Rurality or being underserved has rarely been an
indicator on its own of whether someone will pay more for broadband. There are
three more important factors.
1) Prospects individual Need. (for a specific
purpose)
2) Wealth (The value they put on
their times)
3) Value perceived of the service (What isthe
advertised value of broadband by others, nobody wants to get ripped off out
of principle)
A1) When someone owns their own home business with
4 or 5 computers, or someone is disabled and orders their medicine online, or
etc, they are willing to pay more. I justified $500 a month for a T1, for two
year when I was one of two people working in my home office, as it was my only
choice, BUT BECAUSE I HAD A HIGH NEED. I could not do business without it.
The two years before I had my home business, I also did not
have choices, so Dial UP was acceptable based on my budget. I couldn't
fathem paying over $20 a month. UNtil the day I realized how much money I was
loosing in time online when trying to run a business. And realizing I could save
$2000 a month working from home. I cleared $1500 by buying that $500
T1.
A2) When I serve wealthy neighborhoods, I get
past the install fee problem in about two seconds, and don't discount it.
So I go after those markets first. The bottom line is a lawyer, would
easilly pay a $100 a month for a home connection if it means they can avoid one
weekend trip a month to the office, when they value their time at $400 an
hour. They loose more money squabbling about the cost in time than they do
just paying it. PLus as a successful individual, they understand the value
of professional service and support. They want the same high quality saervice
they receive in their offices.
A3) When Cable and Verizon advertise $19 Broadband,
thats what custoemrs think its worth. Its funny I actually had a television
station, will 30 employees moving into a new office, call the other
day and get upset, because he though he should pay only $30 a month
for broadband, And I tried to charge him $150 for a 2 mbps service. Thats
the value he put on it. Hes sees Cable offer 5mbps for $29. But whats
ironic, is he doesn;t even know what a megabyte is. But he didn;t wantto
buy form someone that he thought was tryingto take advantage of him, and rip him
off. Its funny, when the only other option he could find came out to
be $600 a month, all a sudden I didn't seem so unreasonable anymore. He wonders
why he was put on the end of the install schedule. Peopel aren't naturally
cheap. They get educated by the market and advertising to learn their
perceptions. Whats even moe ironic, is the company, before they moved to
the location, I learned paid closer to $800 a month for their T1. The person
deligated to order the service, just wasn't privy to that information.
Accounting took care of the bill because it was sent to them, they didn;lt know
what it was for, and the previous tech guy did all the evaluation of their past
provider choices. Its the ISP's responsibility to educate their
prospects on their need, if you don't they won't understand how much they should
pay, and can only go on what they hear and see on advertising, where the fine
print is never seen.
So how much you want to charge for residential
depends on your Marketing plan and target market. Do you want to take the
whole market or a small sliver of specialized need
market?
In my wealthy underserved markets, I charge $500
install fee, and I am under charging for what I could get. Its my home town, so
I don't want to gouge my community members. $500 was a fair reasonable price
based on what it cost me to deploy, which was more than I charged them for
900Gear, a quality install, and labor.
However, in main stream served suburbia, I get 95%
hang up, after disclosing $300 install fee. However, the remaining 5%, are
profitable to serve. So I hand pick.
Whats going to get exciting is mainstream
residential wireless, because of low cost gear QUALITY gear like Trango
broadband and Mikrotik.
Do you want to keep the price high and put money in
your pocket to cover man hours, or lower your price, and increase your volume
and market potential? Are you looking to be more profitable today while on a
cash constraint, or are you well financed and looking for the maximum
payoff, considering you may sell for high multiples, after you own the client
base? That determines price.
I have found that the install fee is the deterent
NOT the monthly fee.
If you are in an under served area and have no
competition, your ownly task is to determine thevalue to your client base. Are
they tech savy or not?
I find that just about anybody will pay $100 to get
broadband installed. Without options in underservia, just about anyone
will pay $250 to get broadband installed.
However, if in underserved, and high need and
wealth, their only other choice is Satelite at $600-$1300 install and $89 a
month, and its just a little faster then dial up, and you'll blow them away with
support and performance. So why be cheaper?
My advise is to get as much upfront as possible
when you can, because you never know what lies a head in the future, don't wait
for your ROI if you don't have to. Don;t sell the equipment unless you
have to.
What I will tell you is that in a served area, no
matter how much need, $300 install fees will not win you residential
clients.
Tom DeReggi
RapidDSL & Wireless, Inc IntAirNet- Fixed Wireless Broadband
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