Calculated misery works for airlines – why not telcos?

Calculated misery
Image credit; 1000 Words / Shutterstock.com

In the wake of the recent United Airlines passenger eviction fiasco came a slew of stories on just how bad the customer experience is when flying on US carriers. One of the scariest was an article by Alex Abad-Santos titled “Calculated misery: how airlines profit from your miserable flying experience”.

Now, you would think this would fly in the face of logical business thinking, especially if you are a communications service provider embarking on a massive transformation project and employing big data analytics and AI to enhance the customer experience. Ideally, this will help keep the customers you have and attract others from less concerned competitors.

Well, if Abad-Santos is right in his assumptions around calculated misery, then CSPs are wasting a lot of money and may be better off making their customers lives as miserable as possible to benefit from higher profits.

Hard to believe? Let me explain.

There was a time when US airlines offered a standard service in each class you booked. Everyone in economy got the same size seats and meals. Fares were artificially regulated by IATA and inter-carrier agreements. These seemed to be sanctioned by governments, probably to protect their own national carriers from excessive competition.

Then came the era of deregulation and budget carriers offering much-reduced fares accompanied by much-reduced services. Their models mastered the concept of revenue management that airlines had employed for years but instead of maximizing revenues per passenger the emphasis was maximizing “bums in seats”. Plane seats are disposable items – if no one is sitting in them, they are wasted. So any revenue earned from getting the seat filled is money in the bank.

Budget airlines offer early bookings at the lowest prices – as the plane fills, the prices increase. The early money sits in the airline’s bank account for many months prior to the flight earning interest, and the airline knows well ahead of time if a particular flight will be profitable or whether it should be cancelled altogether.

Customers opting for cheap airlines and cheap flights forego many of the basic rights covered by full fare airlines, but the appeal of cheap prices seems to override all this, and appears to be the main driver for their customers.

Traditional airlines soon caught on but US carriers seemed to go overboard in their methodology that has resulted in calculated misery for so many. And we are not just talking about overbooking practices that allegedly led to the United drama.

The basic flying model of no meals, no baggage allowance, no seat allocation, and carry-on limits, smaller seats with less recline at the back of the plane, etc, has become such a bad experience that people are now willing to pay extra for what they used get for nothing.

You pay for seats with more leg room; you pay more for priority boarding so you can get a space to put your carry-on luggage; you pay for lousy meals and even water because some carriers won’t even let you bring your own on board.

They have made the whole experience of flying so miserable that you end up paying more to relieve the agony of flying – that’s calculated misery. And the scary part is that it is wildly profitable for airlines – in fact, the more miserable they make it, the more money they seem to make.

So why don’t telecoms and internet companies do the same? Depending where they operate, they may be restricted on how much misery they can impose by net neutrality laws or national regulations. Like airlines, they were once national assets that needed protection but now deregulation and increased competition has turned their world of high prices, huge margins and basic service upside-down.

Customers today expect (and even demand) fantastic network coverage and 100% connectivity. This has become the norm. Price does factor into their thinking but unlike airlines, CSPs can’t differentiate or charge more for priority service, higher bandwidth or speed.  They generally use high levels of these features to attract customers, not charge them more. They are expected to give everyone the same level of connectivity. And when they tried to throttle customers that abused those early “all-you-can-eat” data plans they were lambasted – unlike the airlines.

Will we see telcos offering nothing more than un-guaranteed connectivity at a reduced price and charging customers for anything over and above that, including customer service? Is there actually anything left for them to take away from customers to impose their own calculated misery? I don’t think so, but for some adventurous operators it might be worth a try. Any takers?

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Tony Poulos
About Tony Poulos 34 Articles
Tony is a freelance writer, regular speaker, MC and chairman for the telecoms and digital services industries worldwide. He has founded and managed software and services companies, acts a market strategist and is Editor of DisruptiveViews and co-publisher of Disruptive.Asia. In June 2011, Tony was recognized as one of the 25 most influential people in telecom software worldwide.

5 Comments

  1. That’s not true at all – telcos *do* differentiate on speed, and also priority. Not uncommon for differential treatment of, say, business vs. consumer postpaid vs. PAYG users

  2. So with the net neutrality rules in the US changing as we speak, maybe we will see a real “no frills cut price plan” from one of the major operators? Google fi and freedompop showed the way in the US but did not manage to have the impact they were hoping for yet!

  3. What the airlines fail to factor in is the other competition that reduces their overall business. I never fly unless I can’t avoid it – because I hate flying due to those factors you raised. So I holiday locally if at all possible.

  4. Two points I believe are relevant, First, there is a reason for the the customer service problems so often associated with American airlines. Lack of competition. If the industry was not so shielded from real competition, customer service would very quickly improve. I understand that “more competition” is a hard sell when the Commander in Chief thinks a trade imbalance means the US is getting ripped off by free trade deals.

    Second, American network service providers face the same opportunity as the American airlines: compete more effectively to win market share and the commercial rewards, or don’t and suffer through disparaging videos of “help, I’ve fallen and my internet connection can’t support emergency medical service”, and the embarrassing testimony before senate subcommittee hearings to which that inevitably leads.

What do you think?