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Strategies & Market Trends : Buffettology
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To: James Clarke who wrote (882)12/31/1998 1:47:00 AM
From: Jurgis Bekepuris  Read Replies (1) of 4691
 
James,

Regarding AOL competition, there are two usual
suspects: telcos and cable cos. Both of them are
stodgy bureaucracies, but both have additional appeals
and drawbacks. Appeals:

- single provider. One bill, integrated services in
the future.
- owns infrastructure. Faster upgrades, cheaper pricing.

Drawbacks:

- slow to capture markets, innovate.
- owns capital intensive infrastructure.

Switching cost is high but presumably determined by
the user qualifications (e.g. I have a vendor independent
e-mail address so I could switch without inconvenience).
Service pricing may not be as flexible as you think. You
are probably not one of the people who would call long
distance through 10-10-XXX to save a penny on your call.
Yet a lot of people do it. The same applies to the
Internet access, only in a smaller scale because most
of the newbies are ignorant about cheaper or free ways
of the access, and are intimidated by crude software of
the ISPs. AOL has more pricing power
than long distance telcos because you have to
switch to take advantage of the lower pricing. Yet
they are not unassailable. At one point T had free
internet access for all their long-distance customers.
Currently they are playing oligopoly with AOL and
maintaining the $20 pricing. But who knows when
they decide to capture the market again.

We should have a separate thread to discuss
AOL, so I apologize for this post here.

Jurgis - finally reading Lowenstein's "Buffett"
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