Broadband Report: Broadband Choice Comparison by Consumers – Article from Accenture

Despite the aggressive marketing of Digital Subscriber Line-based (DSL) broadband comparison by telecom carriers in the US, cable companies continue to be the leading players in the broadband marketplace. Until now, nobody quite knew why. New research from Accenture has revealed new insights into customers’ buying preferences, and provides direction to executives on how to successfully market broadband choice service.

Adoption of broadband Internet access exceeds the pace of other recent technology advances, and, despite the relative parity between offerings, cable companies still hold the lead over the regional bell operating companies.

For past five to seven years, consumers have rapidly been switching from dial-up Internet connection to high-speed broadband. In fact, they are switching at a pace that far exceeds the uptake of the cell phone, personal computer or the Internet itself. Part of the reason is that cable companies have succeeded in effectively capitalizing on its initial advantage gained through the early development of industry standards, aggressive rollout and strategic prioritization to capture 65 percent of the U.S. broadband market.

Alternatively, DSL, primarily offered by the Regional Bell Operating Company (RBOC), came late to market and has struggled to effectively leverage the strength of the service providers. Despite their relative parity in availability, and aggressive DSL price discounts and bundling of services, cable still continues to maintain a lead in the marketplace.

Our findings reveal that price and speed are the main buying considerations for consumer broadband offerings while other seemingly important factors have less influence than many believe.

So what are the values and features that cause people to make their initial choice so strongly in favor of cable? And what is it that makes them stay with their broadband provider or switch to a competitor in today’s increasingly competitive market? To answer these questions, Accenture undertook an online customer survey of 740 panelists, equally weighted between cable and DSL users. Our findings reveal several interesting answers:

• Price and speed drive buying decisions—Survey results showed promotional offers, monthly price, and effective price reductions through bundling with other products to be the primary reason that people choose a broadband provider. Only after these did consumers name connection speed. A surprise finding was that reliability, customer support, and lack of contract commitment have virtually no impact on customer choice. And the same buying criteria are at play when customers consider switching providers. Better price and or connection speed are the dominant reason for switching providers (20 percent of respondents) or considering churning.
  
  
• Additional value-added features don’t add much value—Added security and SPAM/Pop-Up Blocks are now “must-haves” as part of the broadband service (over 50 percent of respondents). Additional features, such as additional e-mail boxes, online storage and picture services are of interest to a minority of customers (less than one-quarter of respondents). This is despite significant efforts by service providers to develop compelling portals and access to unique content as part of their broadband offer.
  
  
• Customers have strongly held perceptions—Over two-thirds of respondents perceive cable as the fastest technology; whereas, two-thirds perceive DSL as the cheapest service. These perceptions are held even among users of the opposing services – DSL customers view cable as faster and cable customers recognize that they are paying more than DSL. Service reliability is neutral ground for the two services.
  
  
• Cable still has the upper hand—Despite aggressive DSL pricing and promotions, cable broadband still has the lead when customers have a choice of technologies (65-75 percent reported having a choice). When given the choice, a majority of respondents, 55 percent, choose cable broadband over DSL offered by their local telephone provider.
  
  
• E-mail loyalty—Only a quarter of respondents report not using the e-mail service provided by their broadband provider. Moreover, for 60 percent of consumers it is their primary e-mail account. Given the prevalence of free e-mail accounts and other services, it is remarkable to discover the level of loyalty that customers have to the e-mail provided by their service provider.

Accenture’s research provides guidance to providers to be more competitive in the broadband marketplace.

Accenture’s research provides guidance to providers to be more competitive in the broadband marketplace.

Play the price game—Price is going to be the name of the game for the foreseeable future. Invest in price competition and changing customer perceptions through improved marketing, rather than high cost, under-valued additional features and services. DSL providers need to overcome customers’ perception of “technical inferiority.”

Lower the cost structure—Providers need to have a very competitive cost base that will allow them to play the price game. This means looking for ways to radically reduce acquisition costs (marketing, equipment, channel costs); support costs (self-service, outsource) and operations (flow-through, integration).

Enhance and promote e-mail—Build upon the highly embedded base and e-mail loyalty to increase customer stickiness. Add new features and enhanced functionality, such as SPAM and virus protection, and increased storage to dissuade customers from leaving.

Take the long view—Moving beyond price is going to require much more compelling broadband applications and services than are offered today, coupled with fundamental changes in customer behavior. Providers need to begin investing in actively partnering and building out capabilities to begin to offer these services.

Stuart Taylor, associate partner–Communications & High Tech Strategy, focuses on helping communications companies develop and execute their broadband strategies.