Wednesday, October 21, 2009

Broadband operator profits threatened by price cutting

BOSTON, USA: Broadband operators stand to lose revenues and profits, unless they precisely target new tariff and service bundles by market segment. Research from the new Strategy Analytics Tariff & Revenue Strategies Service (TRS) warns service providers to be wary of commodity pricing as competition heats up.

Based on surveys of over a thousand US Internet households, and combined with a ‘virtual shopping experience,’ Strategy Analytics has identified three distinct purchasing segments, along with their market share, all based on responses to prices, features and combinations of digital voice, data and video service bundles:

1. Multiplay Adopters - 62 percent - with both broadband and subscription TV services. Most have mobile services.
2. Non-TV - 18 percent - with broadband Internet service and often mobile, but no subscription TV.
3. Traditional Users - 20 percent – with narrowband fixed-lines and strong relationship with the phone company.

Harvey Cohen, President of Strategy Analytics, notes: “As the broadband market matures and competition accelerates, service providers have been tempted to compete for share by offering broad price cuts. While over 80 percent of households surveyed already have some form of broadband, only 30 percent would consider switching service providers for any reason. Thus operators need to be wary of price cuts that churn their customer base and erode margins for no gain.”

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