The WalMart Effect on the Duopoly

Peter : On Rad's Radar?
| Peter Radizeski of RAD-INFO, Inc. talking telecom, Cloud, VoIP, CLEC, and The Channel.

The WalMart Effect on the Duopoly

As pricing on bandwidth declines, it is having a ripple effect on the whole system. Bandwidth prices have been in decline but the last couple of years the megabits per dollar has really dropped. The more you buy - 1GB or 10GB - the less it costs now. [Which makes the whole inter-connection fight that Comcast and Verizon have had with Level3, Cogent and Netflix seem like nothing more than posturing with consumers caught in the middle per usual.]

Network upgrades and maintenance costs have not dropped the same percentage as the bandwidth costs. So maintaining the network to provide cheaper pipes has remained the same (more or less). As a percentage of costs, it probably tweaked up a little. Upgrades to DOCSIS 3.0, 100GB,, Gigabit2 and the associated backhaul and middle miles have been steady or increasing (depending on geography and provider).

The one thing that is being discussed about the cable mergers is that customer service is at an all time low. So much of residential service is self-service -- from ordering to billing to paying to install. Even tech support for the modem is automated as the call in to support will initiate a modem reset. Simply put, the cablecos are not going to put money into customer service. There are profits to be made, big chunks of debt to be paid back and network to be built. Honestly, I don't know where the cablecos get all that capital to do countless build outs for triple play to a business at $310 per month.

I do know that installation is suffering. Well, the whole provisioning process is awful - from porting to install. Much of that is due to massive staff layoffs that resulted in domain knowledge disappearing. Less staff to do increased work. In some areas there is a single T1 technician for 5 CO's. That is a large area to cover single-handed. (But then unions have been getting squeezed out too.)

Even in the VoIP world where prices have compressed due to hyper-competition. When you have 2000+ providers trying to sell VoIP to everyone, 3 things are going to happen. (1) A lot of amateurs will be in the mix leading to lousy VoIP, horrible experience and clumsy install. (2) Telcos will try to deliver VoIP like they do TDM, which is a mistake since the delivery platform for VoIP is more complicated. (3) Not enough experienced technicians to go around, so installations will be a mess time and time again. I hear horror stories every week. One large VAR thought that if their techs could install wi-fi at a coffee chain, then VoIP would be a piece of cake. What? Hello!! Not even close to the same skill set or complexity. And they even get the wi-fi install wrong occasionally. Dead zones.

As we get more megabits for the same dollar, service will continue to deteriorate. It isn't like the debt that the Duopoly has is going to handled by broadband sales. Or that executives don't want bigger bonuses. Or that shareholders don't want a dividend.

It has an affect on the channel as well. Partners are spending more and more cycles on managing the provisioning for services that pay so little. Kind of unprofitable to spend hours on paperwork for site survey, ordering, porting and then chase the whole project to completion for $31 per month. This system will crack open soon. Yet this was all inevitable. It is the Wal-Mart effect on the Duopoly.

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