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You have now reached the end of this book, so I d like to offer a summary of sorts that will put everything we ve covered into perspective. This industry is in a state of great change at the moment. Consider the graph in Figure 7-4, which plots price against features. This relationship provides a valuable tool to assess the relative success of players in the telecom industry, because it uses two very important characteristics: feature offerings, which are most important to the customer, and price, which is most important to the provider of those features. Let s examine the long-distance providers as examples of how to use this chart. For the most part, the long-distance providers are squarely housed in the lower-right quadrant of the graph where prices are high and features are nonexistent, yet the providers are moving to the lowerleft quadrant where feature-richness is still lacking, but the price is dropping. Little movement upward exists, however. For the most part, they have not enhanced their service offerings much beyond transport. As circuit switching in the long-distance space inexorably gives way to packetbased transport, prices for transport services will plummet. Without a basket of value-added services, the long-distance players will be relegated to being participants in a game of who s-got-the-cheapest-prices, a game none of them are particularly excited to enter.
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Figure 7-4 Graphing features against price as a way to assess performance.
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What about wireless In the last few years, they have made the same move from right to left and are just now beginning to toy with the idea of also moving into the upper-right quadrant by adding services. Customers are rather elastic in terms of what they are willing to pay for telecom services. As long as they perceive value, they will pay more. I often tell people the following statement: I am going to offer you a new service. The service isn t as good as the service you ve become accustomed to over the years, but it does have one advantage: it costs more. I then ask how many would be willing to buy the service. Of course, no one raises their hand. I then observe, So, none of you has a cell phone, eh After all, cellular service for the most part costs considerably more than wireline service, and the quality is absolutely inferior. Yet people buy it by the thousands of minutes per month. Why Because there is tangible, perceptible value in the convenience of mobility, and subscribers are willing to pay more for that added value while at the same time accepting the tradeoff of quality for the convenience of mobility. The secret to success is this: quality and value must be measured from the perspective of the consumer of the service, not from that of the provider of it. For many years, the monopoly telecommunications industry told customers what they wanted and defined the quality of service (QoS) for them. And the customers, because they had no choice, listened, smiled, and liked the service because they were told to. It was a case of the Emperor s New Clothes that brought things crashing down. With divestiture came competition, and with competition came innovation, and with innovation came reduced prices for services. Now that they had freedom of choice, customers could make their own decisions and issue their own dictates about the characteristics of quality, reliability, and reasonable cost. The service providers clamored for a long time following divestiture for open, aggressively competitive markets, and now that they have them, they are realizing the pain that comes from the old adage, be careful what you wish for you might get it. This industry is in its early adolescence. The players are strong, full of energy, and laden with ego and possibility. The customers, who in many ways are playing the role of the responsible adult, are watching carefully to see where they re being led. They re willing to give the industry players plenty of leash because they know that good things inevitably come from all that energy. I often hear people say that the telecom industry is bust; the boom is over. What in the world are they talking about Are we through communicating Is it time to move on to something else now For crying out loud, we have been building telecommunications infrastructure
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