Interest in Broadband Value-Added Services

Residential broadband growth overall is set to slow by over 50% in the next few years, with much of the new subscriber growth going to new provider types such as MNO fixed wireless providers. The residential internet space is more competitive than ever before, as fiber rollouts and 5G network buildouts pressure the market from both the high and low ends. Consumers as a whole are less willing to pay for the highest quality of service than they were during the height of the pandemic – ISPs must be prepared to increase the value of their offerings or risk growing churn.

ISPs need to differentiate based on the reliability of their networks, the usability of their apps and websites, and the additional services they offer. Bundling is increasingly important to attract and retain subscribers, but also allows ISPs to grow their share of the $340B+ home services market – including home internet, mobile, home phone, security, and pay-TV and OTT video services. While the importance of broadband to consumers has not decreased, inflation and a potential recession in 2023 may trigger consumers to downgrade their plans or switch providers.

To help drive increase customer satisfaction and drive stickiness among subscribers, ISPs are launching new services that capitalize on the value of their networks. This includes services such as OTT video services, managed Wi-Fi, whole home cybersecurity, or smart home functionality as part of the bundle.

Consumers are moving away from legacy bundles and towards bundles that include value-added services.

Consumers report the most satisfaction with a combination of traditional and VAS services. When only receiving VAS and no traditional services, receiving multiple VAS helps to further boost satisfaction.

• Subscribers with 5 or more VAS services have high NPS scores.
• Higher downlink speeds are also associated with a higher NPS, with Gigabyte subscribers reporting higher NPS.

Only offering standalone internet or traditional bundles is a losing proposition for ISPs looking to raise customer satisfaction and introduce new revenue streams. 

This is an excerpt from Parks Associates recently published study, Broadband: New Demands and Bundling Opportunities. This study assesses adoption of services and service bundling, service ARPU, upgrades and downgrades of broadband, and perception of broadband speeds received among US households. It also compares perceptions among various groups of consumers, including those with mobile data services.