What Would It Take to Switch to OPALCO Broadband

February 15, 2013
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860872_10151422360873426_1997363780_oOPALCO Broadband plans have recently been published. A key part of any business plan is understanding the value of the product or service. Many organizations design their plans based on focus group input. A focus group is a selected group of potential purchase intenders that represent the overall market. Working with focus groups can provide the business planning process with product or service ideas that are crucial to business success. By repeated refining the business plan from focus group input, a survey of interests can be developed, then tested and asked of the entire market, if the market is small enough.

A great way to do this is to involve market experts and business planners. Some initial questions Islanders have asked are: How much will it cost for the monthly service? How much will the installation cost? How will our local ISPs be affected? How will privacy and security be managed? Will there be any competition on this network? Since Opalco Broadband is a member-funded project, how much more will members have to pay, beyond their current ‘memberships fee’, is another area of interest. Would non-electrified members have access to the network? Who would provide customer service and support? When would the network be available? What sort of study on Microwave towers has been done locally? Why are 100 new towers in the plan? Do I have to have one in my yard, or near my house? What sort of say-so do I have in the process? Who are the decision makers?

Given the Opalco broadband proposal to Islander members intends to spend between 18 and 80 million dollars on the project, how long will this network last without needing more money?

Of course this isn’t an exhaustive list, rather just a few of the questions I’ve heard around town in various face to face discussions.

Once a proper questionnaire has been developed from focus group engagement and the response collected, a value proposition to the possible purchase intenders is likely meet with high levels of interest. Another step in the process can be determining the actual market from the total available market. The total available market is defined as all the individuals, businesses, and organizations that currently use broadband plus those intending to buy broadband when the service is delivered.

This leads to an analysis of the broadband competition in the community. Currently, AT&T, Verizon, Sprint and T-Mobile offer mobile broadband in about 60% of geographical area of the Islands. In a recent conversation with AT&T, their business office told me they would be fully deployed with LTE – the latest broadband product by the end of 2014, about when the Opalco broadband wireless service would be deployed. For large communities in the San Juan Islands, broadband options aren’t much of a challenge. In Friday Harbor, Eastsound and many other hamlets 10 megabit DSL service from CenturyLink is offered today at competitive prices.

Understanding precisely where the retail market for Opalco Broadband is going to come is important. It is possible that Opalco could buy an existing Internet Service provider to initially acquire some customers. Most ISPs are suffering from increased competition and attrition due to their own high costs of Wholesale Internet access (Opalco offers 2007 prices to local ISPs that wholesale access, keeping their cost of doing business higher than it does for itself)

So, we’re down to determining the key question: What will it take to induce 5,000 Islanders to switch from their existing broadband provider to Opalco? Clearly rural Islanders with poor DSL or wireless options are one of the first areas to offer solutions to. How many Islanders live in those areas that are willing to switch to a $90 a month plan and pay for installation is unknown, but it could be known.

The Survey I designed for the Google Gigabit Communities opportunity some years ago, didn’t ask the question, ‘what would it take for you to switch from your current ISP’. Three years ago, that simple, volunteer produced survey asked if Islanders would buy Broadband Fiber Optic 1,000 megabit service from Google at the projected price of $80 per month.

Today, Opalco is asking if Islanders would buy 10 megabit microwave wireless service from Opalco for $90 a month and up to 40 megabit fiber service in Friday Harbor for $90 a month.

OECD stats say about 60% of Americans are connected to broadband. If we assumed 60% of 11,000 homes where broadband customers today, the total available market is 6,600 broadband subscribers.

If the stated goal of the OPALCO Plan remains to win 5800 subscribers, they need to convince non-broadband customers to become first time broadband users as well as address the existing subscribers. They might develop a compelling value proposition for existing broadband customers to switch, or buy them in part through buying existing ISPs.

Its a good question. What would it take for you to switch from your current ISP. While Opalco enjoys a monopoly position in distributing mainland electricity in the Islands, it is impossible to imagine the local market for broadband will not be served by multiple broadband providers. Unlike electricity, broadband prices are declining and competition is firing up.

The question then remains, what would it take for Islanders to switch to Opalco. And the threat to all broadband providers is ‘churn’. Broadband providers want customers to stay on their networks. The prevent competition from attracting new customers through two main mechanisms, both still legal in the US. First they charge a ‘setup fee’, and second they offer discounts for signing long term commitments, and charge a hefty penalty to cancel service.

Assuming 5800 is the correct number of new Opalco Broadband customers for ‘break even’ on costs+overhead+reserves at OPALCO, then only about 700 customers would be left for Islander’s broadband service providers – CenturyLink, Rock Island, Orcas Online and the others.

A good business plan for Opalco to develop would be one that addresses how 5800 Islanders would choose willingly to leave their current provider and also not return to an alternative provider in the Islands. A competitor might build an Opalco-like wireless network for much less than Opalco is planning to spend, so other than negative, and potentially illegal anti-competitive behavior, what could be Opalco’s undeniable market offering be that convinces Islanders to switch?

Gigabit Fiber to the Home. Which is not in the Opalco plan today. That is the single value proposition that may cause a mass exodus from other home and business broadband providers. Would you switch for anything less?

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