Broadband: Where's the Beef?
 
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We hate to repeat ourselves, but it seems like most consumer broadband service providers STILL haven't figured out that they need to get onboard the value-added services boat before it sails off without them.
At the end of 2000, close to six million households in the U.S. had a broadband connection (four million cable, nearly two million DSL, and a handful of broadband wireless/satellite). If the growth rates remain anywhere near most analysts' projections, barring a real economic meltdown, we'll see numbers in the tens of millions over the next few years. In other words, broadband is moving beyond early adopters and entering the mass market (for you skeptics, this is a real market opportunity that isn't going away).
So what are these broadband consumers getting? And more importantly for service providers, what are they paying for? Well, they're getting bandwidth, basic IP services and really nothing more (perhaps with the exception of provisioning and ongoing service nightmares, but that's a different column altogether). For this privilege, they're paying about $40 a month, which might be barely enough to eke out a positive ROI but nowhere near enough to line the coffers of service providers. The broadband industry has been talking about value-added services that will bring about higher margins for quite some time, but has anything really happened? In the consumer world, the answer is no.
In the early days of consumer broadband it was enough to simply tell early-adopting power users: "We've got high-speed Internet access for your home computer - come and get it." But as broadband becomes mainstream, the message must change. Basic service pricing has fallen to commodity levels, competition with cable modem services has grown and, increasingly, new customers are going to need more than a fat pipe to entice them to open their wallets to broadband. If you want to capture someone else's disgruntled customers, speed simply isn't compelling enough, and heaven knows you don't want to drop your prices further.
So what's a service provider to do? The first step is to realize that a rising tide might not lift all boats. The fact that consumer broadband markets will continue to grow doesn't ensure success. Building a profitable consumer broadband business requires providers to build and market service packages that address the wants and needs of average consumers, not just the techno-geeks of the world.
Home networking support is a good example of the kind of package you should consider offering. After writing a book on the subject more than a year-and-a-half ago, we're still bombarded with inquiries from the press and from readers (note: these are POTENTIAL CUSTOMERS) trying to figure out how to get started. The most frequent question: How do I get home networking to work with my fill-in-the-blank broadband service? One place we can surely tell them not to look for the answer is with their service provider because, chances are, there are no packages or support to really address their needs.
Online gaming is another good example. Everyone knows legions of hardcore gamers are out there, many of whom would sacrifice their nonjoystick arm to get a high-speed, low-latency connection. At least one smaller, intrepid service provider we know is starting to bundle DSL connections with access to a private, low-latency Gamespy server and charging an extra $20 bucks a month or so. And guess what? They're one of the few small DSL ISPs bucking the trend and avoiding the bloodbath of recent months.
The point is this: No one is getting rich providing commodity transport. At the same time, millions of consumers are out there wanting something more than just Internet access. These consumers will choose a broadband service provider that offers a compelling solution to their needs, whether they be home networking, gaming, security services, child-friendly Internet or something else. Yes, you still have to get the basics right (provisioning, reliability, etc.), but if you really want to survive in this market, you will need something more than that.
Briere is CEO and Bracco is President of TeleChoice, the strategic catalyst for the telecom industry. They can be reached at telecomcatalyst@telechoice.com. More Telecom Catalyst columns
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