Customer Needs, Not Speeds

R. Pritchard

Summary Bullets:             

  • CityFibre, the champion of altnets in the UK, is reported to soon axe 20% of its workforce due to the UK’s “struggling” economy.
  • An obsession with end user needs rather than financing and technology is needed to encourage customers to migrate from their current broadband solutions.

Most folks waking up in the morning may think ‘I need more fiber’ – but that is usually a dietary consideration rather than anything bandwidth-related.

With reports that CityFibre, traditionally the darling of UK altnet market, is set to cut up to 400 jobs from its workforce of 2,300 (but will add 200 more, giving a net job loss of about 200), questions need to be asked and answered.

First of all: How many networks can a national market support? The traditional marketing answer would be three – this is defined thus, “a stable and competitive market never has more than three significant competitors.” So CityFibre remains well-placed to be in a UK triumvirate with BT/Openreach and Virgin Media O2, alongside a (diminishing) gaggle of niche players focused on specific geographies.

CityFibre CEO Greg Mesch has told employees that “the UK’s economy is struggling, and this is affecting both the market and our customers.” The problem with this is that most ‘full-fiber’ offerings are priced at the same rate or below current mainstream products, so this should act as an incentive to switch.

Fundamentally, there are a number of factors at play here.

First: Why switch? If you are getting around 80 Mbps downstream and 20 Mbps upstream (which most target customers can access as competition is focused on urban markets), you’re probably happy with speed and only upset by blips and interruptions to service. This acts as a disincentive to take the risk of migrating.

Second: Does the customer really care about what type of fiber they get? Except in the most geeky of markets, no. Customers use broadband to do things like work, chat, text, share experiences, watch TV and video clips, and so forth. Where enterprise and business customers might be attracted by the ability to support teams in office sites, there is little compelling evidence that super-fast broadband is currently a necessity. As long as current connectivity speeds meet needs, why change other than for price or improved reliability and customer service? Over time, gigabit broadband will be adopted – but it will be a migration, not a revolution.

The fundamental problem is the industry’s tendency to focus on technology and finance, with customers just seen as the beneficiaries of these activities. How often do technology companies actually ask customers what they want? They are used to ‘upgrades,’ which often irritate end users, despite their potential value-add, because no one explains why they are happening and the advantages that they might add.

There is an old marketing adage that Henry Ford said: “If I had asked people what they wanted, they would have said faster horses.” But the Model-T or a horse is only a means to an end. The popularity of over-the-top (OTT) applications is proof there is market demand – for something that adds value. For fiber providers to succeed, they need (directly or indirectly) to demonstrate that they are enabling communications that add value. Technology is necessary, finance is necessary, but ultimately the choice is down to the customer.

What do you think?

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