Follow Dodo or go the way of the dodo

Follow Dodo or go the way of the dodo

Summary: Dodo may not have the most unblemished customer service record as an ISP, but the entry of this internet survivor into Victoria's retail electricity market marks an important point in the evolution of deregulated markets. Taken to extremes, internet service providers will eventually become just service providers as new networked products let them offer everything from Foxtel to insurance — but can the vision become reality?

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TOPICS: NBN
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It may be under fire for misleading advertising and might not have the best history of internet performance, but Dodo recently added me as a customer after it launched an aggressive push into a new market segment that's just crying out for innovation: electricity.

Turning to an internet service provider (ISP) for electricity may seem like a strange concept, but for the growing number of people suffering ridiculous energy bills through a combination of having too many gadgets sucking down power, and too few electricity retailers controlling access to too little electricity, it's one that I suspect is going to become more common.


(Dodo image by Ballista, CC BY-SA 3.0)

Dodo, you see, offers rates comparable to the best of the existing electricity cartel (the result of Victoria's electricity-market deregulation that was, comically, supposed to drive better prices) but offers a 20 per cent pay-on-time discount that puts its effective rates well below those of its competitors. In exchange, customers sign up for a three-year contract and make monthly prepayments against their quarterly electricity bill. This makes sure Dodo won't ever have to chase them for outstanding bills, keeping costs down and customers, presumably, happy.

Now, I'm well aware that Dodo's customer service has been lambasted by many internet customers; I've even taken it to task for less-than-honest marketing in the past. But electricity is either on or off and it's not Dodo's responsibility either way. I figure that if I make its life easier and stay out of its way, it will stay out of mine. I may also regret figuring this, in which case you have permission to scribble "I told you so" on a raw herring and slap me upside the head with it as I scream to be let out of the contract.

That said, I've read the fine print and there's nothing in there that seems unreasonable. The fundamental principle behind Dodo's electricity play is the old — pardon the pun — bird-in-the-hand theory: Dodo encourages customer behaviour that puts money in its hands every month and allows it to keep its administrative costs low, then passes on a good deal of the savings. Its competitors, on the other hand, wear more of the risk in service delivery with quarterly bills, but have to maintain a fatter buffer to absorb the costs when they have to send repeat bills, chase up customers in arrears, write off bad debt, and so on.

Dodo's customer service has been lambasted by many internet customers... But electricity is either on or off and it's not Dodo's responsibility either way.

It's an innovative approach, for the electricity sector at least, that not only puts Dodo's pricing well ahead of its competitors — I checked with my previous provider and it flat-out told me it couldn't do better than a 7 per cent pay-on-time discount — but highlights the service diversification that is going to become essential to survival for ISPs and other service providers in the future.

It is, after all, a crowning glory of the recent push towards deregulation that Dodo is even able to offer electricity services at all: just as server virtualisation separates the server images from the hardware they run on, electricity deregulation has separated the function of selling electricity from the functions of generating and distributing it. Dodo's success or failure in this sector will not be based on its ability to build coal-fired generation plants, but on its ability to lure customers with pricing that's good enough to win them from competitors, and customer service that's good enough to keep them.

The new ISP

So far, let it be said, the Dodo people have been friendly, nice and efficient. Also, the lights are still on. Whether either of these changes in the future, I cannot say. Regardless, however, there's a lesson here for all ISPs — especially those smaller operators who are concerned about their fate in the National Broadband Network (NBN) world, where ubiquitous access to fast broadband will negate any geographical advantages that may have allowed to carve out local niche businesses.

In exactly the same way that all electricity retailers are selling 240-volt, 50-cycle electricity, the open-slather world of the NBN will see the same internet services sold everywhere. And with their core products commoditised, ISPs wanting to expand their businesses will need to compete on price, which will be more than possible if they can, like Dodo, keep internal costs low and construct a billing relationship with customers that puts less money into their hands, but more predictably.

Many ISPs have already done this with telecommunications-related products such as calling cards, wireless internet services and the like. Indeed, the entire base of most ISPs' business revolves around reselling Telstra's ADSL2+ services. Of course, these sorts of discount schemes only work when there's enough market volume to justify them. And with the roster of telecommunications services momentarily exhausted, ISPs will need to look to new industries to offer customers innovative new products that they can access and resell with little incremental cost.

Electricity is an obvious one: since they already have the mechanisms to manage customer relationships, adding new virtual products becomes as easy as adding new virtual servers in your company datacentre. Ditto gas, an area into which Dodo is planning to expand any day now and where increased retail competition can't be but a good thing. Water, perhaps not so much, since the water industry is more tightly regulated and isn't exactly subject to competition just yet.

Since they already have contact centres operating, ISPs could become the point of contact for just about any service you get to your home.

Another certainty is Foxtel — which, as evidenced by Foxtel's recent efforts to push its content to Xbox 360 owners and Telstra customers, is already counting on a broader range of wholesale customers to expand its footprint in the NBN era. Give the NBN a couple of years to get moving, and there's no reason why iiNet, Internode, Dodo and others won't be able to bundle Foxtel with their internet service offerings.

Since they already have contact centres operating, ISPs could become the point of contact for just about any service you get to your home. Dodo is already offering alarm monitoring, for example, which requires little more than some new software and making sure the contact centre is staffed adequately. Insurance products, home loan broking — whatever they can get the skills and regulatory approval to support, ISPs can eventually offer and bundle with their own products.

