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A Rift in Competition: Wholesale vs. Retail Operations

ATLANTIC-ACM’s annual Report Card series collects thousands of service provider ratings from their customers. We publish several of these studies each year – all of them focusing on either wholesale or retail telecom sales and service – and they all are used by service providers for benchmarking how they stack up against their competitors as well as how customers perceive their own performances year over year. Data from recent reports point to diverging trends in the wholesale and retail markets. For illustrative purposes, let’s look at data from a study for each segment – the 2013 edition of our Metro Wholesale Service Provider Report Card for wholesale and our 2013 Business Connectivity Report Card for retail.

In the 2013 Business Connectivity Report Card, which is based on ratings from U.S.-based retail buyers of telecom services, an increased dispersion of provider ratings has developed. When compared to the 2012 results, seven of the eight total operations categories showed increases in:

  • The ranges of provider scores
  • The standard deviations of provider scores
  • The interquartile ranges of provider scores

The 2013 Metro Wholesale Service Provider Report Card revealed the opposite trend, with increasing competition – or compression – in the range of provider ratings, as well as the standard deviations and interquartile ranges.

These findings show the rift between the mindsets of retail and wholesale telecom buyers, with the former believing that the field of providers is becoming more competitive and the latter perceiving a shift toward a provider spectrum with less parity. This is important to service providers in that it signals that wholesale buyers may come to expect the industry average from any one of the tightly bunched providers in the market, whereas retail buyers may not know what to expect. The makeup on the buy side also is illustrative; wholesale buyers are typically more homogenous and have knowledge of the telecom industry, whereas retail buyers vary greatly in both their needs and expertise.

Although only two of the year-over-year changes in standard deviation in either report were statistically significant at the 95 percent confidence level, a correlation of the data shows that there is a very strong relationship between the standard deviation shifts and the survey type (r2=0.88). Clearly, correlation does not equal causation, but the combination of such a strong relationship between the market being studied and the movement of competitive concentration, as well as three measures of statistical spread moving in the same – and opposing – directions, show that there is something to be learned about the competition that exists in the retail and wholesale telecom markets, and where that competition might lead in the future.

If this rift between wholesale and retail satisfaction continues, look for executives and strategists at each level to pursue different competitive playbooks. Whereas wholesale providers have more to gain and more to lose within a tight pack of competitors being shopped by savvy buyers accustomed to an industry standard, retail providers are more likely to face a competitive landscape in which the perception gaps are wider, the product needs are more diverse, and differentiation from the group isn’t as difficult to achieve.

This analysis originally appeared in B/OSS.

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