearch’s biggest local competitor which must bring a hollow laugh to those involved in the early days of Fairfax’s digital experiment.

    Whether Eatability thrives under Optus remains to be seen, but it illustrates just how incumbent strengths like telephone directories are being eroded in the online world.

    Old men have to start moving quickly if they don’t want upstarts eating their lunch.

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  • Little disruptions

    Little disruptions

    Seasoned travellers learned long ago to treat the phone in their hotel room with caution as massive mark ups on call charges were a nice profit centre for most establishments.

    With the arrival of the mobile phone, that revenue stream started to shrink and now one hotel in Vancouver has decided to replace their room phones with iPhones.

    The Vancouver Opus hotel already supplies iPads in their rooms and the phones seem a natural extension to that, particularly given the chain has a “virtual concierge” app to guide guests.

    Increasingly it’s only the older hotel chains that rely on excessive charges for things like telephone calls and Internet access. Those establishments rely on the more senior business traveller who are locked into a 1970s way of travelling.

    When you stay at cheaper accommodation or newer boutique establishments, you find many of the expensive extras in the major chains are available cheaply or free. It’s a quandary of travel that a backpackers’ hostel will offer free Wi-Fi while the Sheraton up the road will charge $60 for an often inferior service.

    The opportunity for the Sheratons, or the Hiltons, or the Four Seasons to charge those sort of rates is dying at the same rate their older clientele is retiring. Its a dead model.

    Fortunately for those hotel chains, slamming guests with fat phone charges was just icing on a very rich cake, the loss of those revenues over the last two decades has been unfortunate but not fatal.

    Other businesses though might not be so lucky – if your business relies on big, unreasonable markups then right now you are in a sector very ripe for disruption.

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  • Can Singapore become a global VC centre?

    Can Singapore become a global VC centre?

    While Silicon Valley grabs most of the headlines about cool new businesses Singapore has been quietly building its own position in the global venture capital industry.

    SingTel, the city state’s main telco operator, setup their own venture capital fund in 2010 with Singtel Innovate investing between S$100,000 and thirty million in various ventures.

    The strategy from SingTel, which is closely aligned with Singapore’s government, is a very canny one – it allows the telco to move beyond being a “dumb pipe” just providing the phone network and fits into the nation state’s aim to be one of the centres in an increasingly Asian centred global finance system.

    Yesterday SingTel launched a new Australian startup venture, the Optus Innov8 Seed fund which offers investments of up to A$250,000 in new start up businesses in return for equity or other stakes.

    To identify the right investments SingTel are partnering with various start up groups and incubators in Sydney and Melbourne which is an interesting way to filter out unsuitable businesses.

    Being funded by a telco, the Optus Innov8 program is naturally focused on the technologies that are going to help their business in an evolving market, the areas they are currently looking at are mobility solutions and digital convergence.

    For Singtel and Optus this is a long term investment as equity stakes in new technologies will position the business well as their industry evolves and margins come under pressure in their core telco market.

    To businesses looking for investments, the Innov8 program is a welcome addition to the funding landscape but Singtel also offer access to Asian markets with operations in India, Indonesia, the Philippines, Thailand, Pakistan and Bangladesh.

    Edgar Hardless, the CEO of SingTel Innov8 says “if you’re looking at going into the Indian market, we can help with introductions. Same with any of our other markets”.

    Those introductions are useful but probably more important is the market intelligence that a partner like SingTel can bring on board. Understanding foreign business conditions is a great advantage for a foreign venture.

    Asian markets can be tough, particularly for Australians who have been bought up with a US centric view of the world, but there are plenty of success stories. There is a successful group of entrepreneurs catering to the massive Indonesian market while companies like Dealize have moved their head office to Hong Kong.

    Dealize was part of the Pollenizer incubator which is one of Innov8’s partners. At the launch, Phil Morle of Pollenizer pointed out that his business has set up a Singapore office to take advantage of the favorable investment conditions there.

    While Innov8’s program is relatively small, it’s a much needed addition to Australia’s start up and venture capital scene and will help some new businesses in the app and mobile space.

    Hopefully a few other corporations are looking at SingTel’s lead and thinking how they can tap into these new industries that may disrupt their own.

    For Singapore, the city state has always had a number of advantages for the finance industry. By expending into new financing new sectors they are securing their own future in the 21st Century.

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