Airlines run networks, too. Whilst the delivery of 80kg packets of blubbering human flesh may not be directly comparable to telco networks, there are some great similarities as well as important lessons. Airlines are becoming more deregulated than telcos, with lower barriers to entry to creating a new network (since planes are notoriously portable in a way that fiber and copper aren’t).
Firstly, consider the case of BAA, which runs most major UK airports, including Heathrow. Of BAA’s £1.7bn UK revenue last year, £743m was from retailing and other ancilliary service; only £665m came from charging for flying people around.
Ryanair are trying an even better trick, of extracting subsidies from regional airports merely for delivering passengers to local businesses. Their only problem seems to be European rules which prevent such overtly discriminatory subsidies. They are heading towards a model of “reverse landing fees”, where they get paid to deliver wallets within reach of geographically-bound businesses.
The Scottish Executive has been busy spending taxpayer pounds on airline subsidies to encourage new routes to open up.
At last, Glasgow lands Europe flights bonanza … Mr Dalrymple still hopes to secure support from the fund for the new routes and stresses that existing flights from Italy, France and Spain have brought significant numbers of tourists into Scotland.
For example, Continental are being given a bung just to fly between Edinburgh and New York.
The patterns is that stand-alone transport is becoming a loss leader to generate captive audiences for other forms of commerce. Telcos need to work out who their customers are, why they are communicating, and insert themselves into the value chain through means other that coercion and regulation. Failure to do this will result in extinction.
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Three WiFi Business models in order of captivity from Roland Tanglao's Weblog
(SOURCE: Telepocalypse )- Gotta love the word captivity, that pretty well describes the consumer's relationship to carriers heretofore :-) ! QUOTE Following on from yesterday’s discussion on how transport is a loss leader for getting people to engage in t
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Before the last Scottish Parliament election, I wrote an email to the then SNP spokesperson for industry. I made the observation that good quality inward investment in high technology was not coming to Scotland whilst manufacturing jobs were disappearing e.g. Motorola's PCS plant in Livingstone and the silicon chip plant in East Kilbride.
My observation was simple - if Scotland wanted to attract high tech jobs from American companies then they needed to make it easier to travel to Scotland. I observed that as a Scot working in America, I found the extra leg of the trip from London to Glasgow or Amsterdam to Glasgow to be tedious and tiriing and often wasteful of an extra day - combination of flying time and extra jetlag. Therefore, it was necessary to subsidize direct flights from major high tech centres in the USA to GLasgow and Endinburgh. I further suggested that the governoment should hold a tender process to take reverse bids - how little subsidy would you like - to run a service from each of a list of cities which include San Francisco, Seattle and New York. My suggestion was that this policy was included in their manifesto.
It's a "build it and they will come" approach. Location decisions for businesses often have a lot to do with the upper reaches of Mazlov's hierarchy. It is important to understand that. Sleep for executives is important :-)
It's interesting that the Labor government of Scotland has chosen to partially implement a policy similar to the one I suggested.
The regulatory issues with subsidies are easily worked around. Traditionally airlines were national flag carriers and subsidies were created to preserve direct employment in the national carrier. In the case where Continental - an American carrier - is receiving a subsidy to bring business people and tourists to Edinburgh, this is a derivative type of subsidy. It is the equivalent of discounting a product. "Visit Edinburgh" is a product and "Visit London" is a product. By subsidizing air travel to Edinburgh, the local government is discounting their product.
Strangely enough this activity is normally called "capitalism".
David
Posted by: at October 26, 2003 12:44 PM"The pattern is that stand-alone transport is becoming a loss leader to generate captive audiences for other forms of commerce. Telcos need to work out who their customers are, why they are communicating, and insert themselves into the value chain through means other that coercion and regulation.
Failure to do this will result in extinction."
While I think the observation is sound (like a high proportion of the comment on your blog), I'd give "captive" and "insert" a bit more consideration.
Passengers are not "captive" as a result of choosing RyanAir or other destination-subsidised carrier, they are, "encouraged." The "captivity" model is proprietary and rapidly finding strenuous competition in "choice."
As for "insert," I'd prefer "invited," or better "welcomed," :).
Small points, but unless the consumer is where they are because they want to be, in a world full of end-to-end choice, they can and will move...
Posted by: at October 28, 2003 02:06 PMHamish's concept of "invited" would fit better with Seth Godin's ideas about "permission marketing". The carrier wants to ask permission to "insert" themselves.
If the "insertion" is truly value adding and not "interrupting" then the consumer should be happy to give permission and invite the carrier into their life.
Posted by: at October 29, 2003 01:49 AM