With the presidential inauguration behind us, the concept of “battleground states” may sound like old news. But for the telecom world, there are new battlegrounds: Florida, Cincinnati and even tiny Roseville, Calif., are where the next battle for the telecommunications marketplace will be waged — specifically, the battle for the lucrative high-speed Internet customer.
No longer “owned” by one provider, HSI customers — spoiled by significant speed and always-on convenience — are open to competitive pricing and evaluating options from telcos, satellite and now, even power companies. For cable companies that have enjoyed the lion’s share of that lucrative market, it’s time to unroll the strategy that keeps these customers squarely in cable’s corner.
COMPETITIVE FACTORS
The combination of decreasing technology costs and a deregulatory environment has opened up the broadband customer marketplace. New players are entering the game, thanks to the Federal Communications Commission’s recent decision to offer incentives to deploy broadband over power lines. Power companies, telcos and satellite are all lined up, honing competitive prices and attractive packages to present to today’s high-speed Internet cable customers.
Advances in wireless technology and intelligent devices have also transformed today’s cable customer. The ubiquity of PDAs, digital video recorders, and Internet-capable cell phones has raised the expectations of already demanding customers, and encourages them to “graze” among providers, seeking out the most convenient and cost-effective service options.
All sides are gearing up for the big prize: the exponential growth of the high-speed Internet market. Newcomers are preparing to poach increasingly valuable customers with competitive pricing and convenience options (witness Verizon Communications’s conversion of pay phones into wireless-fidelity hotspots, with free service to retain digital subscriber line customers).
The $85 billion invested in cable’s infrastructure upgrades is at risk if these cable customers are siphoned off by low-cost providers. Fierce competition is upon cable providers, and the threat is very real. Cable stepped up to the plate less than a decade ago, deploying fiber to nodes of 500 homes or fewer and launching digital services. The end result is a reliable, robust broadband infrastructure engendering loyalty to high-speed service, but not necessarily to the provider.
One of the differences between cable and its competitors has been the cost-effectiveness of cable’s architecture and technology. Ten years ago, telco announcements of deep fiber deployment brought smiles to cable engineers: They knew then it was not cost effective, and they were right. Much-heralded trials were either postponed or ended quietly.
But as with most technologies, costs have dropped dramatically in the last decade for optical equipment and termination points (e.g., optical inputs are standard in most audio components today). It is now economically feasible for telcos to bring fiber to homes.
VERIZON’S MOVE
Verizon is doing just that in nine states this year, including Keller, Texas; Huntington Beach, Calif.; and North Tampa, Fla. (1 million homes passed in 2004). And they have announced new FTTP deployments in California, Florida, Maryland, Massachusetts, New York, Pennsylvania and Virginia (another 1 million homes passed in 2005).
So, what strategies are required for cable to hold onto its lead in the increasingly lucrative and competitive data business?
Increased competitive pressure requires innovation that demonstrates MSOs’ commitment to customer service. Proactive communication with customers is essential, and since HSI customers are usually subscribers of premium video and voice-over-Internet protocol, improving their experience is paramount.
NO REASON TO LEAVE
It all comes down to inertia. To paraphrase Isaac Newton, a customer stays a customer until put in motion by a negative experience. We need to take such good care of our customers that they are too satisfied to bother entertaining competitive offers. Cable operators are beginning to do just that by adding sophistication to customer care.
Investments in operational support systems and provisioning systems, workforce automation and call-center systems with queue monitoring all enhance the customer experience — they facilitate more self-service opportunities and provide for intelligent modeling of the resources required to ease the technical support experience.
New automated tools are now also available that reduce the volume of incoming tech support calls, by — get this — proactively informing HSI customers of conditions that could affect their service and providing self-remediation. Cable operators can now inform their online customers if a virus is detected on their computer, with an active button that takes them immediately to remediation. A customer whose e-mail inexplicably stops operating receives a message explaining that the server is undergoing brief maintenance. Customers in specific nodes can be alerted to upcoming maintenance outages — all circumstances that would otherwise initiate tech-support calls, and, during large-scale events, excruciating hold times.
In systems where such communication tools have been implemented, operators have seen marked increases in customer satisfaction, even received e-mail thanking them for the information.
Such communication tools are available both in client software and in recently announced network solutions. The advantages of the latter, of course, are that nothing needs to be installed on the customer’s computer, and the utility works without regard for the customer’s operating system or browsing client. And because it doesn’t rely on e-mail, those customers not using their cable e-mail addresses are certain to receive the communication.
Automated detection and remediation of potential network disruptions becomes a mandatory tool in order to retain and protect this high-margin customer segment. Competitors with low-cost packages are unlikely to sway customers who are pleased with the support they receive from cable, particularly when there are fewer reasons to call tech support and those calls are handled quickly and expertly. For today’s HSI business, it is essential for cable companies to ensure that technical issues are communicated proactively, and eliminated with ease and transparency.
Continued emphasis on service is a critical success factor for the dominant broadband provider of the next decade. The increased presence of network viruses, escalation of customer expectations, and even greater utilization of the Internet all add complexity to broadband service offerings. But customer care becomes the differentiating element that determines which provider dominates the HSI space. With only moderate investment in sophisticated communication tools that are readily available today, cable can win each of these battles, and ultimately the war.
