Category: What Customers Want

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The Industry What Customers Want

Broadband Advocates

I’m writing this blog while sitting in a meeting of NCHeartsGigabit, a non-profit started in North Carolina to promote the expansion of broadband. The group started five or six years ago as an informal group of folks who were interested in expanding broadband coverage around North Carolina. A few years ago they realized that they needed to move from talking to action and created a non-profit organization that now brings together the various broadband stakeholders to look for broadband solutions.

Today’s meeting is a great example of the progress they’ve made. There is a wide range of attendees representing state and local government, telco cooperatives and ISPs, bankers, foundations, equipment vendors, consultants and engineers. Most impressive is that they attracted both current Governor Roy Cooper and former Governor James B. Hunt to speak to the group. I think their presence highlights the importance that broadband coverage is now getting in this and other states. North Carolina is like the majority of states where there are some pockets of fiber-to-the-home, cities served by the big cable company networks, a smattering of rural areas served well by small telcos and cooperatives, and much of the rural parts of the state with poor or nonexistent broadband.

Sitting in this meeting reminds me how important it is to have what I call broadband advocates – folks like NCHeartsGigabit who have taken it as a mission to promote broadband. I’ve written many blogs about why broadband is vital for rural America and these are folks who get it.

I work around the country in communities of all sizes and I regularly interface with broadband advocates. Sometimes these groups are formal like a broadband committee that is empowered by the local government. I recently worked with such a group in Davis, California and it is one of the most knowledgeable and engaged advocacy groups I have ever worked with. I can tell that this group, which is also backed by widespread citizen support is going to hold the city’s feet to the fire on broadband issues.

Sometimes there is no formal group, but instead the public acts in mass to make their voices heard on the issue. As an example, I was at a public meeting in Pope County, Minnesota last year to give the findings from a broadband feasibility study. This is the most sparsely populated county in the state and there was little broadband outside of the county seat. The public meeting was standing-room only and the county officials heard story after story about how lack of broadband was affecting people’s lives. The County officials heard this message and have since provided funding in a public private partnership with a telco cooperative to bring broadband to the County.

The more common situation is that there only a few broadband advocates in a community who push for broadband. If these few broadband champions are persistence enough they can sometimes finally pull the rest of the community along. The best example of this I can think of is my friend Mark Ericsson who was the one-man force behind bringing broadband to Renville and Sibley Counties in Minnesota. He went to hundreds of local meetings and eventually got a lot of other volunteer help, but without his early persistence this project would have died in the early days.

His success is memorable because it is rare. Bringing fiber to a rural area requires a huge amount of effort. It means convincing politicians to support the idea. It means raising the money needed for doing the feasibility analysis. It means raising even more money for customer education and marketing and in many places a referendum. It takes yet more money to raise the funding. And unless a community wants to be an ISP it means finding an ISP partner to operate the business. More often than not, a community with only a few advocates can’t make it through this daunting gauntlet of tasks.

This is why I always recommend that communities with poor broadband make a push early to involve as much of the community as possible finding a solution. I don’t understand the sociology of why it works, but I know from practical experience that unleashing a group of broadband advocates often creates momentum that is hard to stop. Households in rural counties generally want broadband badly enough that many of them will agree to play some role in getting a broadband network. If a community really wants broadband, my first advice is to create the advocacy group first and then get out of their way.

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What Customers Want

The Price for Triple Play?

I was recently working on a project for client who is thinking about competing in a new city and wants to understand the real market rates customers are paying. We solicited copies of bills from existing subscribers to the incumbent telco and cable company to find out.

I doubt that anybody would be surprised from what we found, but it was good to be reminded of the billing practices of the big ISPs. Here are a few of the things we found:

