Broadband operators accused of punishing customers for loyalty

Britain’s broadband providers might need to rethink their customer loyalty programmes, according to analysts, after a new report exposed a price strategy that drives customers away.

Ofcom accredited broadband comparison service Broadband Choices has released its latest Real Cost of Broadband report, which claims that line rental prices are rising markedly faster than the rate of inflation. Meanwhile customers who stay with the same provider are punished twice, with the highest prices on broadband and the highest line rental.

The total average combined broadband and line rental cost is currently £19.84 per month, compared to the £20.19 average in 2009. However, despite the lack of enthusiasm for phone lines and mobile becomes the de facto comms device, the report notes, broadband-only packages are rare. “Those that are available can often work out more expensive than an equivalent package with line rental and sentiment towards line rental charges is poor,” says the report.

“Steadily increasing line rental charges in the UK have been masked by falling prices for broadband services,” says the report. With many providers now offering free broadband deals, the average monthly cost has decreased by 73% since 2009, it says. Meanwhile, the average line rental price has risen by 56% over the same period. The result leaves many consumers confused about the amount they pay each month.

Telecoms industry analyst Paul Lambert at Ovum called for broadband providers to justify their charge increases by improving customer satisfaction and loyalty. “They have ample opportunity to justify any price increases, by increasing download speeds or offering new services to loyal customers,” said Lambert. “Given that it costs more to gain a new customer than it does to offer more value to a loyal customer, this also makes sound business sense.”

As it gets easier for consumers to compare the prices and packages, broadband providers should proactively engage with loyal customers, according to Lambert – or risk losing out in an increasingly competitive market.

However, analyst Clive Longbottom, senior researcher at Quocirca, said broadband providers are unlikely to change. “For every person who is willing to do the little amount of work to get a better deal, there will be tens that are happy to let things roll,” said Longbottom, “these are corporates, where shareholder value comes way above social values.”

The report raises important issues, said Strategy Analytics Executive Director Philip Kendall. “Companies increasingly work hard in segmenting their bases and predicting churn behaviour. So they make decisions on offers based on their overall value and their churn likelihood. If a third of their customers are never going to churn, it may not make sense to target that segment with discounts. But the issue of getting broadband without phone line rental is a very interesting one. That’s how some markets work, like Finland, but has not really been a feature of the UK. This would be a good area for Ofcom to examine,” said Kendall.