During the period of October 2008 to early January 2009, when many global markets slid further into economic recession, Analysys Mason conducted The Triple-play Pricing Study, a benchmark survey of almost 1000 fixed broadband, double- and triple-play services provided by approximately 100 service providers from across Europe and the USA.
The mean average price of fixed broadband access is, as one would expect, generally declining. However, prices recovered marginally in the second half of 2008 as service providers aimed to weather the economic downturn either by introducing higher-speed premium-positioned services or by simply raising prices. The unweighted mean monthly access charge across all services observed increased marginally from EUR31.4 in 2Q 2008 to EUR32.3 in 4Q 2008, as shown in Figure 1.
![Figure 1: Unweighted mean speed and unweighted mean price for residential fixed broadband access, 2003–2008 [Source: Analysys Mason, 2009]](/PageFiles/11148/Analysys_Mason_Insight_pricing_fig1_5Feb.gif)
Figure 1: Unweighted mean speed and unweighted mean price for residential fixed broadband access, 2003–2008 [Source: Analysys Mason, 2009]
Although there has been a slight increase in access charges, to some extent this has been offset by operators offering promotional price cuts, with headline savings of up to 25% off the total price of broadband services. Italy and Latvia featured most prominently in the study’s ranking of the top 10 fixed broadband promotions, while the US cableco Charter Communications, which is reportedly close to bankruptcy, topped the tables by dramatically reducing the price of its USD147.97 per month triple-play service to USD70 per month for the first year of service (we calculate the impact of these promotions over a two-year period).
Why fixed broadband service providers must reassess their price positioning during the economic downturn
Overall, prices for broadband services increased during the last quarter of 2008, in part as a response to increasing costs. However, operators in markets that still have room for growth need to continue to attract new subscribers by initially offering their services at promotional prices, in order to tie as many customers as possible into contracts in the short term. A strong promotional pricing strategy becomes even more pertinent at a time of recession when GDP per capita stagnates and price competition becomes greater. In more developed markets, the issue of affordability has led service providers to launch a number of ‘value bundles’ offering double- and triple-play services at reduced prices. In the longer term, when the economy begins to recover, operators that have encouraged this ‘buy now, pay later’ approach will be assured of increased revenue as promotions come to an end and customers are required to pay the full price.
Fixed broadband service providers must reassess their price positioning during the economic downturn, factoring in four key points:
- Ensure entry-level prices are affordable for target demographics … : cablecos are best-placed to offer bare-bones entry-level broadband to absorb latent broadband demand
- … or appear to be affordable through the use of promotions: if costs are increasing then prices may need to be raised, but offsetting this with promotional pricing may also be necessary in order to remain competitive; access and equipment promotions are likely to be relatively popular forms of promotion with consumers
- Continue to investigate alternative revenue sources: the price per Mbit/s will continue to decline
- Service providers should bundle value-added services: but only if it will differentiate their services – ‘me-too’ will not be sufficient.
The Triple-play Pricing Study is available to subscribers of Analysys Mason’s Fixed Broadband research programme.