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From the New York Times: Spring announced another quarterly loss today of 18 cents a share or US$505 million. The news is bad, as it looks like the mobile telecom is losing some of its biggest customers:

In the first quarter, the company lost 1.1 million subscribers; the total number dropped to 52.8 million.

Analysts do not seem spooked, although Sprint’s CEO is considering a sale of Nextel. The recently announced Clearwire joint venture may help prospects in the near-term, but not right now.

Related posts on billso.com

• 8 May 2008: Google bets big on Sprint and Clearwire’s WiMAX venture
• 6 May 2008: T-Mobile’s parent may buy Sprint
• 22 February 2008: Customer lock-in
• 20 January 2008: Nokia, Sprint announce layoffs
• 27 August 2007: Wireless providers gird themselves for battle
• 14 June 2007: Clearwire signs WiMax deal with DirecTV, EchoStar
• 5 February 2007: Wireless from the inside out

From the New York Times and Om Malik: Google and five telecom companies will build a trans-Pacific cable between Tokyo and Los Angeles, to increase bandwidth and reduce costs. The Times reported on the Unity consortium last September, but this new announcement confirms the US$300 million project. GearLog has more information on this topic. I haven’t determined if this new cable will connect with Honolulu.

It’s an important announcement because, as Om notes, this is the first time that Google has publicly confirmed its corporate strategy of building its own international telecom infrastructure through acquisition and investment. Google claims it wants to provide more reliable service to its users, so the company is entering the undersea cable industry not as a competitor but as a customer and complementor of Bharti Airtel, Global Transit, KDDI Corporation, Pacnet and SingTel.

As I mentioned on 7 February 2008 and 31 January 2008, the oceanic cable business can be risky. Google will have priority on the 7.68 terabit connection when it is completed. Adding more bandwidth is an essential part of providing scalable, reliable web services in North America and the Pacific Rim. If Google controls its own network as a source of competitive advantage, will competitors like Yahoo and Microsoft face higher costs to stay in business?

From the AP and Consumerist: Enzyte is history.

On 21 September 2006, I reported on the US government’s investigation of Berkeley Premium Nutraceuticals, the company that markets and sells Enzyte. The company’s advertisements featured a man named Smiling Bob, who lived a “better life” because of Enzyte. The advertisements included fake endorsements from medical doctors, and fake statistics from customer satisfaction surveys.

No one was satisfied

Enzyte was advertised as a natural male enhancement treatment. The Enzyte pills were little more than a placebo. The company made its money through credit card fraud, along with a steadfast refusal to process returns and cancellations from millions of customers.

It’s just the kind of business model that made the US Departments of Justice, Commerce and Health take notice.

Founder Steve Warshak, his mother, and others now face fines and jail time for their roles in the scam, as well as obstructing the investigation. This editorial in the Cincinnati Enquirer hails the ruling, and pleads for Smiling Bob’s demise.

Over a 100 years ago, Americans had another name for fake medications like Enzyte: patent medicine. See Wikipedia, QuackMedicine.com and the US National Library of Medicine for more information on this topic.

One strategy that telecommunications companies have adopted is bundling, or selling a combination of services at a reduced price. The goal is customer lock-in, a situation in which the buyer is more or less trapped in their purchase. In many cases, lock-in happens when the customer satisfices or compromises to gain value or convenience. Customers might grow dissatisfied over time, but they are unlikely to leave because alternative services are not available, or their perceived switching costs are too high.

A variety of US cable television and telecommunication companies have offered bundling programs. The usual items include television service and broadband Internet.

Companies that offer cable modems usually offer these services through the same “pipe” or connection – the coaxial cable drop found in many homes.

Local exchange carriers (LECs) offer POTS (traditional or “plain old telephone service”), and the final connection to the home is the familiar RJ-11 modular phone jack found in most US homes. Some LECs also offer mobile phone plans in their bundles.

Landline connections may be offered through VoIP or POTS, depending upon the carrier’s technology.