  • Both incumbents use promotional rates to provide lower prices to new customers or to existing customers who are willing to negotiate and to sign up for a term contract. Promotional discounts were all over the board and seems to mostly range between a $5 and a $25 discount per month. But there was one customers who was getting a $60 discount on a $180 monthly bill.
  • Both incumbents also offer bundling discounts, but they were applied erratically. Our sample of bills was not a statistically valid sample, but roughly half of the bills we saw had a bundled discount while other customers buying the same products were not getting a discount.
  • The cable incumbent offers the typical three tiers of service offered by most cable companies. While every cable customer had one of these three packages, we surprisingly didn’t see any two customers paying the same price.
  • The cable company had programming fees that were separate from the base programming charges – one fee to cover local programming costs and another labeled as a sport fee. These were not always billed at the same rate and there were not being billed to all customers with the same packages.
  • There was also a varying range of fees for settop boxes and cable modems by the cable company and WiFi modems from the telco.
  • What surprised me most was how widely the taxes varied from bill to bill. Customers with the same products often had tax charges several dollars apart. This makes me wonder why more taxing authorities aren’t auditing bills from time to time to see if all of the tax due to them is even being billed.
  • Nowhere on the bills was any customer told the speed of their broadband products.
  • There were obvious billing errors. For example, I saw a bill charging the subscriber line charge to somebody who doesn’t have a telephone line. They probably had one in the past and are still paying $6.50 per month long after they dropped their landline.

I hadn’t looked at that many customer bills from a single market for a while. I’ve always known that prices vary by customers, but I didn’t expect them to vary this much. My primary take-away from this analysis is that there is no one price for telecom products. I hear clients all of the time saying things like “My primary competition comes from a $49 broadband connection from the cable company”. But that’s not really true if most people are paying something different than $49. Some customers have discounts to lower that price while others may be paying more after considering ancillary fees.

The bills were confusing, even to me who knows what to look for. It would be easy, for example, for a customer to think that a local programming fee or an FCC line charge are taxes rather than revenue that is kept by the service provider. Both ISPs mixed these fees on the bill with actual taxes to make it impossible for the average customer to distinguish between a tax and a fee that is just a piece of a product billed under a different name.

These bills also made me wonder if the corporate staff of these big ISPs realize the wide range that customers are paying. In many cases there were fees that could have been billed that weren’t. And there was a a wide variance tax billing that would make a corporate CFO cringe.

These bills reinforce the advice I always give to clients. I think customers like transparency and I think the best bill is one that informs customers about what they are buying. In this market most customers could not tell you what they are paying for the various products. Bills can be simple, yet informative and some of my clients have wonderful bills. After seeing the billing mess from these two big ISPs, I think honest straightforward billing is another advantage for a competitor.

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Technology What Customers Want

The Demand for Upload Speeds

I was recently at a public meeting about broadband in Davis, California and got a good reminder of why upload speeds are as important to a community as download speeds. One of the people making public comments talked about how uploading was essential to his household and how the current broadband products on the market were not sufficient for his family.

This man needed good upload speeds for several reasons. First, he works as a photographer and takes pictures and shoots videos. He says that it takes hours to upload and send raw, uncompressed video to one of his customers and says the experience still feels like the dial-up days. His full-time job is working as a network security consultant for a company that specializes in big data. As such he needs to send and receive large files, and his home upload bandwidth is also inadequate for that – forcing him to go to an office for work that could otherwise be done from his home. Finally, his daughter creates YouTube content and has the same problem uploading content – which is particularly a problem when her content deals with time-sensitive current events and waiting four hours to get the content to YouTube kills the timeliness of her content.

This family is not unusual any more. A decade ago, a photographer led the community effort to get faster broadband in a city I was working with. But he was the only one asking for faster upload speeds and most homes didn’t care about it.

Today a lot of homes need faster upload speeds. This particular family had numerous reasons including working from home, sending large data files and posting original content to the web. But these aren’t the only uses for faster upload speeds. Gamers now need faster upload speeds. Anybody who wants to remotely check their home security cameras cares about upload speeds. And more and more people are migrating to 2-way video communications, which requires those at both ends to have decent uploading. We are just now seeing the early trials of virtual presence where communications will be by big-bandwidth virtual holograms at each end of the communications.

Davis is like many urban areas in that the broadband products available have slow upload speeds. Comcast is the cable incumbent, and while they recently introduced a gigabit download product, their upload speeds are still paltry. DSL is offered by AT&T which has even slower upload speeds.

Technologies differ in their ability to offer upload speeds. For instance, DSL is technically capable of sending the data at the same speeds for upload or download. But DSL providers have elected to stress the download speed, which is what most people value. So DSL products are set with small upload and a lot of download. It would be possible to give a customer the choice to vary the mix between upload and download speeds, but I’ve never heard of an ISP who tried to provide this as an option to customers.

Cable modems are a different story. Historically the small upload speeds were baked directly into the DOCSIS standard. When Cable Labs created DOCSIS they made upload speeds small in response to what cable companies asked from them. Until recently, cable companies have had no option to increase upload speeds beyond the DOCSIS constraints. But Cable Labs recently amended the new DOCSIS 3.1 standard to allow for much upload speeds of nearly a gigabit. The first release of the new DOCSIS 3.1 standard didn’t include this, but it’s now available.

