When technology changes rip out your bottom line

May 22, 2008

I was inspired by this great article in the only “paper” magazine that I subscribe to (Fast Company). The article is about the fall of AOL and how their tumble into obscurity was marred by general business mistakes which compounded with the eventual loss of the company’s largest revenue generator (dial-up).

I got a call about a month ago from my first tech employer (small ISP in Rhode Island called NetSense). The president of the company and I still remain in contact – he informed me that he was selling off his last PRI line (used to handle large amounts of dial-up customers). Lucky for him dial-up wasn’t his largest revenue generator (his hosting revenue is king).How will new communication channels effect existing channels?

I then started thinking about some of the other services that we use whose days may be numbered. I came up with one rather interesting service: cell phones.

As I have talked about before (here and here) communication is changing. Not only are the ways in which we communicate (Web, IM, E-mail, etc…) changing the channels in which we communicate are also changing (Blogs, Wiki’s, Facebook, Twitter etc…). I think about the ways in which I communicate with people. More and more of that communication is done digitally. I use IM and Twitter exclusively when I want to ask brief questions or touch more than one person at time.

Additionally, VOIP and software programs like Skype are making strong cases against traditional cell phones. Remember the tustle between Apple and Cisco – it was essentially over “who owned the connection”. Once cell phones started adding Wifi and services like Skype became more and more reliable – a traditional “phone number” and the services that companies like AT&T, Sprint and Verizon offer are becoming less valuable.

What I see happening is you will no longer need to “call” someone or send someone an “e-mail” you will simply say to your device (which will be tethered to the Internet) I want to communicate with Ron. Wherever I am and whatever services I have available (Skype, Twitter, IM etc…) we will be connected. I don’t see anyone needing a single number (except for the people that only have cell phones). Our children will be connected in ways we can only imagine and it won’t be with a phone number.

Don’t get me wrong, I love my cell phone and right now I use it for a lot of my communication. What the article made me think about was this:

If you are a cell phone company today (or an investor in a cell phone company) what you should be doing is learning from AOL’s mistakes and should begin planning for the day when they begin to lose subscribers. Are they going to use their channels to deliver new services so they can keep their subscribers or are people going to be sick of paying $45 for a phone and $50 for connectivity services when they would only really need the $50 service fee to have connectivity for their communication applications.

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6 Responses to “When technology changes rip out your bottom line”

  1. Luke Gedeon Says:

    We got rid of our land-line years ago. Definitely looking forward to sharing one wireless service for both phone and laptop.

    It is funny that the cable/phone/internet thing is just now starting to merge. About 10 years late.

    When my Macbook can connect (fast enough) through my iPhone, Apple will rule the world.

  2. notronwest Says:

    Luke,

    I agree with you completely and have not had a “home” phone since we moved into our first home about 6 years ago. I wonder how many other people out there are not using a land line. I bet the numbers are increasing.

  3. mikull Says:

    it’s true, and i embrace the change… but realistically, let’s not forget – they actually passed a law to force people to use digital television.

    among other things, the lesson i see there is this: for every person who gets it, there’s 2 who don’t – and one of those doesn’t want to hear about it.

    if i actually said things like twitter and skype to my dad, he would smack me and tell me i’m too old to be using drugs. of course, my dad has never (and probably will never) own a home computer.

  4. notronwest Says:

    Well you cannot deny that you (or someone you know) used AOL for their dial-up access to the Internet way back when. And that person is clearly not using that today (I do actually have a sister in-law that lives in Indiana that still uses dial-up).

    At least in the digital television case – they have created subsidies to help those less fortunate rabbit ear owners. What about the 25 or so customers left on a dial-up connection who have no choice but to switch to broad band. And more importantly, what happens to the workers at the ISP before they go out of business – a slow and gradual death – that’s what.

    Just stating – that there are a ton of services out there that are in jeopardy and they better learn from AOL.

  5. mikull Says:

    Ah, yes – but people don’t know they’re in jeopardy… and without broader acceptance and subsequent migration, you’re not going to see the disappearance of services that continue to generate significant revenue.

    Sure, most people would do better with skype than some verizon landline- and over time this trend will continue, but without laws or focused marketing, it’s going to take a significant amount of time.

    The deeper into technology I get, the more I simultaneously underestimate and overestimate the digital consciousness of the people around me.

  6. Litotes Says:

    Somehow i missed the point. Probably lost in translation đŸ™‚ Anyway … nice blog to visit.

    cheers, Litotes.


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