Lack of Innovation Forces Carriers to Use Extra Fees

Every once in a while I come across something that irks me enough that I feel compelled to write about it. In this case it’s the creative use of extra fees telecom carriers apply to beef up their bottom line.

In my most recent experience I was hit with a $2.oo charge to receive a paper invoice from my wireless service provider. Now, I don’t know about you but I don’t see this type of charge on any other utility invoice I receive. Why is it that telecom companies, in this case the largest national carrier in Canada, think this is acceptable?

In another example, the service provider I use for TV, Home Phone and Internet Service seems to think that charging an extra fee for Message Relay and a nicely disguised CRTC LPIF Fee is a reasonable thing to do. Now extra fees have been around for a long time and the airlines are the biggest users but this all points to one critical factor.

Companies that rely on extra fees to increase revenue lack innovation. Rather than trying to develop a sustainable new product or service the consumer will see value in they resort to extra fees to prop up their bottom line. As an investor I start to worry these companies have reached a plateau and have no where else to go to drive growth in the business. If these companies must rely on incidental charges to grow their revenue then they must be in trouble. I don’t think it’s a coincidence that the carrier charging for a paper invoice also has a stock price that’s been languishing in the depths of despair for the past 10 years.

Innovation is the cornerstone of business growth. Without it a business will cease to exist at some point. One doesn’t have to look too far to see that companies like Apple that have embraced innovation as a critical part of their business are growing at a significant pace. Charging extra fees removes some of the pressure for other companies to be innovative because their revenue line shows some growth….but it can’t replace it. Extra fees are an indication of lazy thinking and a lack of creativity.

The telecom landscape is getting more competitive, not less, and the large incumbent carriers will probably have to learn the hard way that extra fees is not a replacement for innovation. Only time will tell but you may be wise to avoid these stocks.

There, it’s off my chest. On to more creative & innovative pursuits.

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