However, a cable company has to make sacrifices in their network if they want to offer faster uploads. It takes about 24 empty channels (meaning no TV signal) on a cable system to provide gigabit download speeds. A cable company would need to vacate many more channels of programming to also offer faster uploads and I don’t think many of them will elect to do so. Programming is still king and cable owners need to balance the demand for more channels compared to demand for faster uploads.

Fiber has no real constraints on upload speeds up to the capability of the lasers. The common technologies being used for residential fiber all allow for gigabit upload speeds. Many fiber providers set speeds to symmetrical, but others have elected to limit upload speeds. The reason I’ve heard for that is to limit the attractiveness of their network for spammers and others who would steal the use of fast uploading. But even these networks offer upload speeds that are far faster than the cable company products.

As more households want to use uploading we are going to hear more demands for a faster upload option. But for now, if you want super-fast upload speeds you have to be lucky enough to live in a neighborhood with fiber-to-the-home.

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What Customers Want

Technical Support as a Product

Verizon announced a new line of products this week that provide three different tiers of technical support to help customers better handle the wide array of devices and issues they face in the ever-more-confusing digital world.

The first product is the most intriguing. For $10 per month a customer gets technical support for virtually any device connected to their home network such as printers, smart locks, smart lighting, security systems and smart thermostats. Unlike the Comcast smart home product where customers only get Comcast-approved IoT devices, a Verizon customers can buy devices anywhere and still get support from Verizon in connecting or troubleshooting connections to such devices.

The technical support also comes with other useful features. Verizon will help you isolate and remove computer viruses and malware. They’ll help you with complicated tasks such as transferring photos, files or personal settings between computers. They also will provide up to 5 PC tune-ups per year that will run diagnostic tests and maximize computer performance. Maybe most important of all, joining the service puts customers at the top of the queue for call to technical support (which I guess means longer wait times for customers who don’t buy the service).

A second tier at $15 per month adds LifeLock Select, the identity protection service as well as McAfee Security and Safe Family – a suite of virus protection and parental control software. The last tier, priced at $30 per month adds an insurance plan for smart devices in the home other than smartphones or computers. It will cover smart TVs, tablets, smart thermostats and other IoT devices, and Verizon will repair or replace broken devices. This top plan also adds LastPass, a password management tool. The product doesn’t include any in-home assistance, although that is available through Verizon partners.

This is not a new product and there are numerous companies offering online technical support such as 24/7 Techies, AskPCExperts, Bask and Best Buy’s Geek Squad. Several of these services also offer a first-tier plan for $9.99 per month.

I also know a number of smaller US telcos and ISPs that offer something similar. Many of these companies operate in geographically isolated areas where there is no Best Buy or other outlet for technical services and support. Some of my clients sell monthly subscriptions similar to Verizon’s base fee. Others operate a physical store location where customers can get computer repair services.

I think every small company I’ve talked to who offers something like this tells me that they are lucky if the operation breaks even. But they all maintain the service because it distinguishes them from competitors and builds tremendous customer loyalty. Most are happy if their technical support effort breaks even.

I’m sure Verizon has done the math and believes they can make money at this – and they probably can. A company of their size can keep call queues full so that technicians have little or no down time. I’m sure Verizon is also counting on the fact that most customers will buy this service and only use it sporadically. A customer who really uses the service will cost Verizon more than the $10 fee.

The biggest issue that anybody who offers this kind of service faces is keeping a competent technical staff to support customer calls. Many employees who take this kind of job view it as a stepping stone to a better paying technical career, so there is usually high turnover of staff.

It’s an intriguing business line for ISPs to consider, particularly those in more remote markets. Our home networks are getting increasingly confusing. Sometimes just getting a printer to work right can eat up hours of time and figuring out more complicated devices can be maddening. As long as you recognize that you won’t get rich doing this it’s an interesting way to create personal relationships with customers while providing an invaluable service to customers that will differentiate you from the competition – unless your competition is Verizon.

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The Industry What Customers Want

When Marketing Plans Fail

It’s really easy for ISPs to assume that customers want what we are selling. I have clients that march into a market and assume that the majority of customers in the market will gladly change to a fiber network if they are using an older technology today. But sometimes we find that customers don’t want our products.

