This example from photographer-blogger Thomas Hawk is the perfect illustration of how enormously frustrating it can still be to deal with the phone company or its various subsidiaries (it could just as easily be Verizon or Qwest as AT&T in this case).

I spoke to a group of salespeople from a software vendor who sell to the telecoms industry this week. The topic of my presentation was how telcos are transforming themselves and in particular the evolution of customer care (or customer experience as they’ve apparently been taught to call it by Accenture). For all the complex and important sounding changes I discussed with them in terms of processes and software applications, the fact is that there is still something very fundamentally wrong with customer care when people are still having experiences like the one detailed by Thomas Hawk on his blog. It goes way beyond software and back to the approach taken by the telco to the whole question of care.

Telcos need to:

• see customers as customers, not as a series of transactions, and as such give each of them one number to call which will allow them to deal with any issue associated with their account
• equip the person on the other end with a holistic view of the customer so that they know everything about them, and capture whatever information they enter in the IVR stage permanently so they don’t have to keep repeating the same information over and over again to each new person/machine they talk to
• empower individuals in call centers to really solve problems for customers, and not just pass them over to someone else. Give them more decision making authority and allow them to chase other employees as necessary to get things done instead of making the customer do the running around
• remember that if the customer is calling care it is because you have not done something that they want you to have done, and they expect you to be able to fix it. This is your problem, not theirs, and they have every right to expect you to deal with any complexity that exists that may make this more difficult to achieve than it should be. Don’t tell them why you can’t do it - instead, figure out when and how you will do it, and let them know.

All of this is so basic, and yet telcos still struggle with it at the most fundamental level. A good chunk of the transformation of the customer experience that’s happening at the moment should be going into changing attitudes rather than applications, or all the investment in the world in new software and processes isn’t going to make a difference.

The standard story told in the US media, by certain politicians and by consumer rights groups is that the US lags the rest of the world in broadband, with studies often placing the US well down the international rankings. This week there was a report from the INSEAD / the World Economic Forum which contradicted somewhat those glum findings and accords more closely with my own views on this topic.

The problem with many of these reports is that they focus on price and availability of high speeds without investigating the negative effects associated with heavy government intervention in the market. As an example, Japan is often cited as the beacon of international broadband, often closely followed by Korea, but in both of these countries the government has intervened in a heavy-handed fashion to achieve the results seen today. European countries often also score highly, often because of the competition introduced via local loop unbundling regulations - a less intrusive form of intervention than in Japan and Korea but nonetheless a much more aggressive form of regulation than that which applies in the US.

Another flaw is that it is assumed that faster speeds are always a good thing, and that diminishing returns never set in. The fact is that, beyond a certain point (currently around 10Mbit/s or so) extra bandwidth is just that - extra. There is almost no application in existence today which requires more than 20Mbit/s when in peak use, and so 100Mbit/s is a senseless benchmark. Getting more of the population to 5, then 10 and ultimately 20Mbit/s is a reasonable goal, but beating up on the US for the paucity of 100Mbit/s connections is an exercise in futility that could lead to bad investment decisions. Verizon’s FiOS infrastructure is certainly capable of delivering that kind of bandwidth, although AT&T’s U-Verse probably isn’t under the present architecture. But the point is that it doesn’t matter.

Another thing that’s rarely examined is the pricing side of the equation. Providers in Korea in particular have a very spotty financial history due to the suicidal price wars they’ve engaged in. But that competition has been spurred by the fact that they - like the US - have inter-modal competition between various infrastructures, not just regulation-based service-level competition on a common infrastructure. The latter gets quick results in terms of number of providers and price competition but it rarely foments real innovation because the underlying wholesale services everyone is using are the same. With a shift from bitstream to local loop unbundling products that changes somewhat, but competing infrastructures - especially ones built on fiber - are much more likely to provide real differentiation.

Hence the massive speed and price competition that’s been triggered in the US in areas where fiber has been rolled out by either AT&T or Verizon. In time this will reach more and more of the population and provide a further boost to both the speed and price sides of the equation.

The biggest issue for me is that these reports rely a lot on the question of timing. Where the US is today, other countries either were yesterday or will be tomorrow. We’re all heading down pretty much the same path, just at different speeds. The impatience that often accompanies the criticisms of US broadband deployments is misguided too. It usually leans on an argument about competitiveness and the ways in which broadband can transform the way we work by providing more opportunities for home working / teleworking and so on. But guess what? The measly 5Mbit/s so derided in these studies is just fine for most homeworkers and is available to almost everyone. The biggest barrier to adoption of home working is the cultural change involved, not the technology. Many companies and individual managers are still uncomfortable with the idea and suspect that a home worker is a less productive worker. That attitude needs to change more than we need more government intervention or sackcloth and ashes about the parlous state of the US broadband market, and it’s great that we finally have a study that seems to get that.

