Somewhere from my fuzzy recollection of economics classes, I seem to remember that as products evolved in their lifecycles, you moved from “charge what market will bear” to “variable cost pricing “ – i.e. make sure price covers your variable costs and there is some left over to cover residual fixed costs. If anything, I would have thought this would apply in spades in the telecom sector, with its significant fixed cost network capacity investments.
In the last month, I have been reminded by three instances of why the industry seems to not apply variable cost pricing
- I lost my wallet in Paris couple of weeks ago, so I had to call my card companies. All of them say “call collect” from overseas so the hotel patiently connected me to the AT&T operators (multiple times – most of the AT&T operators are too impatient to navigate the card company IVR and would hang up if they did not get a human voice to accept the toll charge – as we know a human takes a few minutes to find in most card companies). But that experience was a good reminder of the calling card charges we all loved from AT&T in the 90s. Massive charges for minutes persisted even as local stores in various markets were selling prepaid cards for a fraction, and we all steadily quit carrying the AT&T calling card in our wallets.
- I recently wrote about the GoGo wi-fly network on the New Florence blog. What was interesting to read was Aircell was leveraging its experience in airphones we had in most seatbacks in the 90s. It was also a reminder that in spite of a significant …