Unlimited plans: the sky's the limit--except when it isn't.
The marketing trend of offering unlimited plans began eight or nine years ago, explained Eileen Bodamer, a principal of Bodamer Consulting LLC (Alpharetta, Ga.), a consulting firm for the rural telecommunications industry. "The landline companies felt they had to do this to compete with wireless," she said. "Once it was nationally advertised, everyone started to ask: 'Why can't I get this?'"
Unlimited plans--particularly when it conies to long-distance--have been terrible for the industry, Bodamer said. "Everyone assumed there would be an initial spike in usage and then things would come back to normal, but that did not happen. Those unlimited plans attracted customers who use that service. When you're paying four to eight cents a minute for access alone, it doesn't take long before you're underwater."
For many telephone companies, unlimited long-distance serves as a retention tool, Bodamer said. "They offer it to keep the customer for other profitable services, but they're no longer actively promoting it," she said. "They have it in their back pocket, but they're certainly not putting this up on billboards."
She said this is less about the small telcos bundling long-distance in with their other services than about them competing with companies that do bundle their long-distance service with the rest of their telecom offerings. She said it's akin to the loss-leader phenomenon at grocery stores--you run in to buy the bread that's on sale for 50 cents, and while you're there you decide to pick up the rest of your groceries. She said small telcos don't want their customers to go elsewhere for unlimited long-distance and wind up switching out all of the rest of their telecom services to the competition.
This is the case for Consolidated Telcom (Dickinson, N.D.). "Many years ago, we offered unlimited long-distance calling plans, back when there was a profit to be made," said Rhonda Dukart, marketing manager, adding that the company has grandfathered in those customers wilt) signed up lor it. "Rut for the past two Or three years, we've done everything we can to avoid promoting our long-distance service. We don't even list it as a service." Customers who ask for long-distance service are offered several different plans in varying minute buckets.
LeAnne McCarthy, marketing director for Walnut Communications (Walnut, Iowa), said she was leery when her company made the decision to offer unlimited long-distance a year ago. "We felt we had to do it for competitive reasons, but at the time, I was not happy to be moving in that direction."
For Walnut Communications, it has proven to be a good move. "Our customer response has been positive," McCarthy said, explaining, that before the move to unlimited, the company sold its long-distance in buckets of minutes: 200 minutes, 500 minutes, etc. "We have an older demographic, so this has been a way of keeping some of those landline customers and keeping them happy"
As Bodamer predicted, Walnut Communications did see a spike in usage, but fortunately it leveled out after a few months. "It's like kids with a birthday present. They'll play with it constantly, and then it goes into the toy box and is forgotten."
Even so, the Iowa teleo did have a handful of customers who overindulged. "We identified the outliers," McCarthy said, noting that their usage shot up and remained much higher than other customers. "We took a passive approach and gave them a warning and said: 'Look, you are abusing this. If you don't take it easy we're going to put you on a permanent plan.' That's all it took."
Jeanne Bliss, president of CustomerBliss and author of "I Love More Than My Dog: Five Decisions That Drive Extreme Customer Loyalty in Good Time and Bad," said using the word "unlimited" creates a false sense of security. "It's playing a game of 'gotcha' with the customer," she said. "Any extra money you make signing up new customers will be lost once you have to spend time and effort explaining to people why it's not really unlimited. That ... could cost you customers in the long run."
Celiphones and Billing Issues
When it conies to wireless plans, Bodamer pointed out that telcos must oiler unlimited calling plans for their cellphone customers. "It's just the standard because of all the national advertising," she said, adding that only a minority of customers overpay for what they're using. "We all thought the unlimited plans would serve as an insurance policy in that you pay $20 every month even if you're only using 513, but that hasn't played out."
Still, McCarthy conceded that this is not a key marketing message. "We don't do a lot of 'unlimited' advertising," she said. "It's not in big letters on the marketing materials. It's not hidden, but it's also not prevalent."
Most of the telco marketing managers agreed that one of the main benefits of the unlimited plans for consumers is the simplified billing. "Customers definitely want to know what their bill will be every month. They wouldn't want to see the bill jumping by 520 or 530 every month or so," said Devan Darnbrough, in charge of marketing, Web design and security with Huron Telecommunications Co-operative Ltd. (Ripley, Ontario). He pointed out the majority of Huron's customers are on a preauthorized payment plan, meaning their monthly payments are automatically taken from a debit or credit card. "They want to know what is coming out of their bank account."