I’ve just spent the last couple of days at CTIA (see yesterday’s post). I wanted to present some thoughts I’ve had during that time.

Firstly, it’s been interesting to see the shadow the iPhone casts over everything even though Apple isn’t visibly present at the show. Sprint’s big announcement was around the Samsung Instinct, which is a clear iPhone competitor. But the devices on display were running beta software which was glitchy and slow, and it was clear that - though they have some nifty features - these devices are not a match for the iPhone. AT&T itself had another device which mimics certain aspects of the iPhone - the LG Vu - but it is another poor match for the device on everyone’s minds. Of all the things that people love about the iPhone - the design, the UI, the browser, the ease of use - none of them are matched by most of the devices on display here, even though the manufacturers of those devices have been making phones for far longer than Apple. The Sony Ericsson Xperia X1 showed the most promise of any device I saw at CTIA, but won’t be launched for several months.

And AT&T appears to be keen to cement the thought leadership the iPhone deal has given it. Its announcement that it will deploy Microsoft Surface tabletop computers in some of its stores will further up the cool factor for AT&T and put more pressure on its competitors to find ways to compete. I haven’t seen much from AT&T’s competitors that can match it in terms of providing differentiated experiences on devices or in stores. (I have to admit that throughout the Surface presentation I was thinking about this YouTube video which I first saw a few months back - “take that, Apple”).

I discussed managed mobility services with several players at CTIA, and found broad consensus in several areas. It seems clear that the next several months will see launches from major players including both AT&T and Verizon around managed mobility services, and that a range of factors are coming together to create a fertile environment for uptake of these services. The complexity I have referred to previously in the enterprise mobile arena is creating demand for these services. And technology is now available to enable the supply side, both from specialists like Mformation, Sybase and Nokia/Intellisync and from RIM and Microsoft. Launches in the next few months from those two big carriers and increasing uptake over the next year or two should follow.

“Openness” appears to be becoming the new “convergence” in that it is a term everyone seems to feel compelled to insert into every pitch and keynote despite the fact that it means different things to different people. AT&T still appears frustrated that Verizon has got so much attention for playing catch-up with the GSM world: as Ralph De La Vega (head of AT&T Mobility) put it today, “we were open before open was cool”. But he also suggested AT&T now views Android much more favorably than it did at first, ironically because Android will be “open” to AT&T’s branding and applications in the device UI, rather than being restricted to just Google and open source software. I’m hoping the open thing will soon blow over at least in the form of hype, and that we’ll start to see some significant real moves towards openness. Android will be important to watch when it launches - Texas Instruments is demoing two Android devices here - but it can’t be the only game in town.

Carriers need to get better at explaining that they already offer openness on the RIM, Windows Mobile and Palm platforms, where users get unfettered access to the Internet and the ability to install their own applications. But they also need to find ways to extend that openness all the way down the portfolio for those customers who want that. And they need to stop pretending that “choices” and openness are synonyms. Just because you give your customers a choice between two hand-picked applications does not mean your approach is open. Allowing them to pick the application they want regardless of whether you have endorsed it is. And carriers still have some learning to do in this department.

Overall, the show is as always a nice snapshot of a point in time for the wireless industry. But I hope that by the time the Fall show rolls around we’ll have moved forward in all these areas - compelling devices, managed mobility and openness in particular.

Several major wireless carriers this week announced unlimited wireless plans for $99 - Verizon kicked things off, AT&T followed suit, T-Mobile joined the crowd, then US Cellular finished off the week with its own announcement.

The Verizon and AT&T deals are pretty much identical - $99 per month for unlimited calling. T-Mobile threw in unlimited texting, which makes sense since its user base tends to skew young and therefore is more prone to communication via thumb than mouth. US Cellular’s is a national offering too but its user base is more regional.

Financial analysts and investors have largely seen all of this as a bad thing, either because it will start a price war, or because it will take everyone spending over $100 on voice currently and bring their spending down to $100, by definition decreasing their spending (Om Malik would appear to be a case in point).

There is already speculation that Sprint will attempt to undercut all of the above, which it could do by simply charging less than $99 for its unlimited voice plan, or presumably by charging $99 or slightly more for a plan that would include unlimited voice and messaging and/or data usage. Certainly, Dan Hesse has suggested that he has what have variously been described as “nukes” or simply “missiles” he can fire off to kick-start the turnaround at Sprint, and one of these is presumed to be a dramatic move on prices. With the other carriers having now stolen a march on that particular idea, he may need something new.

