The New Habituation

by Neale Martin published June 06, 2005 in Telephony Telephony

In the past, competition in communications was the result of legislative and regulatory fiat. Whether from such clumsy attempts as UNE-P or spectrum auctions for wireless bypass such as multichannel multipoint distribution service, the outcome was always predictable: under-funded start-ups offering undifferentiated products and services with a slightly lower price than the incumbents.

The incumbent service provider response has been equally predictable and desultory. Monopolistic DNA created a reflexive action to destroy potential competitors through regulatory and court machinations or through predatory competitive practices. Meanwhile, incumbents decided the best response to competition was to get bigger, as if combining two large declining businesses would somehow yield an invincible earnings juggernaut.

The reality of the telecommunications industry is that innovation typically comes from vendors that are more than willing to sell to all network providers, like arms merchants happily supplying both sides in a war of attrition. Predictably, customers show little or no loyalty to their telecom providers, whether they are incumbents or new entrants to the market. The demise of so many companies in the telecommunications space, including the iconic AT&T, provides mute testimony to the overall apathy customers have for providers of largely commodity-type offerings.

However, new technologies are changing the way customers communicate. A teenager of today is just as likely to be found IMing or texting as talking on the phone. And if they are talking, more than likely it's on a mobile phone. The business person is confronted with the same multiplicity of communications options. When contacting co-workers, do you call their office or cell? Do you use e-mail or IM? Hundreds of millions of customers are making billions of these communications decisions each day.

Our options are proliferating across all communications media. Do you watch broadcast TV, cable, satellite, rented DVDs, TiVo or video-on-demand? You want to listen to music? Depending on where you are, you can listen to the radio, a CD (purchased or burned), the ubiquitous iPod, Internet radio, an MP3 phone or one of two satellite radio networks.

New network technologies, wired and wireless, continue to expand the ways businesses and consumers communicate and access information. But before we start laying odds on which technology will win (VoIP, EV-DO, WiMAX, FTTH, IPTV), it would behoove us to take a reality check. Unlike the past, when an oligopoly market and protective regulators all but guaranteed success, the future will be ruled by companies that do the best job actually serving their customers.

The winners will be those companies that are most successful in getting customers to habituate on their products and services. For example, why do teenagers use cell phones while sitting by a perfectly good cordless landline phone? The parent in us wants to scream out, “Because the kid doesn't pay the bill!” But the marketer in us should recognize that the teenager uses a cell phone out of habit. (Before we harrumph too loudly, remember we are no different with our BlackBerries.)

Why are teenagers habituating on cell phones? The mobile is always nearby, holds all of their regularly called numbers and can be used for voice, text, pictures and Internet access. The landline phone works at only one location, has limited functionality and a very poor user interface.

To drive this point home, the ILECs introduced cellular service in the mid-1980s but did everything in their power to prevent customers from cannibalizing wired with wireless. While this strategic decision was understandable from a financial perspective, it was disastrous from a marketing perspective. Attempting to control customers instead of winning them prevented the incumbents from establishing a long-term competitive advantage in the wireless arena.

Still, many service providers continue to look at the competitive market from this inside-out perspective, trying to control customers through contracts, proprietary technology and government intervention. Future success will not be guaranteed by picking the right technology or by buying the right competitor. It will be the result of creating a user experience so automatic it becomes a habit.