I have a number of examples of this. Many years ago I helped a client who was building traditional HFC cable TV networks and one of the markets had a substantially lower customer penetration rate than he expected. It didn’t take much digging to find out that a substantial portion of the community were conservative Mennonites who just weren’t interested in cable. He might still have built the town anyway, but he had to pare back his earnings expectations for that particular portion of his buildout.

I have another client who was building fiber in small towns and also experienced low take rates. He had guessed on his likely take rate by counting the homes with a satellite dish and he assumed that a reasonable percentage of these would want fiber broadband since the town had almost non-functional DSL. But it turns out that this particular little town was full of folks who considered themselves as political outsiders and they didn’t trust any ISP in their homes.

Those two examples are the extremes, but I see this phenomenon even more when clients introduce new products. New Product launches often are not the success that an ISP is hoping for. Consider some of the following examples:

  • I had a rural client who got almost no takers for a new burglar alarm and security product. Turns out most of the people in this market didn’t even lock their doors and weren’t worried about security.
  • I had a new client roll-out the triple play in a college town. He expected a lower-than-average take rate of telephone and cable TV because of the students, but was shocked when he sold less than half of those products compared to his expectations.
  • I have a number of clients who are getting almost no takers for smart home products, while they know neighboring ISPs who are doing well with the products.

All of these situations could have been made better with some market research. We’ve always found that a survey, if done correctly is an accurate predictor of residential penetration rates. A valid survey must be administered randomly and also given to enough people to be valid. I’ve seen many clients rely on non-random surveys, such as sending out post cards – and then being surprised by the results of their new roll-out.

So asking customers is always a good idea. But sometimes it’s not particularly cost effective. It can easily cost $7,000 – $10,000 to do a proper survey and that might not make sense when just introducing a new product line into a small market.

But there are other techniques. One is to pre-sell with a campaign that says you’ll roll out a product if enough people in the market show interest. If the new product is something that people want badly enough you’ll find neighbors talking to neighbors about the campaign.

One interesting marketing I saw recently involved giving temporary upgrades for free to customers. I had a client who improved the network and could now offer faster broadband speeds. But after a round of marketing, nobody was upgrading so the ISP started offering a free upgrade for three months, with the provision that customers could go back to the slower speeds if they didn’t want the new product. Virtually every customer kept the faster product and paid the higher price after the trial.

Finally, you can never discount customer education. For example, I have a client selling smart home product that gives folks a free assessment of the ways it can help their home. They walk through the home and talk about all of the ways that it might make the customer’s life easier. They don’t use any hard sell techniques – it’s done by technicians and is strictly a factual listing of what might or might not work for each customer depending upon their home. Price is only brought up if the customer shows interest. This has resulted in significant sales of the new product line, which the client believes is because the customer has gained an understanding of the real-life benefits of the product.

All too many times I’ve seen traditional marketing programs fail. Many customers have grown immune to mailers and don’t even open mail. And people generally will not call for a new product when they don’t understand the immediate relevancy to them. When you find yourself running into ineffective marketing it’s time to get create and try something new and different.

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Technology What Customers Want

Gigabit LTE

Samsung just introduced Gigabit LTE into the newest Galaxy S8 phone. This is a technology with the capability to significantly increase cellular speeds, and which make me wonder if the cellular carriers will really be rushing to implement 5G for cellphones.

Gigabit LTE still operates under the 4G standards and is not an early version of 5G. There are three components of the technology:

  • Each phone has as 4X4 MIMO antenna, which is an array of four tiny antennae. Each antenna can make a separate connection to the cell tower.
  • The network must implement frequency aggregation. Both the phone and the cell tower must be able to combine the signals from the various antennas into one coherent data path.
  • Finally, the new technology utilizes the 256 QAM (Quadrature Amplitude Modulation) protocol which can cram more data into the cellular data path.