However, it’s not clear that it would have made a huge difference even if Sprint wasn’t playing “me too” at this point. Think about it. Wireless churn stands at somewhere between 1 and 3% for the larger US carriers. That means that in any given month, only 3% (or fewer) subscribers switch carriers, or put another way the average lifetime of a subscriber is between 3 and 8 years. Even the most dramatic move on pricing would be unlikely to loosen up more than a small number of additional subscribers in any given period. Look at the iPhone - growth appears to have slowed, and there are doubtless several reasons. But one is the simple fact that many people are locked into 2-year contracts (which by themselves would limit churn to just over 4% if everyone stayed in them) and over three quarters of US wireless subscribers are currently with a carrier other than AT&T.

Given that Sprint currently has negative “flow share” towards the other three big carriers, just turning that trend around would be something. But simply reducing prices will not likely do the trick on its own, especially when competitors are making similar moves. Forrester has a survey which has been used by Morgan Stanley to look at brand loyalty, and it illustrates where Sprint’s problem really lies:

Verizon scored an average response of 7.7 out of a maximum score of 10, AT&T and T-Mobile scored 7.2 each, with Sprint Nextel averaging 6.1 among their customers. Factors such as reliability, trust and prior experience
were rated as key factors in making a carrier choice.

Sprint has by far the lowest rating of any of the main carriers (Nextel’s independent rating is even lower), and this ties in directly with its churn. It needs to be doing a better job of keeping existing customers happy at least as much as it needs to win new ones.

As to the question of whether the impact of unlimited pricing plans will be good or bad, it’s hard to argue they’ll be good. The answer really depends on which of four resulting trends is strongest:

• existing customers of a carrier switching to a higher-priced plan (i.e. going from limited to unlimited), which would have a positive ARPU and revenue impact
• existing customers of a carrier switching to a lower priced plan (i.e. because they currently spend more than $99 either because their plan costs more or because of overages), which would have negative ARPU impact
• customers switching from other carriers, which would have positive subscriber and ARPU impact, but which seems relatively unlikely on the whole because the model has swept all but one of the major carriers in the space of a week
• new customers signing up with the carrier because of the new plan (which seems least likely of all, since current wireless non-subscribers tend to be poorer, with poor credit scores, and are therefore much more likely to adopt pre-paid or at least low-priced postpaid offerings.

Given that the fourth trend is likely to be negligible, and third also small, that leaves the first two. There is an argument for switching from a lower-priced to a higher priced plan if it allows you to make another simultaneous change - i.e. to switch your calling from another network to your wireless carrier. If people cut the cord either at home or in business as they make this change, they may save money overall while increasing spend with their wireless carrier. The premium on top of more modest allowances of minutes is likely to be at most $50 and probably considerably less, so it would be competitive with unlimited wireline calling plans. However, it seems likely that the percentage of subscribers currently paying more than $100 for their voice services who will switch to the $99 plan will be close to 100% within the first few months. While providing some goodwill benefits similar to those enjoyed by Sprint with its Fair & Flexible plans and AT&T/Cingular with its Rollover minutes, it’s not clear those will translate to sufficient churn reductions to offset the loss in ARPU / revenue.

Had Verizon been alone in making this move, the picture would look very different, even if it only had a few months of lead time over the other carriers. But because the others have responded - or are likely to respond - very quickly the overall impact seems likely to be at least slightly negative.

On the other hand, it’s also worth asking what would have happened to voice ARPU over the next year anyway. It has been stable for some time, and with most growth coming from prepaid and family plans at present it is likely to drop considerably in the coming years. Per-minute pricing has been dropping for some time, since that ARPU has been buying ever larger numbers of minutes over time. The current model for consumer communications has flat-rate pricing as its endgame every time (see broadband, wireline voice, TV), and although it has taken a very long time to get there with wireless, we’ve arguably had several baby steps already - the “bucket of minutes concept” and the elimination of long-distance and roaming charges being among the most obvious. This will doubtless accelerate the decline in ARPU somewhat, but overall it may simply cap voice ARPU at a nice high rate (about twice current ARPU), freeing consumers to increase spending on data, which is where all the growth is today regardless. It may not be as bad as some people think.

Note: the image used in this post is a picture I took myself a while back on a walk through NYC. Unaccountably, a huge inflatable rat was sitting on the back of an unattended trailer outside a Verizon Wireless store. Seems somehow strangely apt for this story. Original can be viewed here.