I think every ISP I’ve talked with this year is seeing higher churn. For those not familiar with the term, churn is the measure of how many customers an ISP loses. Churn is inevitable. It’s churn when a customer moves and drops service. It’s churn when a customer changes to another ISP. It’s churn when a customer doesn’t pay their bill, and the ISP cuts off service.

The industry churn rate varies widely by the size of the ISP and by markets. The biggest national ISPs have a churn rate in recent years between 1% and 1.5% monthly. The three large cell carriers have churn just under 1% monthly. These large businesses know that a lot of their churn comes from competition. When customers have multiple choices for satisfactory broadband or cell service, they are more open to changing providers to react to special pricing.

Smaller ISPs typically have far smaller churn rates. I know a number of small fiber ISPs with historic churn rates between 4% and 6% annually. Many of these fiber ISPs don’t face competition across their entire footprint, although almost everybody has some competition these days. Every ISP has customers that move away or die. There are always exceptions to the rule, and I know ISPs operating in college towns and near military bases that have always experienced much higher churn than average.

Many ISPs have programs to try to reduce churn. They might have a win-back program to try to talk customers out of changing to a competitor.

The headline for the blog is a new definition of churn. Some ISPs who have been trying to understand higher churn have dug deeper into the data. What they are telling me is that most of the increased churn is due to household economics and customers who can’t afford to pay the monthly broadband bill. Nonpayment has always been a big component of churn, but it is now moving to the top of the list.

Most households want to keep the broadband connection, but in tough economic times they are going to value keeping food on the table more than broadband. We can’t forget that dropping broadband can be a significant savings for a household, particular when it also means dropping streaming services, which might cost as much or more than the broadband bill. Most people who drop broadband have some partial alternatives like using cellphones or computers at the office.

When ISPs dig deeper into economic churn, they are finding something new. They are finding that people who drop broadband because they can’t afford it want to come back. They might pay for broadband for six months and drop it for three or four months. When they are flush again, they come back. That’s a new category of churn that we haven’t seen much of in the past. These are households that value the broadband connection, but who just can’t afford it. If I had to coin a name for this new class of churn, it might be something like occasional customers.

If you look around the world, there are models for selling to occasional customers. ISPs in places like Nigeria sell broadband by the day, week, or month because they understand that many households cannot commit to a steady subscription. ISPs there understand that getting some revenue out of a connection over the course of a year is far better than getting nothing. If an ISP drops a customer permanently, they strand the cost of the drop.

There are a number of ISPs in the U.S. who recognize this phenomenon to some small degree. For example, some ISPs offer seasonal rates for snowbirds or college students who are only in the market for part of each year. But I haven’t heard of any ISP that makes it easy for customers to come and go when they can afford to connect. In fact, many ISPs make it hard for customers to come back.

One of the good things about the way that most ISPs sell broadband is that they make customers prepay for the coming month. One way to deal with occasional customers would be to sell clearly-labeled pre-paid broadband that automatically expires at the end of the billing period if the next monthly bill hasn’t been pre-paid. Customers with this plan could come and go as they can afford to pay.

While there have always been occasional customers, what’s new today is the large number of customers who are struggling to pay their broadband bill. There are a lot of smart marketing people in the industry, and I’m sure some of them will find clever solutions to the problem. Rather than shun customers who have trouble paying, ISPs should provide a way for them to pre-pay when they can afford it. That’s way smarter than just losing the customers to permanent churn and stranding network costs.