DSL by default

Have you ever felt like Bill Murray in the movie, "Groundhog Day"? Are you reliving the same situations day after day after day?

It wasn't too long ago that carriers needed the assistance of a consulting firm in formulating strategies to control unnecessary migration from private lines to frame relay. Recently, however, the focus has been on controlling migration from services like ISDN and Internet access to digital subscriber line (DSL). A new day, but essentially the same song and dance.

As a consulting firm, our overall recommendations haven't changed much. End users tend to think in terms of comparing pipe sizes and figuring out how large a pipe to install. The answer to controlling the cross product impact between DSL and existing services is simple: Don't sell DSL. Instead, describe, package, price and sell the services that use DSL as the underlying infrastructure.

For example, consider launching a small office/home office connectivity service that packages a DSL modem, a business phone line, an Ethernet connection, Internet access, voice mail, maintenance and management options, home wiring, or even some software and content. Another approach is to offer a remote LAN service that connects to a traditional broadband service like frame relay or switched multimegabit data services. By tying the new DSL-based remote LAN access solution to a complete enterprise network package, a carrier can slow the migration rate of installed customers yet make it easy for new customers to buy and use the service.

These types of multiservice packages have another advantage: They create a barrier for the competition. If a competitor offers one or two of the service elements at a lower rate but can't address all the other service elements, customers will find it difficult to use the competitor's solution. A multiservice package locks in customers and locks out the competition.

Creative pricing structures can go a long way. Again, instinct tells us to simply copy the competition's pricing structure and offer lower rates - not necessarily a bad strategy for high-commodity services like voice; end users generally want to be able to easily compare prices. But with DSL, there's a lot more room for differentiation, other than price.

Offering a unique pricing structure is powerful because you can control who buys the service and what applications the service is used for. You control cross product impacts by controlling the end user's behavior.

Creating a pricing structure for a new service begins with asking the right questions. What are you trying to accomplish with the service? Who should buy it? What should they do with it?

Are there certain user behaviors that you want to encourage or discourage? Are there network designs that are more or less advantageous in terms of performance or the cost of service delivery? Are there competitive or substitute services that have pricing structures that can be exploited to your advantage? And so on.

Once you've developed your service definition and pricing structure, the next step is to establish rates. Cost-based pricing might have been an acceptable solution in a monopolistic environment. In an unregulated and highly competitive environment, however, carriers must focus primarily on willingness to pay and market values.

Finally, carriers should revisit their margin, revenues, market share and other financial objectives. At this point, they may need to fine-tune pricing structures and rates to meet those goals.

By providing a platform for new and unique services, DSL has the potential to increase the overall size of the high-speed services market. Problems between services arise when the market size is stagnant and new technologies must steal customers from the embedded base. If a new technology can increase the size of the market by opening up new opportunities, then all services will reap additional revenues.

Liza Henderson is a Broadband Consultant with TeleChoice, Verona, N.J. Her e-mail address is lhenderson@telechoice.com.