The amount of data speeds that can be delivered to a given cellphone under this technology is going to rely on a number of different factors:

  • The nearest cell site to a customer needs to be upgraded to the technology. I would speculate that this new technology will be phased in at the busiest urban cell sites first, then to busy suburban sites and then perhaps to less busy sites. It’s possible that a cellphone could make connections to multiple towers to make this work, but that’s a challenge with 4G technology and is one of the improvements promised with 5G.
  • The amount of data speed that can be delivered is going to vary widely depending upon the frequencies being used by the cellular carrier. If this uses existing cellular data frequencies, then the speed increase will be a combination of the impact of adding four data streams together, plus whatever boost comes from using 256 QAM, less the new overheads introduced during the process of merging the data streams. There is no reason that this technology could not use the higher millimeter wave spectrum, but that spectrum will use different antennae than lower frequencies.
  • The traffic volume at a given cell site is always an issue. Cell sites that are already busy with single antennae connections won’t have the spare connections available to give a cellphone more than one channel. Thus, a given connection could consist of one to four channels at any given time.
  • Until the technology gets polished, I’d have to bet that this will work a lot better with a stationary cellphone rather than one moving in a car. So expect this to work better in downtowns, convention centers, etc.
  • And as always, the strength of a connection to a given customer will vary according to how far a customer is from the cell site, the amount of local interference, the weather and all of those factors that affect radio transmissions.

I talked to a few wireless engineers and they guessed that this technology using existing cellular frequencies might create connections as fast as a few hundred Mbps in ideal conditions. But they could only speculate on the new overheads created by adding together multiple channels of cellular signal. There is no doubt that this will speed up cellular data for a customer in the right conditions, with the right phone near the right cell site. But adding four existing cellular signals together will not get close to a gigabit of speed.

It will be interesting to see how the cellular companies market this upgrade. They could call this gigabit LTE, although the speeds are likely to fall far short of a gigabit. They could also market this as 5G, and my bet is that at least a few of them will. I recall back at the introduction of 4G LTE that some carriers started marketing 3.5G as 4G, well before there were any actual 4G deployments. There has been so much buzz about 5G now for a year that the marketing departments at the cellular companies are going to want to tout that their networks are the fastest.

It’s always an open question about when we are going to hear about this. Cellular companies run a risk in touting a new technology if most bandwidth hungry users can’t yet utilize it. One would think they will want to upgrade some critical mass of cell sites before really pushing this.

It’s also going to be interesting to see how faster cellphone speeds affect the way people use broadband. Today it’s miserable to surf the web on a cellphone. In a city environment most connections are more than 10 Mbps today, but it doesn’t feel that fast because of shortfalls in the cellphone operating systems. Unless those operating systems get faster, there might not be that much noticeable different with a faster connection.

Cellphones today are already capable of streaming a single video stream, although with more bandwidth the streaming will get more reliable and will work under more adverse conditions.

The main impediment to faster cellphones really changing user habits is the data plans of the cellular carriers. Most ‘unlimited’ plans have major restrictions on using a cellphone to tether data for other devices. It’s that tethering that could make cellular data a realistic substitute for a home landline connection. My guess is until we reach a time when there are ubiquitous mini-cell sites spread everywhere that the cellular carriers are not going to let users treat cellular data the same as landline data. Until cellphones are allowed to utilize the broadband available to them, faster cellular data speeds might not have much impact on the way we use our cellphones.

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What Customers Want

Walking Away from Cable

Several different events in the last week got me thinking about an interesting trend in the cable industry. First, in my community there is a Redbox outlet in a neighborhood grocery store. My wife and I were discussing how busy they seem to be in renting out movie DVDs. All of the Blockbuster and other movie rental outlets have closed. Until I moved to this neighborhood recently I hadn’t notice any video stores or related outlets in a long time. But this Redbox seemed to have a lot of business.

I also saw an article in FierceCable that noted that only 5% of US households have subscribed to a vMVPD – an online cable provider like Sling TV, DirecTV Now or Playstation Vue. My first thought is that a 5% market penetration seems pretty phenomenal for an industry that is barely two years old. But the article notes that while 5% of households are current subscribers to online programming, another 8% of the market has tried and dropped one of the services. Since only about 20% of the total households don’t have traditional cable service it makes you wonder what the real upper potential for this market might be – it might be a lot smaller than the vMVPDs are hoping for.

I also went to a Superbowl party. The half dozen families attending are from my neighborhood and it turns out all of the households are cord cutters and don’t subscribe to traditional cable service. I was the only one that used a vMVPD and I currently have a subscription to Playstation Vue. None of them had tried a vMVPD and they seemed to have no interest in doing so. (I only use Playstation Vue because it’s the cheapest way to get Big10 sports and Fox Sportsnet so I can watch Maryland sports teams – I rarely watch the other linear programming).

