Archive for February 18th, 2009

Why $5 phone service is a good idea

Verizon is considering a $5 phone line option for its broadband customers — that’s a very smart idea and here’s why.  The most important thing a telecom service provider can do right now is maintain its relationship to the broadest base of its customers. At one time, the home phone line was the primary tie between a telecom company and its consumers, but we all know this is no longer the case. Increasingly, the broadband connection is the primary tie, in addition to, for some consumers, a video offering sold either directly by a telco or through a partnership with the satellite company.

Telecom service providers who remain inflexible in their voice service pricing are practically inviting consumers to cut the cord — especially in hard times — and to explore cable options, which often include a cheaper VoIP-based voice option. Once that consumer has moved to a cable bundle, it is much more expensive to try to win them back.

By offering flexible and very reasonable pricing for a landline service, any telecom service provider gives consumers a solid option to maintain a landline, for safety and security reasons if nothing else. A landline phone will operate when commercial power goes out and is a secure way to contact 911 in an emergency and know for certain your location will be known to the operator.  Cable VoIP service has a battery backup and, as many Houstonians learned during Hurricane Ike last summer, batteries will run out during prolonged power outages. At $5 a month, the landline is an insurance policy.  And since many consumers use their wireless phones, with free long-distance, to place any call that isn’t local, a cheap voice service could truly be a cheap voice service.

Telecom service providers have shown their flexibility in the past, most recently by bundling wireless service and broadband, giving cord-cutters a reason to stay with their telco, and not jump completely to cable. As times get tough, it is important to remain open, and to creatively explore consumer-friendly options, and that is what Verizon is doing here.

One additional note, however. Depending on how that $5 phone service is offered, marketing it as a security blanket when commercial power fails won’t work if this lifeline service is based on a fiber-to-the-home network and consumers are well-prepared with battery backups. This remains an issue the telecom industry needs to address.

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