Case analysis

Friends Cable Network(FCN) commenced operations in 1992 and has built up Delhi's largest cable television network. FCN, to be a single point access provider, bringing into the home and work place a converged world of
information, entertainment and services. The Companys Cable operations straddle across key delhi geographies and offers cable television services across 14 locations. At few locations like sarita vihar, pehladpur,Oklhla they offers a high-speed cable broadband services in collobatration with Sify and Spectranet. The Challenge: Customer Acquisition Decreasing, Need for Retention Increasing A Friend cable network provider is experiencing high churn rates and a steady decline of customers. In the highly competitive market, intense competition was forcing friends cable network to find innovative ways to attract new and keep existing customers. The main challenges identified by FCN are Dish TV market penetration, the DTH connections is gradually eating the market share of the most hailed cable network of Indian. DishTV is costing almost the same or less than the monthly subscriptions. For instance Sun Direct DTH is charging only Rs. 75 for the basic channel package which will satisfy most of the customers where as cable operators charge Rs. 150 to Rs. 200 for their grainy channels. DTH TV comes with CD level picture quality and DVD level sound quality. Alliance ISP doesnt offer good services, hence bad taste to consumer and bad name to local interface i.e FCN. Alliance ISP utilize full manpower and effort however revenue is very less based on subscription. If values are believed it is Rs 50- Rs80 per subscription every month which includes interface with the customer and 1 level problem resolution. So it is very difficult for cable TV business to sustain in the competitive market where cost and quality is a demand. Mr Rajiv Goyal, FCN owner looks dissatisfied with the current setup of broadband business and declining cable TV market. Objective : This case study is organized to accomplish following objective : Friends cable network must decide whether or not to proceed with the plan to provide a service of high speed access to the Internet over its cable tv business. Decision to make If Friend cable network decides to proceed with the launch of internet service, then the company must decide the details of this launch: target market segment and existing. what would be the pricing strategy to launch new internet services, distribution channel and sales promotions.
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Analayis of each decisionCable TV services and Internet services in collaboration Pros-

Cons-

Cable TV services and addition to that diversification into ISP market Pros-

Cons-

Mr. Rajiv Goyal decided to do vertifcal integration and enter into high potential ISP market. Mr. Rajiv believes that FCNs network setup and reach to the consumer will give them the added advantage.

Analysis: Evaluting the potential market for Internet services, Identifying target markets, defining services profiles, and forecasting revenues.

Growth in Internet Subscriber Trends

Incidentally, even the internet subscribers are growing at the almost the same rate as that of telecom subscribers. It surged from 16.72 million in July to 17.90 million in September. The number of broadband subscribers surged from 9.47 million at the end of June to 10.30 million in Q3 of 2010. As Indias mid-age population turns more affluent, the demand for broadband services has also surged. The share of Broadband subscription in total internet subscription stood at 57.6% at the end of Sept-10.

Internal Analysis :
Strengths: Largest cable TV network in Delhi and small presence as ISP in few location(In colloboration)

Impressive revenue growth during the period of 92 to 2004 and capital can be used to take initiatives / Proactive management for ISP licence Existing coaxial network in Delhi and known name among customers Weekness: Customers have high price perception and being a small player low service quality FCN does not have any previous Internet service providing experience Other stake holders are reluctant to invest External Environment Analysis Opportunities Threat : Internet as just entertainment and are not willing to pay higher rates before experiencing. Competitors have major brand recognition . Tier-1/2 operators have a more competitive technology in commercial segment, 7 existing ISPs in Delhi with experience. Consumer behaviour analysis on Internet usage (This survey was conducted on Okhla locality where Mr Rajiv Goyal would like to start his services) Potential customer base in small localities where tier-1 operators has limited network. 70% computer penetration foreseen by 2000 / Internet users doubled yearly New Internet contents/applications are more rewarding at high speed

Interpretation: The most important aspect while opting a internet connection is its price and quality. So mostly all the respondents have given most importance to price, quality and speed. Technology and feauture availability of the internet had a mixed response but majority were neutral to the importance of it. But after sales services accounted for important attribute to look for while buying a internet. Company name also had an influence in decision of the respondents.

ISP business startup

The general philosophy of operating an ISP is that you buy large amounts of data transfer at wholesale rates, then sell that same transfer at a retail price. The way to do this is to lease access to the Internet backbone for your network. This access can be leased from the telephone company, cable company or anyone else who owns broadband cabling.

ISP Sample Financials

In starting an ISP, the basic tasks FCN want to consider are:

Securing funding for the project Acquiring the equipment needed Contracting for a backbone (Internet) connection Contracting for telephone services (unless using wireless only) Installing, configuring, and testing all equipment Marketing and managing your ISP

How much revenue can an ISP generate? Based on the success of other ISPs, in a city with 250,000 people an ISP with a fairly agressive advertising campaign should have 6,250 subscribers within 6 to 12 months. At this level, a 9-to-1 ratio (nine subscribers for every phone line) should provide a premium service with no busy signals. With this ratio, 696 phone lines will be needed (6250 subscribers divided by 9, rounded to the nearest 24 lines). At a subscription rate of $20 per month the revenue figures look like this:

Revenue - from 6000 subscriptions Rs. 27,00,000 - from 500 domains hosted Rs. 5,00,000 Telephone expense (Rs14000) Backbone expense (Rs340,000) Building rent or mortgage (Rs25,000) Salaries (Rs300,000) Payroll taxes (Rs9,295) Advertising budget, per month (Rs129,500) Miscellaneous monthly expenses (Rs13,500) Equipment depreciation (based on 600k (Rs16,666) of equipment) Gross margin per month

Rs. 32,00,000

Rs. 8,47,961 Rs. 23,52,039

The above values are consistent with estimation calculated by Mr. Goyal based on experience, but every technology and situation will be different. Fixed cost to start the services included ISP licence + hardware setup .

Market segments Markets can be broken down into slices or segments. Broadband market is divided into two main segments. These are business and household users. Household users are divided by how they use the web. The main uses are:

education communication sport music on line gaming. FCN needs to make profits out of brodband market. it can rollout broadband network across the delhi . It targets those areas and markets with the highest likely number of first time users or unreached market. Potential market for FCN can be cyber cafe, SMEs and household, existing cable users Marketing mix The key to success in this growth market is to provide a good marketing mix. This is a mix of the right product at the right price in the right place and with good promotion. BT put together a marketing mix for gaming on broadband which had:

The right product. High speed and reliable broadband product me. The right price. FCN should offer a range of prices so that users can choose which best suits their own needs. The right place. Consumer can order/buy broadband from local Retail shop and by phone. Good promotion. FCN should use all parts of promotion: Advertisement on RWA magzine Pamplet distributions to houses Marketing executive meet with SMEs owner to communicate value

Distribution Channel