National broadband penetration rates are now at 84% of all households. I’ve seen many of the opponents of spending money to build rural broadband say that households just want broadband to watch video. Netflix has made a huge dent in the market and served nearly 55 million US homes at the end of 2017. Add to that some percentage of the 90 million homes that subscribe to Amazon Prime, and it seems like there might be some truth in that.

But if households are cutting the cord, why aren’t more of them buying one of the on-line cable alternatives? Those services have packages that carry only the most popular cable channels at half the price of buying traditional cable.

I think the answer is a combination of two factors. One of the predominant factors is price. Every family at the neighborhood party has kids and they dropped traditional cable because it was too expensive. That has to be the factor that explains why the Redbox outlet is doing so well. Most of the movies available from Redbox are also available online. But getting online means also having an Internet-enabled TV or else buying a Roku or other web interface. And even then, watching many of these newer movies means subscribing to yet a different online service. I think there is a cost barrier, or perhaps a technology barrier that is keeping households using a traditional DVD player and Redbox.

Two different households at the party told me that they were satisfied with just watching Netflix and the free programming available on YouTube. And that is the second important trend. Households are getting used to watching just a subset of the programming that is available to them. When somebody drops cable TV and doesn’t buy a vMVPD service it means they have walked away from all of the content that is available only in those two media.

Most of my neighbors still watch the major networks using rabbit ears (something I don’t do). So they are still watching whatever is available on local CBS, NBC, ABC and FOX. But the families on my street are learning to live without the Game of Thrones, or the Walking Dead. They are no longer watching ESPN, Discovery, Comedy Central, the Food Network and the hundreds of channels that make up traditional cable TV.

This means their kids are not growing up watching traditional cable networks, and thus are not developing any brand loyalty to those networks or their programming. If you don’t learn to love a network when you are a teenager, will you decide to watch it when you are older?

I don’t have any answers to these questions, and obviously I can’t define a trend just from talking with some of my neighbors. But I found it intriguing that they all had dropped traditional cable and had not replaced that programming with something online. This tells me that there must be a lot of people who are not enamored with linear programming whether it’s on cable or online. And a lot of people are convincing themselves that it’s okay to walk completely away from the big pile of programming that is offered by the cable TV networks.

This is potentially a watershed phenomenon, because somebody that walks away from traditional programming is probably not coming back. These folks are cord cutters who are literally walking away from most of the programming available on traditional cable. Those networks and their programming are going to become irrelevant to them. But interestingly they are still going to consume a lot of video content – just not that created by the traditional cable networks. In my mind these households are looking a lot like Generation Z in that they are foregoing traditional programming and watching something else.

The vMVPDs are banking that people will transition down to their smaller packages when they leave a cable TV provider. But will they? This is a phenomenon that you can’t determine from industry-wide statistics, other than perhaps by seeing the dropping number of paid subscriptions to the various cable networks. People like my neighbors are dropping cable due to the expense, but they are quickly learning to live without traditional cable programming and aren’t chasing the online alternatives.

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What Customers Want

Millennials and Media

I’ve read a lot recently in various trade articles talking about the percentage of Millennials that are watching (or not watching) traditional TV content. The various polls and studies show that Millennials are far less interested in watching linear TV than older generations. They are far less likely to buy a traditional cable TV subscription.

Millennials are starting to have a huge impact on our society. They now make up 32% of all adults in the US. They are more educated than earlier generations and 40% of Millennials between the ages of 25 and 29 have completed a bachelor’s degree compared to 32% for Generation X and smaller numbers for Baby Boomers and the Silent Generation.

But I have rarely read anything that describes what Millennials are doing in place of watching traditional TV. We now know from a study by Nielsen that part of the answer lies in the fact that Millennials read a lot more digital content than older generations. Digital content is content generated by online sites. Nielsen says digital content is now the primary source of news, sport, fashion trends and general knowledge for this generation – to a far greater extent than older generations.

Nielsen has begun tracking digital content and has begun to rate it much like they do for television viewing. Since advertising is shifting towards the web this tracking is of great value to potential advertisers. Historically we’ve been ranking websites by the number of ‘hits’ on their website. But the Nielsen digital tracking goes much deeper and measures time spent at each web site – which is what advertisers want to know. Advertisers have been able to get this kind of information from huge sites like Facebook, but never for everything else on the web.

