Monday, May 16, 2011

Mobile coverage and information in markets

In his Twisted Wire podcast last week Phil Dobbie raises the question of how consumers should be informed about the coverage available on mobile networks. On positing the idea of a consolidated detailed map of coverage Telstra’s Max Jennings said;

I don’t think so. It’s a very competitive industry in this country, and it’s in each of the operators interest to (a) publish correct data about coverage and performance and (b) to maintain that performance level over time. Now the coverage maps won’t indicate performance per se, they’ll indicate where the signal is available; but the capacity side of the equation is also extremely important.

Your customers will very quickly tell you if you are not meeting the expectations that were delivered to the customer at the time of purchase and they have the opportunity to walk to one or two or however many operators that exist selling mobile services.

I don’t think it needs to be regulated. I think the competitive forces within the industry will sort that issue out.

The discussion reveals a good example of the naive faith in competition and markets promoted by telcos. As I've outlined elsewhere the discussion ignores what is known in economics (after Akerlof's paper as the "market for lemons". More recently research shows that the problem of the efficiency deviation of lemons markets is increased by increasing competition.

The position described by Max of a customer being able to change network after the fact of finding poor coverage reflects the failure to understand that the consumer can't do that because of a lack of information about the alternative.

The suggestion ignores the high switching costs for customers as well. There is not only the problem of time commitment now but the very fragmented spectrum model that really you want to keep your phone on the network you bought it for.

But the buzzword in customer experience these days is "reducing customer effort" with its own score. The attitude of let customers buy and then experience the coverage doesn't reduce customer effort.

It is a bit disappointing because when Max and I worked together in the Corporate Customer Division of Telstra the research then conducted on customers by PA Consulting revealed that reducing the effort they had to put into managing telecommunications was a big driver of assessment of the quality of customer service. That in turn fed part of the assessment of the attractiveness of our long term agreements (called Strategic Partnership Agreements).

Max and Phil went on to share a joke about how Vodafone was already witnessing a big churn driven by poor coverage experience. Vodafone has now developed a coverage checker that conveniently uses Google Maps. It has however already received negative comments as the coverage shown isn't what is reported.

The site carries the usual disclaimer about such predictive models. Over time the site could get better by being adjusted by the actual experience at actual places. (one of which can also one how high off the ground you are - ever noticed poorer coverage on the higher floors of a building). I sympathise with the carriers and the difficulty of actually defining a coverage expectation, given all the factors that can affect it. But I feel for their customers far more.

But let's face it, Vodafone has felt driven to this situation because of a small disaster with coverage. Telstra and Optus have no need to respond.

Real world markets don't work like they do in economics or MBA courses - firms and policy makers need to recognise that.

Novae Meridianae Demetae Dexter delenda est

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