{"id":14019,"date":"2017-06-05T11:21:37","date_gmt":"2017-06-05T10:21:37","guid":{"rendered":"http:\/\/www.ispreview.co.uk\/?p=14019"},"modified":"2017-06-05T11:24:38","modified_gmt":"2017-06-05T10:24:38","slug":"analysts-blame-price-hikes-slowdown-uk-broadband-isp-market","status":"publish","type":"post","link":"https:\/\/www.ispreview.co.uk\/index.php\/2017\/06\/analysts-blame-price-hikes-slowdown-uk-broadband-isp-market.html","title":{"rendered":"Analysts Blame Price Hikes for Slowdown in the UK Broadband ISP Market"},"content":{"rendered":"

Telecoms analysts have warned that periodic price hikes and a lack of innovation could be fuelling a slowdown in customer growth among many of the United Kingdom\u2019s largest phone and broadband ISPs (e.g. BT<\/a>, Sky Broadband<\/a>, TalkTalk<\/a> etc.), although the wider picture is more complicated.<\/p>\n

Over the past few quarters there’s been a definite slowdown in the number of new customer connections (net adds) being added among nearly all of the market’s largest fixed line broadband providers\u2019, albeit with the possible exception of Virgin Media<\/a> that has maintained a reasonably predictable yo-yo growth between quarters (largely supported by their \u00a33bn network expansion, although some argue that they should be doing a lot better).<\/p>\n

For example, BT<\/a> added +29,000 new broadband subscribers (net) in Q2 2017 but this is down sharply from +76,000 in Q2 2016 and going back further they were adding over 100k per quarter. Meanwhile TalkTalk<\/a> has continued to bleed subscribers (mostly since the 2015 cyber-attack) and similar trends have been seen elsewhere, although we don’t yet have any solid numbers for Sky Broadband<\/a> in 2017.<\/p>\n

According to analysts on the FT<\/a>, it’s all about price and a lack of innovation. This is a problem because the alternative is often to raise prices (i.e. not relying on net-adds), which is difficult to do that once your customers have become conscious of such things.<\/p>\n

Jerry Dellis, Analyst for Jefferies, said:<\/strong><\/p>\n

“For the first time that I can remember, BT<\/a> put up its prices but experienced a negative reaction in terms of customer churn. There is a sense that the broadband market is slowing.”<\/p><\/blockquote>\n

Guy Peddy, Analyst for Macquarie, added:<\/strong><\/p>\n

“There has been no product innovation for a long time. It\u2019s just speed and price. It is harder to raise prices without innovation.”<\/p><\/blockquote>\n

In our view this is perhaps an oversimplification of today’s market. Price has certainly played its part, not least since October last year when the Advertising Standards Authority<\/a> (ASA) forced ISPs to combine the cost of broadband and line rental together. Some consumers were confused by this and saw it as making services appear more expensive, when in fact the total cost was not significantly different.<\/p>\n

Elsewhere many ISPs have taken customers for granted by not only raising prices but also removing features at the same time, such as free UK calls or reduced upload speeds. At one time or another pretty much all of the major ISPs have done some something like this to their customers, most of which are usually loyal (data from Ofcom<\/a> suggests that only around 1 in 10 switch ISP every year).<\/p>\n

However there are other factors at play too. A similar stagnation was observed as ADSL2+ broadband services reached near universal UK coverage, which lasted a couple of years until Openreach<\/a> (BT) began to roll-out faster “fibre broadband<\/em>” (mostly FTTC<\/a>) services from 2010 onwards and that gave the market a boost. We may see a similar pattern repeat as the roll-out of FTTC<\/a> matures and “ultrafast<\/em>” FTTP<\/a> and G.fast<\/a> deployments gather pace.<\/p>\n