Here are just a few of the things that Nielsen found about Millennials and digital media:

  • In terms of volume, the leading website used by Millennials is BuzzFeed. This site reaches 83% of US Millennials each month. The content on BuzzFeed is aimed at Millennials and the average BuzzFeed viewer sees an astronomical 38 videos on the site per month. Users don’t have to go to BuzzFeed to see the content, which is widely distributed through the various social media platforms. The platform carries news, the many videos, quizzes and the popular Millennial food site Tasty.
  • Just behind BuzzFeed is Group Nine Media. This company has four web brands including NowThis, The Dodo, Seeker and Thrillist. The companies content is aimed at younger audiences and now reaches 81% of Americans in their 20s. The platform has grown quickly to 1 million minutes per month of streamed content.

Another popular digital content site is MIC. This site offers news aimed at younger viewers and reaches over 25% of people between 21 and 34 years old each month. They are now attracting over 40 million unique viewers per month. Perhaps the most interesting thing about the site to advertisers is that 56% of their viewers are female.

Refinery29 is a site aimed at young women. It’s a mix of fashion, beauty, entertainment and money news. The platform is a mix of text articles and videos and reaches 62% of women between 18 and 34 each month, but a huge 88% of women between 21 and 24. In 2017 Adweek reported that the site reached 500 million viewers worldwide.

Another web site that caters to Millennials has an interesting distribution network. Rather than maintain a web site, VIX distributes content on social medial sites like Facebook, Instagram and YouTube. The site carries video content on lifestyle tips, entertainment, food and life hacks. 62% of VIX viewers are female and VIX reaches 40% of US women between 18 and 49 each month.

All of this is bad news for companies that advertise on TV. Statistics show that linear TV audiences are aging quickly as younger viewers abandon watching real-time TV and its associated ads. Anything that is bad for TV advertisers is ultimately bad for the TV product and anybody that sells it. But the reality is that younger generations are abandoning the programming made for and watched by older generations. This is almost inevitable and is a market reality that the whole industry needs to come to grips with.

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What Customers Want

A Managed WiFi Product

A number of my clients are now selling a managed WiFi product. But the product they are offering customers under that name varies widely, and so today I thought I’d discuss a few of the different products being sold under this name.

The simplest product is one that I would call a WiFi network. Historically, ISPs that provided WiFi placed a single WiFi router near to where the broadband connection terminated into the home. And it was typical to include the WiFi functionality directly embedded into the DSL or cable modem router. This product has been around for a while and I got my first WiFi router when Verizon supplied an all-in-one router on my FiOS connection nearly 15 years ago.

But as homes have added numerous connected WiFi devices, a single WiFi router is often inadequate. With today’s greater demand for bandwidth by devices a single WiFi router often can’t reach to all parts of the home or connect smoothly to numerous devices. Most of my clients tell me that WiFi problems are now the biggest cause of customer dissatisfaction and in in many cases have surpassed cable TV issues. Many customers supply their own WiFi routers and ISPs get frustrated when a customer’s inadequate WiFi device or poor router placement ruins a good broadband delivery to the home.

Today there are numerous brands of WiFi network devices available. These systems deploy multiple WiFi routers around the home that are connected with each other to create one ubiquitous network. The routers can be connected wirelessly in a mesh or hard-wired to a broadband connection. These devices are widely available and many customers are now installing these networks – I’ve connected an eero network in my home that has vastly improved my WiFi quality.

I have a number of clients that sell the WiFi networks. They will place the WiFi units in the home in a manner that maximizes WiFi reception. The revenue play for this product is simple equipment rental and they charge each month for the devices. ISPs generally set up the routers so that they can peer into them for troubleshooting since customers inevitably will unplug a router, move one to a less than ideal place or place some big object near one that blocks the WiFi signal. But that’s about all that comes with the product – expert placement of routers and simple troubleshooting or replacement if there are problems.

At the other end of the spectrum are a few clients who really manage the customer WiFi experience. For example, customers can call when they buy a new WiFi device and the NOC technicians will connect the device to the network and maximize the WiFi connection. They will assign devices to different frequencies and channels to maximize the WiFi experience. These ISPs have invested in software that tracks and keep records of all of the devices connected to the WiFi network, meaning they can see a history of the performance of each customer device over time.

The ISPs monitor the WiFi performance and are usually proactive when they see problems, in the same manner than many ISPs track performance of fiber ONTs. The WiFi network moves the ISP deeper into the customer home and allows the ISP to make certain that customers are getting the bandwidth they are paying for.

