Update: Ars has picked up this story as well…

You’ve seen what is happening to Microsoft before. A company runs out of ideas so they end up cannibalizing their main source of income to try to squeeze more money out of their existing customers.
AOL is a company well into this phase in its life cycle. A few years back, they made the business decision to make it much harder to get out of their ISP/Content plans. Why? Because that is all that they got.  The MBAs said “we need to stop people from leaving. This is the best thing we can come up with.”  Instead of making a compelling service that would drive new customers and keep existing ones (like how about delivering TimeWarner movies over the net for a reduced cost?), they opted to cheat their current customers out of some cash on the way out the door.  Their reputation was irreparably damaged and their continued downward spiral is a testament to this.

Mobile carriers are obviously as guilty of this practice as any other business without an innovation game plan. Besides high-speed access and wider coverage areas, what other services do you want from a mobile carrier? Music and content? Leave that to the TV networks and record labels. Innovative phone services? Skype, Vonage and the various SIP providers are killing the traditional carriers on features and a large portion of their customers (us included) are biding their time until these services become available over wireless. There isn’t a wide part of the value chain to add to. So where to innovate? How about core competency?

Delivery.

Things like great customer satisfaction, easy plans, expanding service area and data speed,  and inexpensive roaming come to mind. In lieu of offereing these pluses, the mobile carriers have made a practice of signing customers in for long term plans, locking their phones and imposing stiff penalties for leaving early. Why do most customers want to leave? How about keeping customers with great service? 

There has to be a service model that fits in this mindspace as well as a communications strategy that tells customers that they should sign up because we, as telecomX are innovators – so much so that we aren’t worried about you leaving. In fact, our confidence in our product/service is so high that we won’t threaten to screw you on the way out by locking your phone or giving you a huge cancellation fee. When/if that model hits the streets, I think we will see a large migration. Hopefully a WiMAX/4G era coupled with smaller Internet/communications devices will bring on this era.  That is unless the mobile carriers are able to successfully block their customers VOIP traffic.

This is obviously the case with AT&T, which is spending money on attorneys suing people who unlock their iPhones rather than spending money on infrastructure to keep customers from going to the other carriers or providing reasonable roaming rate agreements. For some reason, the customer satisfaction/retention quotient has been miscalculated by these companies. Or perhaps they just really believe consumers forget being screwed. Or maybe someone in PR/Branding needs to speak up?

Which brings us back to the Microsoft example. This is a bad sign for Microsoft and the software industry in general. As more companies move to the SaaS model, the temptation to focus resources on lock-in

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