[AusNOG] NBNco: "Let's start competing with our customers!"

[Mark Smith]

On 17 September 2015 at 09:57, Noel Butler <noel.butler at ausics.net> wrote:
> On 17/09/2015 09:37, Paul Brooks wrote:
>
> On 17/09/2015 7:56 AM, Skeeve Stevens wrote:
>
> I am saying that while the CVC should be like $2.... if they aggregated
> their PoI's, you'd need a lot less because it would scale much much more and
> it would actually costs less.
>
>
> Methinks you're confusing topology with charging model. If you negotiated
> your wholesale backhaul provider to just add up all the traffic on all the
> POI ports and charge you for the aggregate, rather than per physical port,
> it wouldn't matter how many actual POIs there were.
>
> This whole mess also seems to hang on two assumptions:
> 1) every ISP needs to service the whole national footprint
> 2) every ISP needs to charge the same uniform retail price all over the
> footprint.
>
> Are either of these true?
>
>
>
> Of course they are - unless you want to be blasted into extinction
>
> 1 - a necessity to compete/survive
>
> 2 - a necessity to compete/survive
>
> I'm truly amazed someone on THIS list assuming they have any RSP experience
> even asks such a question
>
>

If small players think they can out capitalise and out scale of
economise much larger players, then they're never going to win.

As a smaller RSP, If your only competitive advantage is your lower
price, then you're vulnerable to your competitors lowering their
prices. That is an easy and low effort decision by your competitors,
and if they have larger margins to do it, because their scales of
economy are larger and as they get larger volume discounts from their
suppliers, they have much more room to lower their costs.

It is a race to the bottom, and since you're starting much closer to
the bottom than your competitors are, you'll lose (they will probably
get in trouble for using their market power to crush you, however you
may suffer a fatal blow before they get taken to court, the court case
occurs etc., etc.)

You're far better off trying to find something that your competitors
can't or won't do, creating a barrier to entry. Then you have a unique
advantage (i.e., a natural monopoly), which means customers must come
to you to get it because they can't or can't easily get it from
anybody else, and you can charge what your customers are willing to
pay for your unique value, rather the same or a few percentage points
lower than your competitors' prices.

If you don't think this works, have a think about how local pizza
shops manage to survive in competition to national pizza
chains/franchises, who will have lower costs. They're all
fundamentally selling pizza, so how do local pizza shops get away with
not only selling the same thing, but probably make a much bigger
profit when doing it?




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