It might come as a surprise to learn that Ofcom, in some of its latest research, reports that residential customers now view broadband as an essential utility for communication. Previously it was thought only business customers had come to rely on it significantly.
Equally unsurprisingly, the report shows that during the recession we are spending more time at home browsing the Web and that this pastime has become more important than other forms of social enjoyment. When asked which activity they would rather cut back on, 47% of respondents said dining out and 41% said holidays compared to just 10% willing to cut back on their broadband service. While these findings may not raise eyebrows, they do reiterate the fact that residential users are now viewing their broadband service as more of an essential utility than an expendable luxury. Therefore we pose the question, is broadband recession proof?
Despite the findings that only 10% would sacrifice their broadband connection, the report highlighted that the same respondents are however keen to control how much they spend. In the last year the average household spend on Internet services fell by 66p a month and there is now a growing trend towards the adoption of bundled services. Again hardly earth shattering results, after all we are in a recession and we are all looking for ways to save money!
The report states that a desire to pay less means more consumers are shopping around and are prepared to change suppliers to get a good deal. A quarter of respondents said they are more likely to shop around for a good deal now than they were a year ago and almost half (47%) said they are more likely to take a bundled service now than they were a year ago. While this suggests that residential consumers are becoming more price focused, the report does not provide any insight into the importance of price over other factors such as quality, reliability, speed, UK based call centres etc.
So what does all this mean for resellers?
It’s important to remember that the recession won’t last forever and the decisions you make now will affect your business in the long term. Despite a current requirement to compete on things like price resellers should remember that by compromising on other important factors such as quality they could damage their business in the long term. It’s also important to remember that the expectations set during the recession will impact on your business during the economic recovery. For example if you slash your prices now will you be able to maintain them later or will you have set your customer expectations at unsustainable levels?
Of course, this doesn’t mean you need to be nervous. The Ofcom report also identifies a number of increasing markets and new opportunities for broadband resellers. The residential broadband market is still growing – the UK has seen a growth of 17% in the number of households with broadband over the last year. Plus, as already highlighted, the report identifies a growing trend towards the adoption of bundled services. Take advantage of this trend and you can increase your ARPU (Average Revenue Per User) by providing complete connectivity solutions including line rental, telephone calls, broadband and even additional services such as VoIP, hosting or back up services. Are all of these available through your wholesale provider? (If not, give us a call).
VoIP is one service the report particularly says is experiencing a surge in interest among consumers. 21% of respondents had used VoIP in 2008 compared to just 14% in 2007. As consumers become more familiar with VoIP and aware of the potential cost savings, this creates opportunity for resellers to develop a profitable new revenue stream. Again, Entanet has a number of VoIP solutions available to meet varying markets including residential. Give us a call. It is of course important to remember that the Ofcom report concentrates on residential customers. Our experience has shown that during the current economic crisis businesses are actually more aware of the importance of reliable, high quality Internet connectivity and are looking for ways to utilise this to save them money in other areas. For example many are encouraging the use of video and audio conferences as opposed to travelling to meetings; some are providing the facilities for home workers and demand for systems such as VoIP is increasing due to the potential cost savings available.
So, is broadband recession proof?
In short, yes! The Ofcom report is not the only report to illustrate the resiliency of broadband during the recession. In late June Alcatel Lucent published the results of a similar study which identified that 81% of Europeans regard broadband as “central and essential” to their lives and in February at the Intellect Annual Regent Conference 2009, Microsoft stated it believes consumers are unlikely to give up internet access in order to save money during the recession.
- Techwatch: Microsoft say broadband is recession proof
- Telecoms Europe: Broadband services- recession proof
While arguably no industry (including the communications industry) can boast immunity to recession, service offerings as significant as broadband are able to help them withstand the hard-times more easily than many others. Why? Because consumers’ ‘have-it-now’ reliance on information; their love of activities such as social networking and gaming; and the conveniences that the Internet brings to shopping is here to stay.
Individuals’ views on whether broadband is ‘essential’ will vary depending on how significant their needs and desires are. Yet, regardless of whether or not you consider broadband to be ‘essential’, there’s no denying it has become an integral part of most consumers’ lives.
- The Register: Martha Lane-Fox: No broadband, no citizenship
This doesn’t mean the market for residential broadband can grow exponentially for evermore of course. As well as fierce competition there is a physical point of market saturation to be reached. While price continues to be a deciding factor, the pressure that broadband puts on bandwidth requirement is raising an interesting challenge for service providers. With wholesale prices as they are, some are questioning the broadband models that exist,
But that’s a topic for a completely new article…
Have your say
Do you think broadband is recession proof? As a reseller how has the recession affected your business and as a consumer how have your Internet usage habits changed? Would you give up your broadband connection to save money?
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