Nobody know what to charge for this yet and I see monthly rates for the managed WiFi that range from $10 to almost $25 per month. I don’t have enough experience with this to yet suggest the right price. Like any new product the success is going to be due mostly to the marketing effort expended. I have a few clients who have already gotten penetration rates of 25% or more with prices in the $15 – $20 range.

But this product isn’t for everybody. For example, I have clients that don’t want to take on the product due to the extra truck rolls. But almost all of my clients have worries about eventually becoming dumb pipe providers and the managed WiFi product provides a tangible way to maintain contact with a customer to demonstrate the ISPs value proposition. And like with any equipment rental play the revenue stream is good. Once the cost of the hardware and initial installation have been recovered the product is almost all margin.

 

 

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The Industry What Customers Want

The Rush to vMVPDs

To those of you not familiar with the industry lingo, a vMVPD is a virtual multichannel video programming distributor, or virtual cable company. This term is being used to describe OTT providers that offer a version of the same channels offered by cable companies. This sector includes Sling TV, DirecTV Now, Playstation Vue, Hulu Live, YouTube TV and a few others. These providers stream networks on the same linear schedule as is shown on cable TV. Providers of alternate programming like Netflix or Amazon Prime are not considered as vMVPDs.

Industry analysts say that the vMVPDs as a group gained over 900,000 customers in the recently ended third quarter. That is a startling number and represents almost one percent of the whole traditional cable TV market, all captured in just one quarter. We’ll have to wait a bit to see how the whole cable market performed. But we already know that Comcast lost over 150,000 cable customers for the quarter. Since they had been hanging onto cable customers better than the other cable companies I think we can expect a bloodbath.

This kind of explosive growth is perhaps the best harbinger for the slow death knell for traditional cable TV. This new industry is still less than three years old with Sling TV having launched in February 2015. The industry started slowly and had only a few hundred thousand customers at most by the end of 2015.

But it’s now obvious that a lot of people are deciding that they don’t want to pay the big monthly bill for the giant channel line-up. The analysis from Nielsen shows that most households only watch a handful of channels. While no vMVPD is probably going to give households exactly the channels they most want to watch, they are obviously providing enough channel choices to lure people away from the cable companies.

It’s an interesting transition to watch. To some degree the programmers are contributing to their own demise. When people leave a cable line-up of 200 channels to instead watch an vMVPD line-up of less than 50 channels there are obviously a lot of networks that are no longer collecting customer fees. Practically every network is bleeding customers and this shift to OTT viewing is going to kill off a lot of network channels. I read an interview a few months ago with the head of programming at Fox who believed that his company would shut down the majority of their cable networks within a few years.

Another thing I find interesting about this shift is that the vMVPDs are not particularly easy to use. I’ve now tried four of them – Sling TV, DirecTV Now, Playstation Vue and Fubo TV, and I will get around to trying them all eventually. None of them have the ease of use of a cable settop box. You can’t just surf through channels easily to see what’s on and you have to instead navigate through menus that take several steps compared to a simple ‘channel up’ command on a cable remote.

These four services also have channel guides of a sort, but they are also cumbersome to use. I’ve found that it can easily take three or four minutes to change between two shows, and that’s when you know what you want to watch. The guides on these services are not yet friendly for looking hours or days ahead to see what you might want to watch later. And at least one of the services, Playstation Vue, is so confusing that I often get lost in its menus.

And yet nearly a million people changed to one of these services in the last quarter. The biggest appeal for these services is price along with a total ease to subscribe or unsubscribe. After years of dealing with big cable companies I was apprehensive the first time I tried to unsubscribe to Sling TV – but it took less than a minute to do on-line and was not a hassle. The services differ in features like the number of people who can watch different programming at the same time on an account, but they are all becoming more people friendly over time.

At this point AT&T might be the only company that is getting this right. The company lost 385,000 customers in the third quarter between DirecTV satellite service and U-verse. But they gained 296,000 DirecTV Now customers to make up for a lot of those losses. At this point nobody is talking about the margins on vMVPD service, but it can’t be a whole lot worse than the shrinking margins on traditional cable TV.

I believe we are seeing the future of TV in the vMVPD product. We’ll probably look back five years from now and laugh at these hard-to-use first generation services. I’m sure that over time they will get far easier to use and I’m getting ready to experiment using my Amazon Echo to navigate through Playstation Vue. When it becomes simple to use vMVPDs, then  traditional cable TV might have become passe.

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