The Balancing Act of Innovation and Revenue Growth

by Robert Driscoll on October 15, 2009

KuhnBalancingActWhat’s better?  Metered or flat-rate billing?  This question has been asked for as long as people have been transacting.  Do you charge on a per transaction basis or a simple flat monthly rate that allows your customers to use your services all they want?  Do you continue to innovate and possibly affect revenue growth?  Telecommunication service providers have been struggling with these questions for quite some time as they fight to gain market share.  There’s pros and cons for both businesses and customers.

Flat rate billing made it easier for the end user as it eliminated confusion every month on what they would be charged.  Remember how great it was when your local ISP offered a flat monthly rate for their broadband services or when your cell phone provider offered unlimited monthly calling and data plans?  No longer were you worried about overage charges. 

Now look at it from the standpoint of the provider, at&t for example.  While at&t’s  wireless revenue was up 15.8% for the second quarter in 2009 versus the second quarter in 2008, data services surged.  This month, at&t’s CTO, John Donovan, announced at the CTIA IT & Entertainment conference how their mobile data traffic has increased over 5,000 percent on the at&t network over the past three years with the introduction of the iPhone, netbooks and e-readers to name a few.  Most of these devices access the internet with unlimited data plans offered by the service providers.  Using the example of at&t’s iPhone, these customers tend to use 400 Mb of wireless capacity per month versus 40 to 80 Mb of wireless capacity per month with a typical smartphone user.  This surge in data traffic has overwhelmed the at&t network in certain parts of the country as was reported in a recent Los Angeles Times article even though at&t states that the network is “ample and sufficient”. 

What happens when you neglect your service for the sake of growing revenues?  Eventually it will lead to a defection of customers as some analysts are stating will happen to at&t if or when it looses its exclusivity agreement with Apple to carry the iPhone.  If you neglect your service and your customers, as AOL did when it failed to upgrade its dial-up customers to broadband during the tech boom, it’s just a matter of time before your business erodes as providers who continue to innovate and listen to their customers will not only grow their customer base but their revenues as well.  It’s a fine balancing act for businesses to continue to innovate and grow its revenues, but one that should be managed properly and not overlooked.

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