Wednesday, March 3, 2010

AT&T's Latest Brainstorm: Make Customers Pay DVD Late Fees

Hard hitting reporters at the Kansas City Dot Com just broke this amazing story from Fierce Wireless. AT&T execs, and Verizon execs, would like to implement tiered pricing!

Tireless AT&T Flacks are still out there spinning this non-news news. AT&T wants tiered pricing, but won't say how or when. This has been "reported" for over a year. So what's the story here? Who are these execs talking to?

Well, each other, of course. How do you spell "collusion?" How do you spell "price fixing?" It's wonderful the internet not only provides a tool for bored teenagers to talk about their sex lives, but also for executives of giant conglomerates to social chat about how to manipulate prices nationally through fake news stories.

So let's see, AT&T already has a cap of 5 gigs of data for it's "unlimited" data plans. (As does all other US cell carriers, hmm… no collusion there.) The average iPhone user tops out at a mere 270 megs a month. Which is a few hours of surfing and streaming a month. So what's all this about heavy data users paying for other users? The fact is, most users are paying for a ton of data they aren't using. Why should "heavy" (over 270 megs and less that 5 gigs) pay more? Oh, because these telecoms are so greedy they don't see a good thing when they have it.

I suggest AT&T execs take a look at another big corporation that worked against customers for so long, they created competition that is slowly killing them. Take the example of Blockbuster:

You remember Blockbuster. It was a giant company that basically took over the entire DVD rental industry by buying up competition, out building and advertising, and wiped out Ma and Pop stories. Kind of like how AT&T has built it's market share by buying up competition.

Like AT&T, Blockbuster never offered any new innovations, it simply got bigger than anyone else and wiped out the little guy. But, like Mom and Pop stores, it's primary source of income was not making customers happy (that's was beside the point) it was in charging late fees (money for nothing) that customers hated. But for a long time, they had no choice because there was a Blockbuster on every corner. Even more fun for Blockbuster was pushing around the big Hollywood studios who had no choice but to cut them great deals. (Something AT&T has wet dreams about once they control data access in America.)

But you can't keep a business running by pissing off your customers, even if you control market share. Because Netflix came along, with no late fees, and then Red Box with much cheaper late fees, and easier access to customers (through grocery stores, etc.). So Blockbuster has been slowly dying, unable to innovate and compete. They dried dumping late fees, but their business model was dependent on them and they had to reinstall them.

The Blockbuster model that the rocket scientists running AT&T want to follow. Gain control of the market through size, and then charge people for "data" overages. It won't work, and it will doom AT&T. It will create competitors from where they least expect it. But maybe current AT&T execs aren't worried about long term growth. They're more interested in short term profits. And charging people for air might give them that.

I humbly suggest that AT&T execs turn away from the dark side before it is too late. Concentrate on offering Americans cheap, fast, unlimited data and build new exciting business models around that. If you continue to simply crunch numbers and try to figure out how to charge people more for less, you make not even survive long enough to jump out with a your golden parachute.

Take a look at this amazing quote from AT&T CEO Randall Stephenson about Congress' desire that America compete globally with fast data access: "If the objectives are 100-megabits capability to every home in the United States, that is going to require a lot of investment. To drive that kind of investment will require a redirecting of subsidies that exist today."

This is the head of one of American's major telecoms? We can't give people fast access without government subsidies? This after AT&T has an amazingly profitable year based on it's monopoly on the iPhone? Excuse me, if AT&T can't do it, I suspect Google will.

If AT&T is not capable of being the leader in providing America with high speed data access, maybe it's time for it to get out of the business and try something new. How about DVD rental? Blockbuster is going bankrupt. Maybe there's an opening there. Perhaps you can charge double late fees.

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