It’s been a wild few months in the UK broadband industry. Only last week Sky threw its hat into the ring by offering a basic level of free broadband to its satellite TV subscribers. After all the initial hype. some questions are now being asked about whether such an offering is sustainable, and who the losers might be.
Since Carphone Warehouse’s TalkTalk announced its “free broadband forever” in April, it has struggled to keep up with demand From the outset of the TalkTalk offer, our customers have asked us if it was a good deal. And our response has been the same throughout:
You don’t get something for nothing. If your current broadband provider wants £15 a month to provide your broadband service and the infrastructure to deal with your queries and problems, how much investment do you think TalkTalk is making in the service department if they’re giving you broadband for free?
Of course it is a little more complex than that, because TalkTalk are providing these “free” broadband connections through Local Loop Unbundling (LLU), which means that they control the piece of wire between your premises and the telephone exchange instead of BT. This does allow them to save some money, but when things go wrong it’s not hard to see where the other savings lie.
One customer of ours waited 2 months for his welcome pack from TalkTalk, which included his modem. His request for a refund for the unusuable months fell on deaf ears. This is just the tip of the iceberg – consider the number of calls our customer made over the 2 months chasing his welcome pack.
According to the Sunday Times, TalkTalk is recruiting and training call centre staff as fast as it can, and hopes to have 2200 by September. That’s a lot of staff just answering the phone. Would they need so many if their systems were up to the job in the first place? Take our customer with the missing welcome pack. Would TalkTalk need to answer his repeated calls if it had just got his account dealt with in the first place?
TalkTalk has signed up 400,000 new customers since it launched its free broadband offer. Sky’s announcement last week, as well as Orange’s joining the scrum, has certainly moved the market to compete on price, or lack thereof.
Sky’s offering has a differentiating factor. They can provide an engineer to install broadband for you, albeit at a price. Will Sky invest enough in their self-help provisioning for customers so that they don’t resent forking out for a man in a van?
The broadband market has certainly been shaken up recently, but don’t count out the fee charging incumbents. Those customers who switch to a free alternative may be desperate enough to buy themselves out of their 18 month contracts and jump back into a subscription model if they are continually let down by a lack of service from the free alterantives.