On the other hand, early FTTC<\/a> based “fibre broadband<\/em>” services had a clear market because ADSL2+ was often slow and unreliable (note: FTTC is not immune to some of those same issues) and Virgin Media<\/a>\u2019s rival cable network had limited coverage. By comparison FTTP<\/a> and G.fast<\/a> services face a more challenging market because not everybody needs a 100Mbps+ connection yet, let alone 300Mbps+, and at the same time Virgin Media<\/a> are expanding their network into areas that were previously dominated by Openreach<\/a> (i.e. ISPs on that network will have more competition).<\/p>\n

Put another way, short of shaving some time off downloads and uploads, there isn’t really a killer app (yet) for the “ultrafast<\/em>” era and so building strong uptake could be more of a challenge. On the other hand we’ll never underestimate the ability of clever marketing departments to overcome the usual NEED vs DEMAND conundrum by focusing on faster speeds, regardless of whether or not you’ll see a big benefit in day-to-day use.<\/p>\n

Moving on, the second quarter of every year is also one that tends to be impacted by the movement of students, many of which will be cancelling their contracts and returning home for the summer. The situation usually starts to reverse in Q3 as those same students move back into new accommodation.<\/p>\n

Furthermore consumer habits can also be impacted by changes in the wider political and domestic climate. Recently there’s been a fair bit of political \/ domestic security turmoil over snap general elections, brexit, terrorist attacks and so forth. Suffice to say that switching or upgrading ISP probably isn’t at the top of everyone’s agenda right now.<\/p>\n

Why Do Prices Rise?<\/span><\/strong><\/p>\n

Since we’re discussing pricing then it’s only right that we also consider the reason why so many prices keep rising. One reason is because we\u2019re all gobbling much more data than before and ISP’s have to compensate for the flexibility of those “unlimited<\/em>” usage allowances somewhere.<\/p>\n

The rate of inflation has also been rising over the past few months, although ISPs can\u2019t really use that as an excuse because it didn\u2019t appear to have much of an impact on their historic increases. Until recently inflation had been flat for the best part of a year but prices have continued to rise at a similar pace.<\/p>\n

Most of the largest ISPs are also under pressure to adopt all sorts of new rules and regulations, such as the system for sending millions of warning emails (“subscriber alerts<\/em>“) when Internet piracy is detected (here<\/a>), as well as moving customer support back to the UK, adding more premium TV content, new Internet snooping measures (here<\/a>) and not to mention that expensive new automatic compensation system for serious broadband faults (here<\/a>).<\/p>\n

In other words, over the past 2-3 years ISPs have been swamped by new demands and regulations. None of these things are easy or cheap to implement and sometimes the costs have to be passed on to end-users. All markets go through their ups and downs, broadband and telecoms are no exception.<\/p>\n","protected":false},"excerpt":{"rendered":"

Telecoms analysts have warned that periodic price hikes and a lack of innovation could be fuelling a slowdown in customer growth among many of the United Kingdom\u2019s largest phone and broadband ISPs (e.g. BT, Sky Broadband, TalkTalk etc.), although the wider picture is more complicated.<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"ngg_post_thumbnail":0,"footnotes":""},"categories":[1],"tags":[474,66,74,475,96],"class_list":["post-14019","post","type-post","status-publish","format-standard","hentry","category-uk_isp_news","tag-bt","tag-sky-broadband","tag-talktalk","tag-virgin-media","tag-vodafone"],"share_on_mastodon":{"url":"","error":""},"yoast_head":"\nAnalysts Blame Price Hikes for Slowdown in the UK Broadband ISP Market - ISPreview UK<\/title>\n<meta name=\"description\" content=\"Telecoms analysts have warned that periodic price hikes and a lack of innovation could be fuelling a slowdown in customer growth among many of the United\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.ispreview.co.uk\/index.php\/2017\/06\/analysts-blame-price-hikes-slowdown-uk-broadband-isp-market.html\" \/>\n<meta property=\"og:locale\" content=\"en_GB\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Analysts Blame Price Hikes for Slowdown in the UK Broadband ISP Market - 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