I’ve been thinking about product bundles and the way that we treat customers that only want to buy broadband. Service providers everywhere are reporting that there are more customers every year who only want to buy a broadband connection. And yet a large number of ISPs have policies that make broadband-only customers feel unwelcome.
I will use the example of my experience with Comcast in trying to buy broadband-only. But Comcast is not unique and a lot of carriers have similar policies. Comcast had two separate policies which are definitely not broadband-only friendly.
When I first asked for service I wanted to buy a 50 Mbps broadband product, and nothing else. I was told that the broadband-only product at ‘higher’ speeds was not available as a standalone product and that, at a minimum I’d have to buy basic cable in order to get the faster speeds. They would have allowed me to buy a slower speed, which was probably around 15 Mbps without the cable product add-on.
We have a broadband intensive household, so I bought the higher speed and got saddled with a basic cable product that is completely unused in our home. We’ve never even connected the settop box or watched one minute of broadcast TV in three years. Meanwhile Comcast has doubled my data speeds to 100 Mbps, but I’m still saddled with a cable product that I don’t really want or use. And that means I am paying a huge premium for the broadband by paying for a service and a settop box I don’t have any need for. That makes my broadband very expensive, over $90 per month for a 100 Mbps connection. It also means that I would jump ship in a second for another provider that could offer me the fast speed I want without the extra cost. This one policy has ensured that I will dislike Comcast for life since it’s probably cost me $1,000 extra over three years.
If I had elected to instead take the slower speed then I would have run into the second Comcast policy which works against broadband-only customers. Comcast (and a lot of other providers) charges more for the broadband if you buy it alone. In this case they wanted $10 more for the standalone broadband than if I had also bought something else.
This is all due to the way they handle the bundling discount. What their pricing says is that if you buy more products you get an overall discount, and I can appreciate that. But many carriers do this in such a way as to antagonize the broadband-only customer. In advertising Comcast and others advertise only the lowered bundled prices, and so when somebody comes to buy just broadband they find they are facing a higher price than what is advertised. This is particularly an issue for somebody who drops down to broadband-only since their monthly rate for the data product increases.
Not every carrier does it the same way. Many of my clients have a single price for broadband, and if you then add on more products you get an overall discount. Under that pricing strategy the broadband-only customer feels like they are paying the same base price as everybody else, and they fully realize they could save money on additional products if they want them.
To some degree this second policy is a matter of perception. When I am told I have to pay a higher price than what’s advertised I am automatically unhappy with the ISP. It’s not hard for a company to do this without antagonizing customers.
This is an issue that every ISP needs to look at because more and more customers want to buy standalone broadband. Households have abandoned landlines and are starting to abandon cable and thus standalone broadband is going to be a more common product. I know cable companies are worried about becoming nothing more than data pipe providers – but that is what a lot of customers want from them.
The FCC probably has it within their purview to tackle the first issue. The agency required telcos many years ago to sell ‘naked’ DSL and could require the same 0f cable companies now that they are under Title II regulation. But the second issue is strictly a marketing issue and I think carriers need to get attuned to the fact that customers want to buy only data connections and they don’t want to feel taken advantage of while doing so.
On an unregulated industry this practice could be classified as an illegal tying arrangement. FCC jurisdiction complicates the matter but the policy underlying the prohibition of tying should apply here.
When FiOS broadband was installed in our neighborhood, in Germantown MD, we still had effectively two providers… Verizon FiOS and Comcast. I decided to do a little test… I asked my neighbors who they got and why —
Half on them said they absolutely despised Verizon, and got Comcast; half of them said they absolutely despised Comcast, and got Verizon… No one got the service they loved, the got the service they despised less…
I guess you would call that negative competition where people choose the least unsavory option.