Communications Companies and Airlines – More Similar Than I Thought!

By Sterling Commerce’s John Konczal

Perhaps eliminating in-flight food, taking out the entertainment and having to pay extra on everything from a checked bag to an aisle seat takes out some of the fun in traveling. But that aside, the communications industry could still take a page out of the travel industry book. If you need to fly from Toronto to San Francisco, you can just hop on your preferred airline’s Web site, choose your dates, your airports, and easily and clearly view and purchase an ever-expanding selection of service options. Even with the increase in purchasable options, it is still very easy to book what you need and add on what you want when you’re looking to book a holiday – why can’t ordering your cable and phone service be so easy?

One of the challenges is that airlines and communications companies have structured their sales processes differently. I read a recent article on CNN.com discussing American Airlines’ move to a la carte pricing. Like the pricing structure pioneered by Air Canada, American will charge customers for individual smaller service items and fees, such as a fee for check-in of a suitcase, instead of bundling all service items into one single, simple to understand fare. The article referred to this pricing structure as "unbundling." The article went on to say that telecom and cable companies have been using this pricing approach for many years to offer options like premium channels and pay-per-view events. I’m not sure that’s totally accurate. Really, telecom and cable service providers have worked very, very hard to create infrastructure and processes to support the bundling of wired voice, wireless, data, and cable services.

The way I see it, in the mass consumer markets, service providers have set up a pricing structure that enables different bundle configurations and permutations based on classifications and designations such as basic or premium bundles or packages. Actual a la carte pricing has little or no traction in consumer markets outside of accessories or the occasional digital content product. In fact, the cable companies are vehemently fighting the FCC over mandates that will force the cable companies to move to a la carte channel pricing, so my conclusion was that the CNN.com article was a little off base in comparing the two industries when it comes to a la carte pricing.

When comparing unbundled versus bundled products, airlines and communications service providers are miles apart. But, times are changing, and so must communications companies. Recently, I read of a local broadband service provider beginning to price broadband service based on the monthly data amounts used by the customer over the broadband connection. For example, for $49.99 per month, the allowance is 40 gigabytes per month. Pricing is based on multiple tiers of data usage amounts or usage caps (as some people call these plans). This is just one example of how several big and small broadband service providers are moving to curb – or more effectively manage – the growth of traffic on their networks, or at least make subscribers who download the most pay a bit more. This is an example of a new wave of pricing in the communications industry.

Much like the airline industry, the communications industry must manage its resources expertly and carefully to maintain or enhance the margins investors expect. I will tell you that many consumers are up in arms over these a la carte plans on the grounds that they are unfair. There are even Web sites dedicated to forming mass opposition to these new plans. However, my concern lies with the ordering experience to support consumers when purchasing these plans.

The airlines, through the well thought-out, customer-centric design of their back-office, e-commerce, and reservation systems, were well positioned to move to an a la carte pricing structure supported by a guided selling and order experience focused the clear presentation of options and information supporting making decisions on such options. Using Air Canada’s site as an example, the ordering experience is easy to use, informative, quick, and accurate. On Air Canada’s site, the various levels of pricing and options supporting their “unbundled” pricing structure are clearly depicted and understandable by novice users.

With systems and processes built for bundling and simplified pricing structures, are service providers really positioned in their internal systems and processes to facilitate customer decisions on these “a la carte” pricing options? I am concerned that the industry may be headed toward a significant degradation in customer service when supporting these new pricing structures. How will a novice consumer understand what a five gigabyte-per-month limit means verse a 25 gigabyte-per-month? How will the consumer understand the overage penalties involved? These are the questions and concerns I have.

These concerns are magnified as you think about service providers beginning to offer wide-scale a la carte digital content products and packages. The number of pricing, package, and promotion options will continue to increase significantly as service providers become the super enablers of access to digital content. This will create a greater strain on a service provider’s ordering systems and processes to facilitate customer order decisions across a wide range of service options.

To prepare, service providers need to use the airlines as an example of a possible solution. The airlines have embraced guided selling tools, especially in their e-commerce environments, to deliver rich offer/option search, presentation, research, configuration, comparison, quote, and order/reservation capabilities that focus on ensuring the customer makes an informed buying decision. If the communications industry continues to progress in the direction of the airline industry and embraces a la carte pricing strategies, they also must take a keen focus on the customer experience during the ordering process and fully embrace the informed buyer approach so successfully used by today’s airlines.

John Konczal is global industry executive of communications and media at Sterling Commerce. His specialty is the design and deployment of sales, order capture, and order management solutions supporting complex service bundling in both retail and wholesale communications and media environments. Previously he was founder and managing partner of element22 Partners LLC, a consulting and professional services firm specializing in introducing European and Asian software technology solutions to the North and Latin American markets. He’s also held previous positions with Telution, LHS Group, and AT&T.

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