VoIP Buyers Guide

SUBSCRIBE TO TMCnet
TMCnet - World's Largest Communications and Technology Community

VoIP Buyer's Guide
More VoIP Buyer's Guide Channel Stories

VoIP Buyer's Guide Featured Articles


September 19, 2008

What Drives Cord Cutters?

By Gary Kim, Contributing Editor


About 17 percent of U.S. households now have gone "wireless only" for voice service, and this percentage could hit 20 percent by the end of the year, according to a new study by Nielsen Mobile (News - Alert). On the other hand, about 10 percent of U.S. households are comprised of users who once were "wireless only" but have decided for a variety of reasons that having a landline still makes sense.
 
Nielsen has also found some evidence that the wireless-only habit is beginning to spread.
 
The majority of people who have dropped their landline are in lower income-brackets (46 percent have a household income of $50,000 or less), are younger (64 percent of decision makers in wireless substitution homes are in the 18- to 34-year-old age range, compared to 30 percent of the United States) and have smaller household sizes of one to two people, Nielsen Mobile says.
 
Considering that cord cutters are generally younger and in smaller, lower-income households, it follows that they are more likely to be renters than the average household.
 
In the second quarter 2008, 55 percent of cord cutters were renters, compared with 29 percent of total households.
 
In some markets for some products, such as entertainment video or broadband, demand for the product is clear, and competition revolves around particulars of offers.
 
Significantly, Nielsen Wireless finds that might not be true for cord cutters, where the fundamental issue seems to be the value of the service, not the terms and conditions of service.
 
In the former case, the challenge is to craft a more attractive package, to supply strong demand. In the latter case, the challenge is to create value where potential buyers do not presently see it. One important facet: the biggest problems are with "first time" or "new" potential buyers, not customers who have been buying the product for some time.
 
Importantly, not all wireless substitution households have had a landline previously, Nielsen Wireless says. Some younger wireless “switchers” never had a landline at all. Out of their parents’ home for the first time, some younger households report that they don’t need a landline and think it is too expensive.
 
One thing service providers know about most of their customers is that a household change--moving to a new residence--is a driver of churn behavior. Some of that churn is "involuntary" churn: a particular service provider's service might be available at a new location, especially a current customer moves to a different state or region.
 
The more crucial issue is "voluntary churn," where a customer actually does have the choice of keeping service with the original service provider at a new location, but decides to abandon the service or switch to a different provider. Nielsen Wireless found that 31 percent of wireless-only households had recently moved. Another 22 percent report they recently "changed jobs."
 
So, 53 percent of wireless households have had a recent household move or job change. In 10 percent of cases, respondents reported they had recently become a student, suggesting that some wireless-only behavior occurs essentially when a new household is formed as a child goes away to college, for example.
 
In the second quarter of 2008, Nielsen Mobile detected what it describes as "a very subtle shift in the type of people who indicated they plan to go wireless-only." In the first quarter, 35 percent of likely wireless substitutor decision makers were between the ages of 35 and 54, and 18 percent had an annual household income between $50,000 and $75,000.
 
In the next quarter, 44 percent of respondents between 35 and 54, while 24 percent of respondents with incomes between $50,000 and $75,000 indicated they were likely to drop their landline in the next year.
 
The findings suggest that service providers have to tweak the value-price offer landline voice services represent, especially among younger users forming households for the first time. These days, every marketer has to assume the target customer already has wireless service. So, the issue is akin to the older marketing task of selling multiple phone lines to a single household. The issue there is what additional problems an additional phone line can solve. For many years, the answer was "use a facsimile machine" or "use dial-up Internet." Neither of those drivers are so prevalent anymore.
 
And although "lower prices" are one obvious approach, that tactic can be taken only so far. As taxes and fees grow as a percentage of the total bill any user pays for using landline voice service, there is only so much headroom any service provider has to lower the price. At lower prices, taxes and fees can represent 50 percent or more of the cost of using a service.

Gary Kim (News - Alert) is a contributing editor for TMCnet. To read more of Gary's articles, please visit his columnist page.

Edited by Michelle Robart


More VoIP Buyer's Guide Channel Stories



Technology Marketing Corporation

2 Trap Falls Road Suite 106, Shelton, CT 06484 USA
Ph: +1-203-852-6800, 800-243-6002

General comments: tmc@tmcnet.com.
Comments about this site: webmaster@tmcnet.com.

STAY CURRENT YOUR WAY

© 2021 Technology Marketing Corporation. All rights reserved | Privacy Policy