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Reply From Eircom
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07-10-2002 6:07pm#1
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Who exactly is eircom Ireland?
Are they part of the "Rubiks cube" type infrastructure eircom Limited, or Eircom.net, or Eircom.ie.
Just be glad you got a reply from some minion, who was told to reply as the other so called boss is to scared to be seen to commit himselfto anything in writing.
What a sad state of affairs. I hope most Eircom staff know about their redundancy entitlements?
good luck.
Yours,
paddy20
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Originally posted by Jorinn
How is revenue static unless you gain 0 customers?
Perhaps that's how the people in the i-Stream marketing department think. Keep costs low by attracting zero (or close to it) custom. You're thinking like an micro-economist (that's either a compliment or an insult - depends which way you take it:)).
Dr Pip's minion is referring to static revenues from the group of customers that will sign up, while the costs will increase or decrease depending how often they avail of a flat-rate service. Effectively, a customer will pay them a fixed amount for a variable amount of Internet access (which of course is the whole point)
So they're saying that the fear is that Johnny Bloggs will pay Eircom a fixed fee but they won't be able to work out in advance how much profit (as a percentage rather than as a figure) they'll be able to make from Johnny. I say "rather than as a figure" because even at the moment they can't work out how much money they will make from any customer as a monetary figure in advance.
I guess they've never seen an "all you can eat" pizza place:D (OK, these places don't generally make much (if any) money from me but they do from the people I bring with me)
They're ignoring the fact that Esat have effectively done their market research for them. Admittedly the market attitude may have changed a little but that's OK - UTV are doing their flat-rate market research for them at the moment.
Why do I say this? Esat had roughly 20,000 customers on NoLimits. Assume that's a sample group of the market for flat-rate Internet in Ireland. Esat's marketing has never been as all-pervading as Eircom's so I think it's fair to say that we can regard it as a sample. I'm not going to back up that statement heavily as I think we're all agreed here that the flat-rate market in Ireland is greater than 20,000 users. UTV and Esat certainly think so. If someone (anyone - especially if you work for a telco monopoly) does want to argue the toss I'll happily do so in another thread which we'll call "Soula Evans' replacement says there's no market for flat-rate in Ireland, Seamus Ryan says there is".
Esat found that they weren't making money on 2,000 of those customers, based on monitoring usage of the full 20,000 over the course of three months from the beginning of February 2001 to the end of April 2001.
Remember the cost per user to Esat was based on the interconnection rates they were getting from Eircom. The cost of connecting a user to the internet is less for Eircom than it is for Esat as they're not carrying the same interconnection costs/rates (officially they are as eircom.net pay the same interconnection rates as Esat but given that the transaction is effectively Tony O'Reilly and backers taking money out of their left pockets and putting it into their right pockets the official stance doesn't apply). We know this to be the case as Eircom Ltd are obviously not selling the cost of a phone call at cost.
Esat were making money on at least 18,000 users (or 90%) - we kinow this because these were the customers they didn't cut off (I'm ignoring the 1200 they reconnected for obvius reasons - they were making a loss on these 1200). The question is how mucjh money they were losing on these customers, though keep in mind that the only reason they were losing money on these customers was because they were paying the interconnection rate to Eircom.
UTV currently maintain (and I've no reason to disbelieve them) that even paying Eircom's current interconnection rates they can make money allowing up to 150 off-peak hours per user.
The marketing bods in Eircom know how many people can be expected to have seen the Esat and UTV adverts (every firm monitors the advertising of its competitors). From that, after making an allowance for customer inertia (mentioned below) they know what the percentage demand for flat-rate is in Ireland. They can use themselves as a control group in the experiment and make a verification of the data by looking at the UK.
Eircom would actually make more money per customer than UTV if they introduced a similar (as in "same number of hours") service in about two-three months, especially if they charged slightly more for the privilege. Most Irish consumers are quite lazy about their telecoms provider - they don't consider switching from Eircom even when the lower cost (of most calls - not just for the Internet) is staring them in the face (it's partly the fault of the OLOs - they don't make enough of an issue of "easy to switch - you don't need another phone line - we're not out to screw you - we just want to give you cheaper calls"). Most people just naturally assume they got their phone from Eircom and that's pretty much that. Eircom also have a marketing budget that none of the other operators have. If they introduced a flat(ish)-rate package offering 150 off-peak Internet hours for €35-40 before Christmas they would actually get quite a few customers more than UTV/Esat combined. Plus, getting back to the first sentence in this paragraph, most heavy Internet users in Ireland have probably already signed up with UTV or Esat (especially if the UTV TV adverts continue, plus the word of mouth recommendations). By Christmas Eircom would be left with a large number of lighter users (more profitable) who simply want one charge on ther phone bill for Internet access (I'm sure Eircom don't believe these people exist but they certainly do).
