Speed Matters

slow-downPark Associates just published the results of a survey that looks at why consumers switch broadband providers. The survey showed that 9% of households changed broadband providers last year. The company surveyed households that had changed and categorized their responses into seven categories.

It turns out that the number one reason that people changed providers was to get faster speeds and 35% of households listed the need for faster speeds as their primary motivation.

Of course, there are still households that care about price. 18% of households that changed broadband providers did so because they could buy comparable speeds at a lower price. But almost nobody changed providers to accept a slower speeds, even with a savings.

The survey results are backed-up by real world statistics. In most markets in the US today there is still duopoly competition between the cable company and the phone company, with the cable company generally having faster speeds. There has been a steady exodus for years from phone company DSL to cable modems and in 2015 alone the cable companies added 3 million new customers, while DSL continued to decline.

There is a lesson to be learned from these statistics. While the news is full of talk of gigabit fiber networks, not all fiber networks offer blazingly fast speeds. I know of a number of owners of fiber networks that offer speeds that are not much faster than the cable modem products they compete against. Those networks are not capitalizing on their technological advantage.

One thing that most of my clients have learned over the years is that increasing customer speeds doesn’t cost them very much. I’ve followed up on hundreds of network speed increases and almost universally ISPs report that customers use the Internet the same after a speed increase than before – but customers always say they love the faster speeds. And so, to the extent that faster speeds don’t cost much to implement, a fiber owner ought to always have speeds faster than their cable competitors – why would you not?

One issue that continues to confound customers is the different between advertised speeds and actual speeds. I have one client whose basic product on fiber is 30 Mbps and they deliver that speed very solidly all of the time. They are competing against a cable modem product advertised as ‘up to 60 Mbps’. And yet, in that market, the fiber product is demonstrably faster than the cable modem product. But this advertising discrepancy creates confusion in the minds of consumers.

There might be some help coming in this area since the FCC will soon be requiring the large broadband providers to disclose more information to customers about their broadband products. But I guess we’ll have to wait to see how truthful they really become.

My company conducts surveys and one thing we’ve found is that that only a small percentage of consumers actually know the speed they are supposed to be getting or the speed they are actually getting. But what they do understand is when their speed is not fast enough to do what they are trying to do.

We know that overall that the amount of data used by the average household has been doubling about every three years. What that means is that people will buy a data product and within a relatively short number of years they will start bumping against that speed and realize they need something faster.

I think the cable companies understand this issue. Comcast has upped speeds across the boards for data customers at least twice this decade that I can recall. Increasing speeds periodically stops customers from hitting their speed ceiling and keeps them happy with the product they have. If you are operating a network that can provide faster speeds you should be increasing speeds from time to time also. You don’t want many of your customers to be in the 9% looking for a new broadband provider.

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