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… Your hold time for tech support is approximately 2 hours …
By Larry Hendrick | March 1, 2007
Have you ever taken the calculator to determine the real cost of tech support for Internet service? With the announcement of the Houston WiFi deal approved by the City Council, I started thinking about a few statements reported last week.
Earthlink is paying for all the costs of installing and running the business of delivering WiFi to the entire city of Houston by 2009. The WiFi deal says that Earthlink will sell the service at wholesale to competitors for $12/month, and that service can be re-sold for whatever the competitor deems necessary for a profit.
Wholesale Internet Access
I began wondering about a few things. First, how can Earthlink make a profit wholesaling service at $12? I know what many of their costs are, and this is cheap for a 1Mbs connection, unless it is over subscribed to the point of uselessness. However, over-subscription numbers will have to wait for another day.
My second question pertains to competing with Earthlink. If I want to compete, what retail price will I need to charge my customers to turn a profit? Assuming I will have to provide my own first level tech support, it’s easy to come up with the base price I will need to charge my customers for service.
Calculating Costs
I will have to run telephone support 24/7 which will require a minimum of 4 people. Because each week has 168 hours, this will allow for one support person at a time, and there will be eight hours each week of overtime at time and a half. This assumes each person works a forty hour week and someone is willing to work overtime. Because there is only one support person working at a time, tech support can only handle minor problems from customers. It doesn’t work. What’s my password? Why can’t I connect? You know, the type questions techs spend most of their support time answering.
I can’t afford to hire professional help desk personnel, so I will scour the college campuses for tech-savvy students that can answer a telephone and follow a script. If I pay them $12/hour, that gives me a labor cost of $2016 each week, or $8736/month. I’m not even going to hire a supervisor to begin with, because I’ll fill that role.
From my ISP experience, one support technician can handle about 300 customers (as long as things go well), if you want to give good service. Those 300 customers have a cost to me of $12/month each (from Earthlink); that is $3600/month plus the $8764/month (includes 8 hrs overtime/wk) support tech cost. That gives me a loaded cost for each customer of $41.12, and I would like to make a 20% profit margin bringing my total retail price to $51.40/month.
What?
What am I missing here? Earthlink is selling this service for $22/month. My cost includes no billing department, office rent, computers, Internet connections … Well, you get the point. These numbers are only for inventory (Internet access) and Labor costs.
Let’s change the parameters. I’m going to hire tech-savvy high school kids and pay them $9/hour and furnish pizza rather than overtime. I will lower my profit margin to 10%, which will put me out of business, but we’re just running numbers here. That still gives me a retail price of $37.60 for each customer against that same $22/month.
Let’s look at this from another perspective. If I go back and hire the college kids and pay them the decent wage of $12/hour, how many customers must I have to make it profitable, if I want to compete with Earthlink’s $22/month retail price. Hang on … I need a spreadsheet for this one.
WOW! Remember, this still requires four support techs to cover the 24/7 clock. To sell my service for $22/month/customer, each technician has to support 1380 customers.
“Your estimated hold time for customer service is approximately two hours, fourteen minutes. Please stay on the line. We appreciate your business. Really … We promise … “
My other option is to pay my support people $2.61/hour to drop back down to 300 customer per tech.
Maybe I need to rethink this whole customer service thing …
Topics: WiFi |