What Customers Want

Naked Broadband

cheetah-993774I suspect the word ‘naked’ got a few of you reading this far. Naked broadband refers to broadband that is sold as a standalone product and that does not require bundling with something else.

There has been some regulatory pressure in the past to require naked broadband. In the early 2000s several states like Florida, Georgia, Kentucky and Louisiana tried to force BellSouth to offer naked DSL. At that time BellSouth required that anybody who bought DSL also had to buy a landline telephone service.

BellSouth challenged the states’ ability to regulate broadband in that manner and in 2005 the FCC agreed with BellSouth and overturned the state rulings that required naked DSL. At that same time the FCC opened a Notice of Inquiry into the issue, but I don’t believe that docket was ever acted upon or closed.

Since then the market has reacted to what customers want and both AT&T and CenturyLink widely offer naked DSL. Verizon offers it in some places but charges a premium to buy naked DSL versus bundled DSL.

One of the main reasons that the FCC sided with BellSouth was that the agency didn’t really have the authority to regulate broadband in that manner. But with the FCC’s new Title II regulation of broadband they probably have this authority today. So I ask the question – should the FCC require cable companies and fiber providers to offer naked broadband?

This is a valid question considering that we are now seeing a lot of households trying to cut the cord. In my own situation, Comcast will sell me a standalone connection to their slowest broadband products, but in order to get a faster broadband connection I have to bundle the Internet with a cable TV product. In order to get 100 Mbps broadband I have elected to buy the smallest basic cable product available and I pay over $100 a month for the bundle. I have a settop box sitting in a closet somewhere since we don’t even have a TV. I thought I might finally have a use for this package during the Olympics, but the NBC Olympic web sites still wouldn’t give me access since I don’t subscribe to the USA Network.

I feel that I am paying an extra $30 a month for something I really don’t want. And Comcast counts me (and probably a whole lot of people like me) as cable customers when we are only reluctantly so. I wonder how bad the cord cutting statistics might be if people like me could drop a cable product we don’t want?

There are some providers that offer naked broadband. Verizon sells standalone Internet connectivity on their FiOS network. Google is glad to sell you a data-only connection. And a number of municipalities and fiber overbuilders also offer data as a standalone product. But there is no rule that makes any of these companies do this and tomorrow they could decide to force people into a bundle.

I know many smaller telcos and cable companies that also force a bundle. I fully understand the desire to do this – these companies are trying to preserve revenues at a time when telephone and cable subscriptions are dropping. But these companies really have to ask themselves if they want to force customers to buy products they don’t want. These kind of practices create resentment, and in the long run this is probably not the signal that should be sent to customers. This is a dilemma, and perhaps the right answer is to price naked broadband at a price that is required to sustain your business.

It is pretty easy to make an argument that it is anticompetitive for large cable companies to not sell naked broadband. In many markets they are the only ISP with fast broadband and failure to sell standalone broadband is a barrier for people to cut the cord for cable programming. After Comcast and the other big cable companies finish their DOCSIS 3.1 upgrades over the next few years they will have the vast majority of fast broadband connections in the country.

This issue is one of many that can now be raised since the FCC brought broadband under Title II regulation. I think that this new authority also lets them look at price caps and perhaps even at broadband pricing (although Chairman Wheeler promised Congress he would not do that). It will be interesting to see how the FCC uses the new authority it has claimed. I know there are a lot of households in the country that would love to just buy a fast standalone broadband connection and be done with the bundle.

What Customers Want

The Broadband-only Customer

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.

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