New pricing focus for Bell apparent in Optimax strategy: Cope

Bell Canada’s decision to launch its Optimax fibre-to-the-node (FTTN) high-speed Internet service with metered pricing is a sign of things to come from the incumbent telephone company, says George Cope, president and COO. He made the comments at the BMO Capital Markets Media and Telecom conference on September 12. Cope admits that the company is not as advanced as its rivals in positioning certain products as premium-priced services, but changes have now been made to pricing strategies in a number of segments. He adds that the results of those changes have started to bear fruit as average revenue per user (ARPU) rates in some segments has started to improve. Bell Canada implemented a $5 per month price increase for its higher-speed Internet access products in the fourth quarter of 2005 for all new customers. Existing customers began paying the higher prices in the second quarter of 2006. The video side experienced a $4 increase in monthly per-subscriber revenue in Q2 2006 compared to Q2 2005, jumping to $54 from $50. While adapting some consumer segments to the new realities may take some time, new broadband products are an ideal illustration of where the incumbent telephone company is heading: namely, that high-speed Internet is a premium product and should be priced that way. "We absolutely have to monetize the investment in the Internet and the capital investment we are making in fibre-to-the-node," Cope said. "The market is still growing but the penetration of high-speed Internet now is about consistent service and more and more usage, and not quite as big a battle for just straight market share of subscribers…It’s a significant capital investment we are making and it can’t be just described as ‘Well, it’s table stakes in the industry and therefore you have to do it.’" Bell’s new pricing strategies are about driving more revenue and higher margins, said Cope, adding that growth areas such as the Internet, wireless and video should be hitting 60% margins, considerably higher than the 40% being achieved from Bell’s traditional wireline telephony services. The Bell Canada president explained that this can be achieved by extremely tight cost control and appropriate product and pricing strategies. " just doesn’t drive how you structure your revenue, it helps you drive how you structure your costs. So how much incremental cost can you put in per dollar of incremental revenue? And that a real focus of ours and probably wasn’t It’s a refinement to the way I think the organization was before," Cope said. While the growth services of wireless, Internet and video are going to be key to future revenue and profit generation at Canada’s largest communications company, improving the results in the legacy local access business through reduced churn will also play an important role. Winback activities are now kicking in which allow Bell Canada to win back previous customers there as well, Cope said. During the one-day BMO Capital Markets Media and Telecom conference, many elements of the changing telecom industry were discussed. One panel pitted the cable companies against the telephone companies with a reseller in the mix. An upcoming issue of Network Letter will have a recap of that panel with a eye on the contentious issues.

New pricing focus for Bell apparent in Optimax strategy: Cope

News | September 15, 2006

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