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Is this Vonage's, MSO's and Some VC's Worst Calling NightMare?

For all the VC's and investors who thought the idea of minute stealing and the prospect of millions of customers flocking to cheaper calling by VoIP services like Packet 8 and Vonage making their investments the next Amazon, Google, Yahoo, eBay or even Microsoft what may be their worst possible nightmare is now unfolding before their eyes.

For the cable MSO strategy folks like Jim Tobin at Comcast and his peers at CableVision, Cox and Time Warner, the stakes in the game to get out the door with Sprint with an offer of a true four-play just got more interesting, while their odds of winning sooner, rather than later became more difficult, but not impossible.

Why? With AT&T deciding to offer Unity, a plan that gives their customers unlimited free calling between everyone within their family of customers (mobile, landline) as part of a combo landline and mobile phone pricing plan the single largest addressable market now can talk to one another for a fixed rate per month. It is a very well calculated move by a company that has the size that matters and basically say to millions of customers, "Why Switch" or asks the question to the public, "what do you need the other guys for when you can have it from us?"

Why is this so important? It marks a dramatic change in understanding, and really, executing on the concept of "community" by the biggest phone company in the USA. To me it says "we know what you do. We can do what you do. An we are going to do what you say you can do better, faster and cheaper with the customers you want, who we already have." It signals Wall Street too by saying, "we can play that game too, and we'll be better at it, and we have a head start in the race."

Community has long been a term of every online services mantra to describe their target audience, and almost always a part of every start-up's fund raising pitch, so by saying to the public at large that their current customers are one "big community," AT&T is messaging and tipping their hand that they get the 'Net marketing crowd's philosophy, without even going after the online world today.

In gambling, a move like that, is called a tell, but this is no gamble in my mind. It is a move to reclaim market domination through customer billing and services simplification. In many ways this pre-empts the cable MSO's moves and in other ways tells all the mobile players without an existing land line play that matters (T-Mobile, Sprint, numerous regional carriers) that now with Cingular and AT&T under one roof, taking customers back, or keeping them from leaving (reducing churn) is the highest priority for the merged company. By using the unified billing concept the combined entity will likely save millions off the bat, but also by saying they no longer have to bill you by the call says that they're now one big network too. It also means that one grade of call quality will be assured, that you talk to one customer service person and that neither side can blame the other for issues any longer.

What is also interesting in the story, is the fact that Verizon is trying the same approach in some markets, giving further evidence that the two biggest phone companies, with the already widest reach in the combined mobile and fixed wireline game, clearly know how to go out and play the game of "keep-a-way" many of us played as kids very well.

So what's not included, yet. International and mobile roaming. Those are two very lucrative, cash generating markets, but for the most part that only impact a small portion of the market anyway. The reason this is so attractive is as pal David Beckemeyer's research with PhoneGnome indicates, most people call the same people all the time, and for the most part, their calling circle is five parties or less, making what AT&T is doing here, the modern day version of the old MCI Friend's and Family.

While this plan does not include CallVantage (yet) it is a very logical and progressive move for what I call laddering in marketing. Laddering is the act of doing things one-step at a time. It is also much in line on the domestic front with the move by 3 for no roaming costs when you go from 3 serving country to 3 serving country.

In my view the blending of DSL, IPTV, FTTH/FTTP will come too as part of AT&T's Unity plan. The signs are there and already my sources are telling me that the net phobic approach that the old Cingular leadership had is being wiped out under the new AT&T, as a more net centric, unified vision is going to emerge. This move in my view is the first step in executing on that vision that has had 22 years to grow up.

The AT&T Unity pricing move gives existing customers one less reason to switch. This also means to me that VoIP and Mobile companies that do not have a clear cut Voice 2.0 vision and roadmap, and are only selling Voice 1.5 services where only the wire and bill are different from what the phone company offers (cable MSO's and VONAGE are prime examples here) or those companies that think cheap Long Distance is the pot of gold at the end of the rainbow, are heading down a path that is akin to walking on quicksand.

I also believe that unless the early stage VoIP companies are looking at the very lucrative business market the way Fonality and Digium, CallTower and Covad are, that fighting to win over the mass market of consumers, in light of AT&T having the capacity to keep lowering monthly costs for the combined mobile and wireline crowd, will become tougher, as people now have less reason to leave the oldest name, and possibly best quality calling offering in the business.

Many of us keep saying minutes will at some point be dropping to zero. With the Unity plan AT&T basically dropped domestic calling to that level. Don't be surprised if they now start executing globally in a similar direction as Vodafone or Orange. I don't see the bankers saying stop, so why should they?

So lets take stock in what AT&T now has. Lower price. More customers. Millions of mobile customers under contract. Millions of homes already reached.

I'd say that Unity is very much the right name for what they are offering.


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