What Drives Churn in an FTTP World?
By Michael Dargue
Investment in gigabit broadband networks is continuing at pace, with more and more consumers leaving copper-based DSL in favor of FTTP and gigabit cable services. In comparison to DSL, both these new technologies offer massive improvements in network speed. FTTP also promises greater reliability – having a simpler passive access network should result in fewer faults than its copper predecessor.
Over the next 5 to 10 years, FTTP and gigabit cable will become the primary access options for most households in industrialized countries. With speed no longer a bottleneck, and service incidents hopefully greatly reduced, it is timely to consider what will drive churn in this new world.
Churn is generally viewed as a negative factor, and certainly for an individual CSP, losing customers through churn is unwanted. However, attitudes to churn at a market level very much depend on your competitive position: low churn is a problem when it’s a barrier to growing market share. If there are few available ‘switchers’, then your chances of winning new subscribers are limited.
It’s been just over a year since I upgraded from DSL to fiber, and my contract anniversary got me thinking what would make me switch provider again. I was fortunate to live in an area passed by a new entrant network operator and jumped at the chance to move from copper-based FTTC to full fiber.
First, let’s address the price question. Right now, I feel I’m paying a fair price for my service. It’s more than I was paying before, but not a huge step up. I certainly wouldn’t switch back to copper.
The more interesting question is what price differential would make me churn to another fiber provider when the inevitable overbuild occurs. I’m not going to give a figure, but – like many people – it would need to be big enough to warrant the effort and potential disruption. Looking at my current monthly bill, I can’t really see a new provider coming in significantly below what I’m already paying. So, I doubt I would switch on price unless I faced a big price hike.
Second, let’s talk about service quality. Well, the great thing about fiber is that the access network is rock solid: it isn’t affected by weather or electromagnetic interference. So, on that front there should be no reason to churn. However, the passive optical network is only one component of the end-to-end network. Problems elsewhere can still cause a total outage or lead to slower speeds – for example if capacity upgrades fail to keep up with demand.
Aside from the network performance, the service wrap is also important, and I’ll confess that I once left a CSP at the end of my contract – 6 months after I had been let down badly by their customer support team. (It’s a long story, but in summary, don’t assume that customers forget about these things.) So yes, service quality will still be a factor in the future – even with the reliability of a fiber access network.
The final factor I want to consider is product fit. For me, my current service suits me well. As I said, I’ve had fiber broadband for over a year and it’s a good fit for my current needs. I soon got over the shock (relief?) of not having a landline, and I’m not really looking for any bells and whistles beyond fast broadband.
However, that’s just me. The majority of subscribers in the UK and elsewhere currently take a bundled service, for example the classic triple-play of broadband, voice, and video. Bundling has been the cornerstone of CSP’s marketing efforts in recent years, with many making large investments in content to attract and retain subscribers.
With the advent of gigabit broadband – and particularly the unbundled offers from new entrants – the big question is how many other consumers will be happy with a no-frills, lightning-fast connection. That matters because, for this segment, it’s going to be hard to entice them to switch to a differentiated product. In fact, this really gets to the heart of the key question – what drives churn in a gigabit world?
Taking these three factors together, it seems reasonable to assume that churn levels will fall once customers migrate to gigabit networks. Early evidence from other countries supports this hypothesis with KPN reporting a 40% reduction in 2020 [i].
If this is true, then winning market share is going to be harder for the fiber followers who overbuild rival networks, especially if the first player is given time to consolidate their lead. For the pioneers, if they can avoid giving their customers any reason to leave, then they will be a great position to protect their base, namely:
- Avoid triggering the customer to question value for money, e.g., a big hike in price
- Pay attention to network performance (that’s why customers likely joined you)
- Ensure your customer support is top notch and responsive to any issues that do occur
- Track churn reasons to identify issues with product fit, both in early-life and longer term
Finally, fiber customers tend to be happy customers, and happy customers can be great advocates. Use this to your advantage in referral programs to build your base.<>