Eircom fear that if they themselves introduce such a package and it proves unprofitable they'll lose money twice. Firstly Eircom.net will lose money as they'll have to pay the (imaginery) interconnection rates to Eircom Ltd (or Ireland - whatever it's called). If that happens the group itself will lose money as they won't have another company like Esat to pick up the tab. In other words - as long as it's another operator introducing this service on a non-unbundled line, Eircom can't lose.
Obviously if the ODTR ever gets around to prioritising LLU and making a big deal of it (or if FRIACO gets organised) Eircom are going to take a big hit, having lost the flat-rate customer base. They're gambling that neither will arrive. Ever. Or at least not until they've squeezed the company and taken it public again or sold it on. Tony O'Reilly has made most of his money from exercising share options in Heinz and other companies - if he goes to form he'll be taking it public (ditto the banks and venture capitalists involved - look at their past record). Then it's someone else's problem. I think they can delay both for the required time if the government/ODTR/EU don't actually do something other than publish consultative papers and policy documents (note: this is a hint, Bertie/Etain/Mario)
At the moment many Irish consumers have little idea of how much they spend on Internet access. They access the net by and large through a local number that doesn't get an individual report on their bill. This has suited Eircom greatly - what people don't realise won't hurt the company. IMO partly shooting themselves in the foot, they're moving their own ISPs to a 1892 number, which (presumably) will be reported separately on the bill. If it is, it will be the first clear notion some people will have of how much money they're spending on the Net.
So Eircom have a choice - the same choice they've always had, with one difference. They can continue the way they always have, mopping up individual charges from heavy and light Internet users alike, from now on watching their heavier and most profitable customers move to UTV (making Eircom more money as well remember - but only the interconnection charges - UTV/Esat make the rest). Or they can introduce a competing package, especially for those who don't regard Eircom as an evil bloodsucking force (yes, I'm being slightly sarcastic) and don't think a dialup speed of 33.6 is too bad and milk those twice, both at the telco and ISP ends.
The trouble is that some people in Eircom really seem to believe that no-one would buy into the idea - and worse if they did, they'd find out how outdated their network is. There do seem to be plenty of people working in Eircom who either think that there's no demand or that their network couldn't cope if there was. Both are wrong, but if they do have to upgrade their network, they want the government to pay for it.
Eircom fundamentally aren't interested in home users. They make quite a bit of money from them but very little (relatively speaking) from any individual customer compared with what they make from their leased lines. When single billing is introduced, I'm sure it'll please Dr Pip no end just to be able to present a single massive bill to both Esat and UTV and let them wory about the costs of providing relatively costly monthly paper bills to 200,000+ individual home users.
So the issue is: can "all you can eat" places/products make money? IrelandOffline says they can and they do. So do I. Across Europe, "all you can surf" companies are making money every day. Esat will stay in the market and will make money if they don't screw up. UTV will make money here. I hope it will be at Eircom's expense. In the end it will be at Eircom's expense.
Rambling post/rant, sorry (it is late after all:))0 -
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Ahhh rants are so satisfying
On that point of
"Most people just naturally assume they got their phone from Eircom and that's pretty much that."
Were there not figures released recently (they may have been in those press cuttings I sent to Dangger) where they found that while 80-odd percent of SME's knew about CPS services, some ridiculous number, like 40%, of residential users, didn't. And some didn't even know there was another company than eircom? Even a minimum amount of marketing by UTV, Telewest, etc etc could raise their market awareness no end, and begin to chip away at eircom's monopoly. My parents recently switched (under their own steam too, I was very impressed) to someone who is giving them free minutes and lower call costs, and they're delighted, as my Dad runs his business from home. Irish consumers are quite loyal, but if they can save money on utility bills, they'll jump at the chance, especially in our current economic climate. Or are CPS providers not willing to spend money on advertising here?
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