An ad promotes an Internet Service Provider’s (ISP) subscription plans. On the bottom in small fine print is written “30% minimum speed at 80& reliability.”
The Philippines’ National Telecommunications Commission (NTC) in a memorandum in 2011 mandated that ISPs should provide at least 80% service reliability to customers:
An ISP therefore should be able to provide an internet connection to its customers at or more than its minimum internet speed 80% of the time. Or to put it another way, the ISP’s customers should be able to experience the minimum internet speed they signed up for 24 out of 30 days in a month. If a subscriber does experiences the minimum speed six (6) days or faster in a month, the NTC considers the ISP’s service acceptable.
The ISP is also required to tell its subscribers what the minimum internet speed is. In the ad mentioned above, the ISP informs customers that its minimum speed is 30% of what it advertises. Thus, if a subscriber applies for a 300 Mbps plan, the ISP will guarantee a minimum speed of up to 90 Mbps. An ISP is obliged to give only up to 30% of what the subscriber signs up for.
Just imagine if this kind of advertising is applied in the fast-food industry. A customer orders from a fast-food restaurant and the restaurant is guaranteed only to serve 30% of what’s on the menu. If we order a 10-piece bucket of fried chicken, for example, and the fast-food gives you only up to three (3) pieces and the government allows it, we would surely be angry but we won’t be able to do anything about it.
What the ISP advertises and what it actually serves evolves from the concept of the Acceptable Quality Level (AQL).
The United States military adopted the Acceptable Quality Level (AQL) as a standard for inspection during the Second World War. The idea is to set a level of what would be considered acceptable from a batch of items received from a vendor or a factory.
For example, the US Army may accept a lot of 10,000 bullets if only up to fifty (50) of the bullets (AQL of 0.5%) are defective. The US Army would be willing to pay for all 10,000 bullets even if it really would be able to use only 9,950 of them. That doesn’t sound so bad unless you’re the soldier who ends up with the fifty (50) bad bullets.
How AQLs are set varies from enterprise to enterprise, industry to industry. Vendors would plead for higher AQLs if customers are buying items in very large lot sizes. Sellers of small parts manufactured in large quantities like nails, wires, screws, and welding rods would ask for high AQLs as they would argue that defects are unavoidable and impossible to sort & separate all unconforming items.
Customers, however, would discriminate what items deserve higher (looser) or lower (stringent) AQLs. Customers would insist that how AQLs are set should depend on what the items would be used for. For construction of a large warehouse, for instance, having a higher AQL for a large number of nails may be tolerable. For owners of residential homes, however, they may not welcome a high AQL for nails or any construction material as this may result into a badly built house that can bring inconveniences if not hazards (e.g. a bad nail that leads to a collapsing ceiling).
Food product manufacturers may accept higher AQLs for not-so-critical items like packaging materials but won’t welcome allowances for defective raw materials. A food enterprise may accept a few imperfect boxes but I doubt it would accept even a few bad apples out of hundreds.
And pharmaceutical firms won’t probably be too tolerant for high AQL’s for ingredients for medicines.
Utility firms apply AQLs in their services. Electricity firms negotiate contracts with communities and try to convince consumers to accept a minimum level of power un-reliability, such as allowing for a number of days for a power plant to not supply electricity so that it can undergo maintenance. Water companies try to get customers to agree on an acceptable quality of potability, to the extent notifying customers that the water they supply will not be fit for drinking anytime.
In exchange for higher AQLs, enterprises sometimes offer discounts or defer price increases, from which they can position themselves as low-cost suppliers versus rivals. In other words, customers can get products and services cheaply but they won’t get 100% quality.
ISPs try to out-compete each other via this latter scenario. Some offer the cheapest rates, advertise maximum speeds, but in the fine print guarantee only a minimum speed at a fraction of the time that is compliant to the law.
Some ISPs will try to outdo the other such as by bumping up the minimum speed to 40% versus a rival’s 30%. To the subscriber, however, he or she will never really get what they wish for from the advertising.
When ISPs advertise their maximum speeds, they reveal what they are capable of supplying to their subscribers. But they also are insecure that their operations won’t run perfectly and reliably all the time. Hence, they build in allowances to attain what they believe is an attainable level of performance which they can realistically provide to their subscribers.
The problem with this kind of thinking is that it encourages complacency.
The ISPs over time will won’t feel the need to improve the uptime of their broadband connectivity and to lengthen the time of their maximum service speed since they have the government’s blessing for an 80% reliability and a minimum speed that only requires notifying customers. And they will continue to do so as long as rivals don’t try to up the game.
Many enterprises have over time accepted the AQL and said all right to accepting so many defects in the items or services they buy. It becomes a standard that sometimes no one bothers to see if it can be improved. If a factory is getting 95% acceptable product and its rivals are getting just the same, executives may not see the incentive to improve; after all, the factory is competitive at least for now.
Up-and-coming competitors challenge established companies by bucking the AQL standard, by taking advantage of the complacency that take hold in established companies. A new ISP company for instance may offer guaranteed minimum speeds of 80% (though they may lower the maximum speed advertised) at the same price as rivals.
Competitors, the successful ones anyway, will claim to do better by offering better quality that improves from an industry’s AQL. The real good ones would adopt continuous improvement that lead to zero defects.
Acceptable Quality Levels (AQLs) were established to provide some reasonable standard in the inspection of items. They weren’t meant to set the standards of quality; doing so only inspires complacency and encourages stagnancy.
In a world where competitive disruption is more likely than ever, perfection in quality, via zero defects, is what we should pursue.