Broadband churn driven by desire for cost savings

15 Aug 2005

Of the 5pc of businesses that change their service provider in terms of broadband services, some 55pc of these do so for cost savings, a survey from iReach reveals.

The survey estimates the 5pc churn rate for broadband in Ireland is most likely due to the lack of viable options in terms of service providers and the lack of significant differences in their products and pricing structure.

IReach forecasts this will change as the market becomes more competitive with providers such as Smart Telecom and Imagine fighting for market share from the big players.

More than 60pc of corporate customers believe the Irish telecoms market is more competitive than it was a year ago, but only 5pc believe their broadband needs are well services.

In today’s market, existing relationships with their telecom provider (36pc) is the main factor that influences choice of broadband provider.

Some 54pc of businesses believe there are cost savings to be made by switching. However, only 5pc of businesses have switched provider in the past 12 months, mainly because more than 50pc believe their quality of service is more important than cost savings.

IReach analyst Enda Kelly surmised this mixed view of the broadband market and highlights its relatively immature state, especially among SMEs.

In terms of consumer attitudes to broadband, iReach notes broadband providers have used a variety of mechanisms to limit churn rates and improve customer confidence in their products. It pointed to research that indicates a portal as an entry point — a mechanism used by Eircom and Smart Telecom — will reduce the volume of churn.

IReach also claims consumer reaction to broadband — for those who can access it — has been very positive. Broadband users have a 10pc more positive opinion of the internet than narrowband users.

Broadband users, iReach claims, are also likely to spend 30pc less time watching TV while other media such as music and books remain similar for both broadband and narrowband users. Broadband users are more likely to spend almost 20pc longer on the internet than narrowband users.

In his research, Kelly noted: “The broadband market in Ireland is relatively immature, resulting in varying opinions n the technology. Overall it is positive, however increasing competition will increase customer expectations and requirements.

“Broadband providers must react to these requirements and increase quality of services, while improving products and prices to retain existing and acquire new customers,” said Kelly.

By John Kennedy