Of course, competition is a two-way street. If broadband internet is commoditised by the NBN and anybody with big enough customer service bodies can resell it, there's nothing to stop a bank, for example, from bundling a year's internet access with every term deposit to offering a free hosted PABX or managed security services for small- to medium-size businesses conducting their business banking with the institution. Retail giants like Coles and Wesfarmers could do exactly the same: how does a "spend $200 on groceries and get a month of free Foxtel" sound? Heck, Woolworths has already done it with its Everyday Mobile mobile service.

Given its history, I recognise that it's entirely possible that Dodo may find new ways to add pain to the exercise of buying electricity. But looking at a recent bill, it's hard to imagine things getting worse than they already are. Either way, Dodo's electricity gambit is a harbinger of things to come. Widespread competition in these essential service sectors may put the squeeze on ISPs that have relied on mastery of technological minutiae to survive. It will also bring a Darwinian certainty to all sorts of markets by ensuring companies that without good enough pricing and customer service will lose out to those that do it better. Vodafone is experiencing this sort of karmic rationalisation as you read this. In the long term, those ISPs that pursue similar strategies may eventually need to drop the "I" and be referred to just as "service providers"; those that don't learn from Dodo, may just go the way of the dodo.

Am I a dodo for putting faith in Dodo? Or is this long-time industry survivor really setting the pace for the rest of the industry?

Topic: NBN

About

Australia’s first-world economy relies on first-rate IT and telecommunications innovation. David Braue, an award-winning IT journalist and former Macworld editor, covers its challenges, successes and lessons learned as it uses ICT to assert its leadership in the developing Asia-Pacific region – and strengthen its reputation on the world stage.

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8 comments
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  • Meh. All Dodo are doing is acting as a billing agent. That is they've done the sums (hopefully), worked out by getting customers to pay in advance, they can offer a reduction on the bill. The power companies are happy as it removes a portion of their risk.
    Given that most ISPs require payment in advance already, there is little option for savings in that regard. And unless other RSPs can negotiate volume discounts from a supplier and cut other costs in supplying the market or the deal involves some sort of bundling payoffs, I see little incentive for onselling access.
    As for Dodo billing for power companies, I imagine it will be interesting for customers who may find themselves in financial difficulties and then try and request a payment extension. Good luck.
    Tailgator
  • As you have already said " it will be interesting for customers who may find themselves in financial difficulties and then try and request a payment extension." Especially when they are locked into a 3 year contract with Dodo. Doesn't sound like a real good deal to me !
    Wallingford-314a6
  • I also signed up for Dodo Power and Gas and so far no problems - only a cheaper electricity bill.
    Electricity market is highly regulated and Dodo will have to follow all of the bilsl for late payment/payment plans etc.
    I reckon it would probably be easier to negotiate with Dodo if I got in financial difficulties than one of the old ancient monopoly type incumbents.
    Digger-bb733
  • I read the T's and C's quite carefully and the exit fee is only $20 for the 3 yr contract - please tell me if I missed something ?????
    Digger-bb733
  • Fair enough, and I hope you are right, but if something were to go sideways on the power and gas side of things, you would not be able to take Dodo to task. To my way of thinking this type of contract appears similar to someone entering into a third party finance agreement when purchasing an item, but if the item was faulty, then the finance company would not accept responsibility.
    Wallingford-314a6
  • These days, AFAIK, most energy retailers require a contract to get access to discounts. In deregulated markets like Victoria, there has been a clear separation of duties between the retailer (eg Dodo, Red Energy, etc) and distributor (eg United Energy). In the event of faults you ring United Energy or whoever else is bringing power to your house, not the retailer. I experienced this firsthand not too long ago and UE was more than responsive. So, Digger, fear not; all should be fine.
    braue
  • Dodo? No, No!

    Dodo is simply looking for a bill to anchor down their customers so they can't freely cancel the illegal Dodo contracts and move to another ISP.

    If you are considering using the dead bird for electricity, do not EVER use any other Dodo service such as broadband internet.
    Dodo is simply trying to prevent customers from fleeing when they realise their billing is well above what they expected to pay on their cap or there bogus "free unlimited(*#^**^^***)", that ISP customers are learning to challenge unfair billing and bill shock.

    When you get $5000+ annual billing for $100 value of internet data service you won't be able to tell them to stick their bill if it means your power, insurance, phone, internet etc all get suspended by the all new 'friendly customer care agent' handling your complaint.

    When your first GB of data costs $20, or is free on a phone contract, and the second GB costs $400 (for a few cents of data cost to Dodo) then you know you are not buying data access, but a complex legal contract of abstract financial derivatives carefully written around any consumer or other law designed to protect consumers from scam contracts.

    Dodo still charges pensioners for calls to freecall numbers at one of the highest rates in the business eg
    call doctor 5 mins $5 - cost to dodo - free
    call centrelink 15 mins costs $15 - cost to dodo - free

    So, will Dodo will be any different with electricity services? Absolutely not.
    Dodo are a criminal enterprise, feeding off our good nature to make some scumbags millionaires.

    There is no new ISP here, it's hard core snake-oil salesmen - the psychopaths of service.
    newguy-de5d8
  • Buyers be very aware. Dodo lie through their teeth to get your contract. I was told upon signing that my electricity prices would not go up in the next year. Within two weeks I got an email saying my prices would be going up. Their useless explanation was that I should never have been told that. I was also never told that my usage charges would go up after the first 1,000 kw used. A pretty important point missed. THEY ARE DODGY AND THEY ARE LIARS AND NOW I AM STUCK WITH THEM. I CANNOT GO BACK TO MY OLD SUPPLIER AS THEY ARE TOO EXPENSIVE, AND I FACE A BREAK OF CONTRACT FEE IF I SEEK ANOTHER SUPPLIER. SHAME ON YOU DODO!!!!!!!!!!!!!
    manz666