Mobile Operators wake up, see the Writing on the Wall

The more things change, the more they stay the same…

Theodore Levitt, in a classic article in 1984, argued that companies often fail because they are myopic – focusing too narrowly on current products and not on customer requirements. Railroads failed, not because the need was filled by others (cars, trucks, airplanes, even telephones), but because it was not filled by the railroads themselves. Railroads defined their industry incorrectly as railroad-oriented instead of transportation-oriented.

Quarter century later, mobile operators are yet to learn a thing or two from others’ mistakes. Mobile operators are at the center of mobile revolution, but instead of facilitating the movement and positioning themselves at the heart of this revolution, they are trying their best to stifle innovation and tick their customers off. AT&T’s customer satisfaction score has dropped to 66, its worst since 2006; T-Mobile’s ACSI score (70) is at its 5 year low (no prizes for guessing who is the worst of the lot – AT&T). If they do not change course, operators’ fate looks eerily similar to railroads and several other organizations who were left standing on the wrong side of history.

Let us look at some of the things that consumers have to deal with:

Texting Charges:

1. We do not have to get into a lengthy discussion, but suffices to say that text messaging is probably the biggest rip off with a markup of over 6500 percent. We are not even talking international messages.
2. Even receiving text messages is not free, even if you do not want to receive one. Telcos can happily block a number if you are willing to pay them. Further, unlike most countries where the sender pays for the message, in the US both parties are required to pay. 

Voice Charges:

1. Despite the technological advances, an international call can easily run into a few dollars per minute.
2. International roaming is a permit to extortion.

Cell Phone Data Plans:

1. No unlimited data plans.
2. No rollover data, i.e., you cannot rollover your unused data to next month
3. No shared data plans, i.e., each person in your family needs to pay separately for data.
4. Separate charges for tethering even if you are not consuming more data
5. Most carriers force a data plan if you are using a smart phone on their network, even if you do not want to use their data network. If you are in a Wi-Fi zone for the most part, you may not want to pay extra for the data, but unfortunately that is not an option. This is true even if your device is not subsidized by your carrier.

It is nothing short of a miracle that mobile operators can get away with such restrictive policies. Not surprisingly then, consumers are not too happy with their carriers and are looking for ways around them.

Much like the railroads, mobile operators are focusing on their existing products (cellular communications) instead of their customers. By focusing on their existing products, mobile operators are not catering to the needs of their customers – desire to stay connected – and the consequences are there to be seen.

Messaging apps such as JaxtrSMS, Heywire, Global.AQ, TextFree, TextNow, and TextPlus, among several others are already eating into carriers’ revenues. While carriers charge an arm and a leg for texting, these apps typically offer unlimited  worldwide text messages (SMS) for almost FREE. Similarly, VoIP services such as Viber, Skype, Google Voice, and Voxox are offering ultra low-cost (or even free) calls and eating into the long distance revenues, bread and butter of telcos. The rapid proliferation of smart devices has bought such services within reach of millions of consumers who otherwise had to pay through their noses.

Finally, many companies are targeting the last hurdle – last mile access that gives mobile operators a huge advantage. Google has made no bones about its intention to use white spaces – the empty airwaves between broadcast TV channels – to offer “Wi-Fi on steroids” that could seriously undermine carriers’ advantage. Alternative technologies such as WiMAX that can wirelessly deliver high-speed Internet service to large geographical areas and growth in companies offering Wi-Fi hotspots (e.g., Boingo, GoGo) can threaten operators’ hegemony.

Wireless telephony is ripe for disruption and all the signs indicate that telcos may have to pay a heavy price if they fail to adapt. Companies such as Nokia and RIM are paying a price for losing sight of their customers’ requirements.

Wireless operators may be next in line…