Dukart said for her customers even a difference of $5 a month is important. "People want to know precisely what the bill will come to--taxes, fees, surcharges," she said. "Having a set budget amount is extremely important to customers."
Economics Isn't There
Going back to the all-you-can-eat buffet analogy, most restaurant owners wouldn't dream of approaching their diners and saying, "You are eating too much. This is not healthy" The same is true for telco companies. They don't want to tell their customers that unlimited plans for everyone are not sustainable and will lead to service-quality issues.
"When you and all of your neighbors have unlimited plans, what happens is that everyone is using the network at prime time, so that means that everything slows down from 8 to 10 at night," said Houck Reed, vice president of product management for Tekelec (Parker, Colo.), a mobile broadband solutions company.
Joanne Steinberg, Tekelec's director of strategic marketing, agreed, pointing out that the cost of truly unlimited usage is too high. "There are limits with bandwidths, with networks, with towers," she said. "You can't have unlimited usage because the economics for it is not there."
While she conceded that customers don't like to be shocked when they open their bills at the end of the month, she pointed out customers grasp the concept of paying for what they use. "We all understand that we don't have unlimited access to other utilities," she said. "We don't have unlimited electricity that we then pay a flat rate for. Besides, the term 'unlimited' comes with a lot of asterisks. Nothing is truly unlimited. It's better to personalize your services."
Executives with Comptel Corp., an international telecommunications software company, agreed that unlimited usage is not sustainable and that constant network congestion will lead to service degradation. "You could be watching a Netflix movie on streaming video and all of a sudden the picture starts to pixelate," explained Kristi Siple, senior director of sales and business development, adding that Netflix content alone takes up 30% of household bandwidth usage.
While customers may view this not as positively as unlimited plans, Siple said it will lead to better service and that customers are willing to pay for that. "People will pay for consistency; they will be more loyal to the service that doesn't slow down or degrade," she said.
Another advantage of constantly monitoring the network capacity and customer usage patterns is that it allows carriers to offer more innovative services, said Brad Niven, vice president, North America for Comptel. "So if you notice some extra capacity coming online, you can shoot an online ad to a wireless device that says something like: 'Watch this movie for 50 cents in the next 24 hours,'" he said.
Telcos need to think beyond service and focus on content, Siple said. "It's not just voice or data. It's really about the apps, because once you figure out what it is your customers are interested in, you can offer more personalized service," she said.
Tekelec's Reed agreed. "Ninety percent of smartphone users are using their phones to get on the Internet," he said. "Network operators need to figure out what they are doing and how they can monetize that. If you can't track it or follow it, you'll miss out on all the revenues. If you don't figure this out, you're just a pipe."
AT&T LOSES LAWSUIT OVER "UNLIMITED" PLAN
Matt Spaccarelli, a dump truck driver from California, successfully sued AT&T earlier this year when he noticed that the carrier was slowing the downloading speeds on his iPhone (from 5 Mbps to 0.26 Mpbs). Spaccarelli is one of 17 million AT&T customers who had signed up for the carrier's $30 a month unlimited plan only to find that if they exceeded 3 GB of data a month their download speeds were significantly slowed. As a result of the lawsuit, AT&T spelled out in its policy that any subscriber going above 3 GB in a month will get a text message warning of the cap and explaining that download speeds will slow down for the rest of that billing cycle.
Realizing that it would lose money on its all-you-can-eat plans, AT&T stopped offering unlimited data plans to new subscribers as of 2010 and instead offers tiered-service plans. Other major carriers, including Verizon Wireless and T-Mobile USA, have since followed suit and no longer offer unlimited plans. "Sprint is the only one trying to ride the unlimited wave as long as possible," explained Houck Reed, vice president of product management for Tekelec, a mobile broadband solutions company "They're trying to gain traction, but if you read the contract, it's full of all sorts of caveats."
Rachel Brown is a freelance writer. She can be reached at firstname.lastname@example.org.
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|Date:||May 1, 2012|
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