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ISPs See Rising Customer Defection Rates

Posted: 04th Feb, 2008 By: MarkJ
Pitney Bowes Group 1 Software has released new research which found that customer defection rates within the Internet Services Provider sector have risen from 24.0% in 2005 to 24.6% in 2007 – an increase of 2.5%:

The primary findings of the research are as follows:-

  • Britain is the customer defection capital of the West (22% churn per annum), possibly because of its crowded geography, its national wealth per capita, and its high levels of deregulation across all sectors studied.

  • The three key reasons why people change supplier are consistent across Europe and the US. They are:-

    1. not being recognised as a valuable customer (all countries average – 55%)
    2. unhelpful staff (all countries average – 47%)
    3. ineffective call centres (all average – 42%)
Andrew Greenyer, VP International Marketing, Pitney Bowes Group 1 Software comments, “ISP churn rates are massive, and this year, take poll position, leapfrogging mobile phone. Why? Falling charges in the ISP sector, along with the multiple provision of various bundled (with TV and phone) and unbundled broadband services have created a complex usage pattern amongst consumers. The jury is currently out regarding whether packaged or individual services will win out, and no pundit is currently prepared to put their money on the line on this issue.

At all events, internet service providers face a hitherto largely unpublicised challenge to stem churn. Since the basic service is now so thoroughly commoditised, a number of providers have been exploring ways of adding value to keep customers – mainly through the addition of various forms of free content or themed links libraries. However, convergence between ISP, TV and telephone services makes it almost inevitable that the vanilla ISP cannot survive in the consumer market. Moreover, given the regulators’ scrutiny over any attempted lock-in for TV and telephone, ISP provision will continue to me swept up in the increasing mobility and ease of defection in these more mainstream services.
”

The study was conducted between July and August 2007 using 6,000+ consumers in the US, UK, Germany, France, Italy and Spain. However we disagree that bundled services will mean the end of standalone ISPs.

Back in October 2007 we asked our readers (here) whether they would prefer a standalone broadband package or bundle. Just over 77% unanimously said they'd prefer a standalone package, a figure born out by the fact that most people still use a vanilla broadband package.
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