Tuesday, June 29, 2004

TT: TSTT shooting itself in the foot

Long-distance rates to the United States, Canada and the United Kingdom have been slashed by half, in an aggressive move by telecom provider TSTT to help position the company as the leading service provider in a competitive environment.

However, CEO Sam Martin hinted that domestic phone rates would soon be rebalanced upwards to compensate for the loss of revenue, as calls to the United States, Canada and the United Kingdom come down to $2 a minute from today, down from $4.

He said the question of rate rebalancing was a “top priority” for TSTT.

“The WTO agreement clearly implies all rates should be cost-based and we have been engaging the Government to adjust its domestic rates based on the principle of cost,” he said.

“Twenty three cents unlimited is clearly not a cost-recovery price.”
Martin is crazy. The way to increase revenue is not to drive costs up, but to drive them down and so increase usage. More usage means more money. The average TTian is going to be less likely to use TSTT overall because their international call rates are 100% higher than that of call centers, and their local call rates are going to rise. End result? TSTT will raise rates again to get more revenue, and they'll wonder why that isn't happening.

But, then, TT is perverse. People like knowing they've paid an arm and a leg for a good or service, so TTST just might reap big bucks from their costlier domestic and international service.

Not.

Economics 101, dude. The more you charge for a thing, the less of it is purchased.

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