One issue that I often see neglected in looking at financial projections for potential fiber projects is seasonality. Seasonality is the term used among utilities to describe groups of customers who are not full-time residents.
There are a lot more kinds of seasonal customers than many people realize. Consider the following:
- Tourists areas are the ones most used to this idea. While most tourists areas get busy in the summer there are also ski towns that are busy only in the winter. These communities are now finding that those that visit or have seasonal homes in these communities expect to have broadband.
- College students. College towns with broadband face the unusual challenge that students not only generally leave for the summer, but since there is a big annual turnover in students each year, much student housing is vacant during that time.
- Snowbirds are tourists who go south for the winter, but they come from somewhere in the north and I have clients with farming communities that see a big outflux during the winter with citizens going south for the winter.
- While it’s not purely a seasonality issue, communities near to military bases often face similar issue. They experience high churn among customers and requests to put service on hold during deployments.
ISPs face some interesting challenges with seasonality. Consider college towns. They lose significant numbers of customers every summer, and not just from graduating students, but from those who will be moving to a new apartment or home in the fall. The, all of the students come back all at once at the end of August and expect to be immediately connected.
Students create several challenges for an ISP. First, a fiber overbuilder might not be well known and so has to market hard during that period so that new students know there is an alternative. There is also the issue of making many connections in a short period of time. Students are also a billing challenge and it’s not unusual for students to run out of money before the end of a school year. I have one client that offers a special discounted rate for the school year to students who will prepay.
Tourist areas area a a challenge because a lot of customers will strongly resist having to pay for broadband and other triple play products for the months they are gone. And unlike with schools, it’s not untypical in tourism areas for the customers to be gone for more of the year than they are present. This create a financial challenge to an ISP. It’s hard enough to justify the cost of adding a new customer to a fiber network. It’s even harder to justify making that same investment to get only a half year or less of revenue from each seasonal customer.
I’ve seen ISPs deal with this in several different ways, none of which are totally satisfactory. Some ISPs let seasonal customers disconnect and then charge a reconnect fee when they want service again. I know ISPs who charge a small monthly ‘maintenance’ fee that keeps service live in the offseason at a greatly reduced rate. These don’t usually include cable TV to relieve the ISP for paying for programming that nobody is watching. I also know a few ISPs that try to make seasonal customers pay for the whole year.
Communities that lose resident snowbirds are starting to see the same requests to suspend charges for service while residents leave for the winter.
Most communities don’t have a major seasonal issue. But for those that do, it’s important to anticipate this issue when predicting possible costs to build the network versus the revenues that will be used to pay for it. It’s a lot harder to justify building a new network if a significant percentage of the customers don’t want to pay for a whole year of service.