With the idea of superfast broadband packages gaining ground across large parts of the world, it's not too surprising that different providers are taking different approaches to the way those packages are priced. As it turns out, however, some of the differences can be fairly pronounced, and present some new challenges in terms of ways to make the pricing not only affordable for the users, but also profitable for the providers.
Analysys (News - Alert) Mason recently brought out a new version of its Multi-play pricing benchmark survey, which looks at around 2000 different service bundles across both Europe and the United States to spot some of the similarities, the differences, and maybe even catch some of the larger overall trends propelling the field of superfast broadband.
What the Analysys Mason study unveiled had some very interesting elements to note. First, there is a clear price premium attached to superfast broadband, especially when compared against the slower bundles. Superfast broadband had, on average, a 45-percent price premium than its slower brethren, and this was fairly universal across the lot. Analysys Mason here defined “superfast” as anything with a download speed of 30 Mbps or greater, while anything slower than 30 Mbps was defined as “non-superfast.” A third class, dubbed “entry-level,” made up the lowest costs of the segment.
It seems reasonable on the surface that superfast broadband should carry with it higher price tags. It does more in the same amount of time and thus it provides more value. A better value is a perfect impetus to higher prices, but a lot of consumers—especially those finding bank accounts strained by an overall weak economy--aren't shelling out for the higher-priced, higher-speed broadband access, and this is leaving some providers at something of an impasse.
A perfect illustration of this phenomenon came in from Slovenia, which had the highest premium on superfast broadband, but a low market penetration. Just 3.8 percent of subscribers were willing to take the superfast broadband, despite the fact that both FTTH and VDSL were in wide use across the country. This has led some to suggest that, perhaps, it's better to charge lower prices at first and then raise the prices gradually as users see how much better the service is at higher speeds.
Companies like BT Retail in the U.K., meanwhile, discovered that there's something to be said for price restraint, offering the superfast speeds for the same price as the regular prices, which gave it something of a competitive edge in the market. Such a tactic has something of a good news / bad news scenario attached to it, with clear benefits with customers coming into play but also a limit to future upgrades. Some companies, like Lithuania's TEO, are actually charging lower prices for the higher speeds, which helps to fend off competition in areas in which it's not yet fully encroached.
One other point to consider is that offering more services is a great way to add value, and thus add to pricing, than just offering the straight broadband access. Many slower-speed packages offer unlimited access, so offering unlimited access is starting to be seen less as a competitive edge and more as a basic requirement. But bringing in different value-added services is a way to help get that distinctiveness without having to put in a lot more investment.
There are many options when it comes to broadband pricing, and considering the location and the makeup of those who inhabit same may be the best way to find out just what strategy will work best.
Edited by Alisen Downey