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Selling broadband in an era of Gigabit-speed services

October 8, 2016 09.58 Europe/London By Brett Sappington

reason-switching-broadband-providerThe era of residential gigabit-speed broadband services is upon us, and the way in which broadband is publicized, promoted, and sold has already begun to change.

With a growing number of markets scheduled to receive these extremely high-speed services, broadband service competition is intensifying. Operators in all markets are assessing their ability to offer gigabit-speed services or the impact on their subscriber base of competitors offering such speeds.

Most of the demand-side questions around residential high-speed broadband and gigabit-speed services concern consumer perception of broadband speeds and household need for high-speed services.

According to Parks Associates consumer data:

– Consumers are largely unaware of their broadband service speed.
– Consumers are subscribing to services that are faster than what they think they need.
– Consumers are opting for faster speeds over lower costs.
– 50 Mbps is an important, current threshold for perception of broadband speed.
– Consumers perceive broadband as a utility rather than a luxury.

Pricing and speed are the primary consideration factors that consumers currently use in evaluating a broadband service. While 43% of subscribers report they don’t know their current broadband speed, they do know about the experience that they have online, particularly as it relates to digital media. Respondents who own multiple connected entertainment devices are more likely than others to plan to upgrade their broadband service, opting to pay more to ensure they do not encounter slowdowns or other performance problems.

Other factors such as reliability, reputation, and promotional offers affect selection of operators, but price and speed often determine the consumer’s consideration set, if not their final choice. Because gigabit-speed services are a stepwise increase in speed compared to 25-100 Mbps services (and because of the noticeable performance improvement), speed and price will remain important in driving consumers to this new speed threshold.

However, once consumers adopt speeds of 1 Gbps or more, consumer perceptions change as does the way that they relate to operator messaging, promotion, and retention strategies. Subscribers will have less performance-based motivation for churn or upgrades. Gigabit-speed services eliminate most congestion-related throughput issues, minimizing the number of potential incidents that could spur subscribers to consider alternatives or enter the shopping cycle. From a retention perspective, this condition is a substantial benefit for broadband providers. However, consumers also have little need to consider upgrades to even higher speeds of service. Once gigabit services are introduced, speed-based messaging loses its effectiveness. Without easy experiential benchmarks to show differences in performance from everyday use, consumers are unable to perceive the difference in performance between 500 Mbps, 1 Gbps, and multi-Gbps services.

Lastly, with few performance problems to serve as a quality gauge for consumers, the reliability of a service becomes a key point for assessing the quality of a broadband service. This consideration is particularly important for cable operators, since most have not evolved in an environment that requires 99.999% of reliability in network performance.

As an increasing number of operators offer gigabit-speed services, they will have to find points of differentiation that allow them to compete in areas other than price. Future messaging and promotion of extremely high-speed broadband services will focus on several new areas, including reliability/quality of service, service tiers and caps, applications and new features, and bundling options.

The time and cost of network improvements, in-home networking bottlenecks, latency, and heightened risks for operators and consumers remain the greatest challenges to gigabit-speed service rollout, adoption, and quality of experience. The emergence of these services will force changes in promotion of broadband services, ultimately requiring broadband providers to use new strategies to drive subscriber acquisition and upgrades. Operators with older networks that cannot easily match gigabit speeds will have to dramatically change their approach to the market.

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Filed Under: Speaker's Corner Edited: 8 October 2016 09:58

About Brett Sappington

As senior director of research at Parks Associates, Brett Sappington leads Parks Associates services research team, including access and entertainment services, digital media, OTT, cloud media, video gaming, and technical support services. Brett is an expert in worldwide television and broadband services. His personal research focuses on the activities and trends among operators and the market forces affecting their businesses. Brett is a regular speaker and moderator at international industry events.

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