When Did Alienating the Customer Base Become a Viable Strategy?

Verizon CTO Richard Lynch, addressing members at the FTTH Conference in Houston this week, made strong noises  that the Telco might embrace the notion of “metered” or “usage based billing” in the future. 

“We are going to reach a point where we will sell packages of bytes,” Lynch said. “Now I’m not announcing a new pricing plan. But we have already gone this way in wireless because that is where the resource is most constrained.”

Time Warner Cable, readers will recall, tried this over a year ago---and it went over like a lead balloon.  In fact, I published a piece on UBB back in early 2008, suggesting that the PR fallout would be too much to compensate for the potential revenue bump.  This turned out to be correct.

Consumers are tired of being nickel and dimed to death—everywhere from the grocery store (“You want a plastic bag?  Pony up!”) to the airport (“Oh, you wanted to bring luggage with you?  Cash on the barrelhead!”).  Our research suggests that they will not tolerate it.  Survey work we completed in the US suggests that 63% would churn broadband providers if offered a 20% discount.

Some have suggested that the only way for metered billing to take hold is for the entire industry to back it—Verizon had long been a hold-out.  Just like in the case of airlines’ extortionate baggage fees, providers will emerge who refuse to play the nickel and diming game.  They will benefit immensely from the “we don’t screw you over” marketing message.

Customers have grown accustomed to paying for their broadband service in a certain way, and appreciate and expect a predictable monthly bill. Dramatically altering the model, with no discernible added value, will prove to be a big mistake.