Results from Analysys Mason’s Connected Consumer 2013 survey indicate that broadband service providers could reduce annual rates of customer churn by as much as 3% if they were to provide “superfast” broadband services. The report draws on a survey of 6,610 consumers in Europe and the U.S.
Among respondents who said they planned to leave their current broadband service provider in the next six months, 14% said they would do so because services weren’t fast enough. Upgrading these customers to higher speeds could reduce a typica service provider’s monthly churn rate from 1.4% to 1.2%, yielding a 3% reduction in churn annually, according to Analysys Mason. That’s about double the growth rate for major European broadband service operators, such as Deutsche Telekom or Telefonica in their domestic markets, the research firm said.
Customers who take up higher-speed broadband services are more satisfied as well as less prone to churn than those with lower-speed services, Analysys Mason added.
Though price elasticity does come into play, the market research firm could not find any relationship between the price premium on superfast services and customer take-up in any of the survey countries. The firm’s analysts attributed this to:
- the availability of higher-speed services is limited in geographical terms (for example, the footprint of superfast broadband is restricted)
- price competition for non-superfast broadband drives the price down, so the superfast price premium can be high but still affordable for consumers
- superfast is driven by both operator and demand-side factors
It’s unlikely that operators will be able to hold the line on superfast service premiums over time as such services become increasingly common, said Analysys Mason. Offering superfast broadband services should be viewed as a customer retention strategy and could and should be coupled with more in the way of value-added services as a means of generating incremental revenue, researchers advised.