Agonizing over savings

Alina Tugend of the New York Times provided a great example of this decision-making process in her article last week. Customers sometimes obsess over lock-in when their friends brag about how much they saved by switching. Yes, lock-in also works well for insurance companies, too!

In Honolulu, Oceanic Time Warner, Clearwire and Hawaiian Telcom each offer bundles. Oceanic has a standard cable television package that includes cable modem service, long distance calling and VoIP calling plans. Oceanic staff can connect the customer’s RJ-11 telephone jacks to the company’s network, so customers can continue to use their existing landline handsets and equipment.

Clearwire offers broadband Internet service, long distance calling and VoIP telephone numbers through its WiMax network. Customers can hook their landline phone into Clearwire’s modem. The Clearwire service does not require an installation visit, but the coverage areas are somewhat limited. This article at DailyWireless.org has several interesting diagrams of business telephone systems.

Hawaiian Telcom keeps struggling

The HawTel package includes a POTS landline, long distance calling and DSL. HawTel is still working on its IPTV offering, which has been delayed by implementation problems. IPTV would let HawTel offer television service through the same RJ-11 telephone drop used by its landline and DSL offerings.

As a side note, I hated HawTel’s obnoxious “Savers Unite” advertising campaign, and am glad that it has been replaced. Was the tagline a call to action or an insult? It was hard for me to tell. The radio and television ads reinforced a stereotype of the “thrifty local” who clips coupons, hoards travel-size toiletries and wears old clothes to pay the “price of paradise”. Then again, telecom marketing campaigns usually strive for the “common touch”, in an effort to hold the average customer.

Telecom bundles are subject to a host of Federal, state and local regulations. Pricing is often controlled by government agencies and franchise agreements. On 18 August 2007, I discussed HawTel’s naked DSL option, which let consumers order DSL service without a voice landline. HawTel was late to act, as thousands of subscribers adopted mobile phones and dropped their landlines. These customers switched to Oceanic, Clearwire, or other broadband Internet services.

Customer lock-in is difficult to achieve when companies fail to implement their industries’ key success factors well. On 16 November 2006, I discussed HawTel’s billing problems after the company was purchased from Verizon. Mike Ruley never overcame these earlier issues and lost his post as HawTel’s CEO earlier this month, as I mentioned on 5 February 2008.

The New York Times reported on 11 February 2008 that Facebook users were unable to delete their profiles and data from the social networking site. Manhattan consultant Nipon Das has become a reluctant example, through his two-month struggle to cancel his Facebook membership.

In many Internet-related industries, stickiness is a high priority. Content publishers and web site operators want customers to return again and again to their properties. Return visits mean more advertising revenue and sales opportunities.

What happens if your customers want to leave?

When web sites collect personal information, customers sometimes find they are stuck. I’m one of those folks who continues to receive unwanted email and text messages from services that I tried and later abandoned. I’ve got my own ways of unsticking myself from their customer databases, but that’s another story.

As I reported on 20 June 2007 and 10 August 2007, more professional users are trying social networking sites like MySpace and Facebook. This is a difficult market to enter, as Business Week discussed on 22 September 2007.

According to this 13 February 2008 article in the Times, Facebook is trying to deal with user deletion requests. The earlier article attracted more attention to the issue. Right now, the deletion process is manual, and most users will need assistance from Facebook customer service representatives.

As a friendly note to my students, I do not require anyone to sign up for a Facebook account. The Facebook badge that I use on my blog is a handy way to display my email address. I used to republish my blog articles to my Facebook page, but I’ve stopped doing that.

No one has to sign up for a user account at billso.com, either. These user accounts are helpful for people who want to leave comments on the site, but the current version of the site works just fine for anonymous users. It was more trouble than it was worth to require logins on my course web pages, especially since I manage the assignments and grades in TurnItIn.com.

See my other articles about Facebook from 3 January 2008 and 28 May 2007 for more information about that service.