Tag Archives: Park Associates

Are There Two Broadband Markets?

In a recent survey of 8,000 broadband customers nationwide, Parks Associates found that FWA cellular wireless customers feel better about the price they pay for broadband than subscribers of other technologies.

The survey asked broadband customers to react to the following statement: “I receive Internet service at a fair cost / good price”. The response by technology was as follows:

  • 61% of FWA cellular customers reacted positively to the question.
  • 51% of fiber customers feel they are paying a fair price.
  • 40% of DSL customers responded positively.
  • Only 35% of cable customers think they are paying a fair price.

These responses are measuring two things – the way customers feel about broadband performance of each technology combined with how they feel about the price.

These survey results have to be troubling to cable companies. Cable companies have been raising rates regularly for years. For example, Comcast already has rates far higher than FWA, and yet the company still raised rates by $3 in December 2023. There is no mystery why customers like FWA pricing more than cable company pricing. Comcast has a list price of $86 for a 200/5 Mbps broadband connection, and most customers also are charged $15 for a modem. This contrasts with Verizon FWA, which has a list price of $60 for speeds between 100 – 300 Mbps, with addition savings for using autopay or for bundling with Verizon cellular. T-Mobile FWA has a list price of $65 with a small discount for autopay.

However, the list price isn’t everything since a lot of customers are paying less than list price. Verizon had a recent promotion for FWA home broadband at $40 for new customers and $25 for existing cellular customers. T-Mobile has been advertising a price for home broadband for $30 for existing T-Mobile cellular customers. Comcast also has heavily discounted special prices. There are current web deals for buying the 200/5 Mbps plan for $30 ($45 with the modem). But every customer buying a low-price Comcast product knows the prices will eventually skyrocket when the promotion is over.

The customer reactions to fiber are more puzzling where 50% of customers don’t think they are paying a fair price. Many fiber providers have prices that aren’t that different than FWA wireless. AT&T sells 300 Mbps fiber for $65. CenturyLink sells 500 Mbps fiber for $50. Frontier sells 500 Mbps for $50.

My consulting firm conducts surveys, and we’ve been seeing similar results. I’ve recently come to the conclusion that there are two different broadband markets in the country – a market of customers who care about price and one where customers care about speed.

There has been a huge migration of customers upgrading to gigabit broadband. OpenVault reported that at the end of 2023 that one-third of all broadband customers are now subscribed to gigabit speeds. These are clearly the customers who care about speed, and these households are likely not interested in the slower speeds being delivered by FWA cellular wireless.

Eight million customers have elected to buy FWA home broadband that delivers top speeds between 100 and 300 Mbps. Some of these customers live in rural areas where this is the only fast option, but many of these customers are in towns and cities and are switching from cable companies and fiber ISPs. These are the customers for whom price is more important that broadband speeds. These customers find the FWA speeds to be good enough, at least in relation to the price they pay.

This creates a real dilemma for cable companies. They have lowered the promotional prices to the lowest level I’ve seen in many years to compete with FWA prices. At the same time, cable companies are seeing many customers migrate to the fastest speeds and higher-priced products – but these customers hate the prices. It’s easy to understand customer dissatisfaction when some customers are getting promotional prices at $30 while many other customers are pay far more than $100. It’s virtually impossible for a cable company to satisfy both sets of customers. The attempt to deal with the two drastically different market segments might be a major part of the reason why Comcast and Charter have stopped growing.

Speed Matters

slow-downPark Associates just published the results of a survey that looks at why consumers switch broadband providers. The survey showed that 9% of households changed broadband providers last year. The company surveyed households that had changed and categorized their responses into seven categories.

It turns out that the number one reason that people changed providers was to get faster speeds and 35% of households listed the need for faster speeds as their primary motivation.

Of course, there are still households that care about price. 18% of households that changed broadband providers did so because they could buy comparable speeds at a lower price. But almost nobody changed providers to accept a slower speeds, even with a savings.

The survey results are backed-up by real world statistics. In most markets in the US today there is still duopoly competition between the cable company and the phone company, with the cable company generally having faster speeds. There has been a steady exodus for years from phone company DSL to cable modems and in 2015 alone the cable companies added 3 million new customers, while DSL continued to decline.

There is a lesson to be learned from these statistics. While the news is full of talk of gigabit fiber networks, not all fiber networks offer blazingly fast speeds. I know of a number of owners of fiber networks that offer speeds that are not much faster than the cable modem products they compete against. Those networks are not capitalizing on their technological advantage.

One thing that most of my clients have learned over the years is that increasing customer speeds doesn’t cost them very much. I’ve followed up on hundreds of network speed increases and almost universally ISPs report that customers use the Internet the same after a speed increase than before – but customers always say they love the faster speeds. And so, to the extent that faster speeds don’t cost much to implement, a fiber owner ought to always have speeds faster than their cable competitors – why would you not?

One issue that continues to confound customers is the different between advertised speeds and actual speeds. I have one client whose basic product on fiber is 30 Mbps and they deliver that speed very solidly all of the time. They are competing against a cable modem product advertised as ‘up to 60 Mbps’. And yet, in that market, the fiber product is demonstrably faster than the cable modem product. But this advertising discrepancy creates confusion in the minds of consumers.

There might be some help coming in this area since the FCC will soon be requiring the large broadband providers to disclose more information to customers about their broadband products. But I guess we’ll have to wait to see how truthful they really become.

My company conducts surveys and one thing we’ve found is that that only a small percentage of consumers actually know the speed they are supposed to be getting or the speed they are actually getting. But what they do understand is when their speed is not fast enough to do what they are trying to do.

We know that overall that the amount of data used by the average household has been doubling about every three years. What that means is that people will buy a data product and within a relatively short number of years they will start bumping against that speed and realize they need something faster.

I think the cable companies understand this issue. Comcast has upped speeds across the boards for data customers at least twice this decade that I can recall. Increasing speeds periodically stops customers from hitting their speed ceiling and keeps them happy with the product they have. If you are operating a network that can provide faster speeds you should be increasing speeds from time to time also. You don’t want many of your customers to be in the 9% looking for a new broadband provider.