Spring 2002
Public Affairs Issues
Unlocking the Meaning and Value of Broadband
Editor’s note: Targeting a specific issue, this brief
provides an examination of broadband and the
cable industry.
What do you call it when television shows are
available on demand, when whatever Internet site
or application you pull up is immediately delivered
to your computer, when your remote control has
more buttons and functionality than your telephone
keypad, and when you don’t pay extra for separate
“lines” to make any of it work? It’s called
broadband, and it has the potential to plug cable
customers into a more sophisticated, easy-to-use,
entertaining and information-rich world.
With the majority of broadband consumers still
seeing their local “cable company” as the folks
who provide video channels, the industry has a
long way to go to outgrow its past and continue to
participate in the business it originated. The cable
industry embraced the term “broadband” in an
attempt to shed its somewhat thorny maiden name,
and to begin to explain the many benefits that can
be delivered via cable’s “fat pipe” into the home.
The broadband environment is not about video
alone – it never has been – but the majority of
broadband’s customers can’t tell you what it truly
means for them. Simply put, broadband means:
 Hundreds of video entertainment and
information channels on television
 Inter-activity and on-demand content
 A provider with a local presence
 No need for additional phone lines, and
always-on access to the Internet
 The highest-available speed of data delivered
to their computers
The question is: why don’t customers know it?
The industry’s opportunity and challenge is to
educate its customers and to address three critical
areas of consumer demand: cost and value, quality
services and convenience.
Cost and Value
To continue to compete with newcomers in the
multichannel industry, some say that broadband
will have to be less expensive or be part of a
package that includes long distance, cable and
even wireless and calling services. To compete
against less costly technologies and the efficiencies
of satellite providers, cable must not let cost be the
single driving factor consumers use when choosing
a broadband provider. However, nearly a third of
households subscribing to broadband service have
a household income below $50,000 a year.
Broadband, despite Consumer Reports’ cost-saving
tip, urging a “return to a dial-up connection for your
Internet service provider unless you need a fast
connection for your work,” and particularly its highspeed data product, is becoming a necessity for many.
To date, the value of bundling is still largely
unexplored. Would consumers spend more on
broadband services and remain more loyal to
broadband providers if they were able to save money
over multiple products? Though the initial answer
seems to be “yes,” cable broadband providers still are
mostly “discussing” the roll out of bundled services.
In Omaha, Neb., customers who subscribe to a
package of services (a combination of video, local
telephone and high-speed data) are five times less
likely to leave for a competing provider. International
operators, most notably in Japan, are building
successful broadband industries against strong,
satellite incumbents based on aggressive bundling
strategies, and in some systems the penetration rate
for multiple-product packages is nearing 40%.
Cable has made daunting capital investments to make
broadband services widely available, but the work has
just begun. Now cable executives must design a
simple billing and packaging solution to give
consumers a compelling, value-based reason to switch
from their current providers. They need to widely
communicate the value of the package offer and stick
by this strategy – giving it time to be adopted.
Customers will make the switch (and spend more) if:
 Offered a package of services that appeared
on one bill at a multi-product rate
 Allowed to switch seamlessly from current
providers without making a rash of annoying
phone calls
 Promised (and provided) ongoing customer
service
Cable also must recognize and respect the value of the
customer relationship. Cable operators should take a
cue from the grocery industry. Nearly 55% of major
grocery chains have frequent-shopper programs,
tracking consumer purchase trends, and creating
custom discount promotions to get customers to
extend their purchases to new departments. One small
grocery chain regularly processes 95% of its customer
transactions with loyalty cards, compared with the
national average of 67%.
This model could work for the cable industry, where
profit margins are equally treasured and where
programmers can share in the cost of promotions,
much like the grocery store vendors and suppliers do.
The rewards should offer real value, perhaps a free
month of service or an account credit. To hold onto
customers in the face of fierce competition,
creative and simple loyalty programs offer longterm value, as opposed to easily missed and
quickly forgotten one-time promotions.
Quality Services
The variety and depth of available broadband
services are hard to match, covering both
recreational and professional/work applications for
all potential audiences. Access to interactive, ondemand and Internet content is easier, faster and
more understandable with broadband. Consumers
are becoming more adept at navigating the
technologies (largely thanks to Interactive Program
Guide advances and the phenomenal consumer
adoption of DVDs, PVRs and the like), and the
value of broadband is becoming more and more
evident. In January, combined at-work and athome broadband Internet usage outpaced dial-up
usage for the first time, and Jupiter Media Metrix
estimates that approximately 25% of people who
currently use dial-up access are “thinking about
upgrading to cable or DSL sometime in the next
year.” The big question is, how many of them will
even be able to access broadband services by then?
Beyond technical attributes and accessibility,
however, is a deeper quality of service that is also
necessary for cable to prevail. Quality customer
services – including full use of the industry’s
community connections, existing customer
relationships and multiple consumer “touch
points” to advance the business of broadband
cannot be underestimated. Being “local” is a
distinguishing characteristic to capitalize on, not a
hindrance for cable. For example, when local
customers call customer service to check on the
status of an upgrade, they should be provided with
specific local information on their neighborhood –
not their zip code or state.
community events for their own customers? With
the runaway popularity of some of our most wellliked products, it’s amazing to see so little branding
actually reach the customer. A retail-like model and
merchandising approach are sorely needed, with
programmers and operators working together to “take
it to the trenches” for consumer audiences.
Convenience
Efficiency, especially in the data arena, is close to
unbeatable. Reliability is high, no dial-up is
necessary and the access rates and speeds (getting to
consumers what they want) are unrivaled. Retailers
are also recognizing the value in broadband, as
convenience has definite financial rewards for those
who provide it. Broadband consumers spend 67%
more per person on e-commerce than dial-up users,
according to Nielsen/NetRatings.
Broadband companies have the ability to make
consumers’ lives easier by integrating technology and
content in a customizable, yet easy-to-use, fashion.
These companies still have the largest established
customer bases, and an open opportunity to build an
unrivaled information database that can “help them
help you.” With buy-in from consumers, broadband
technologies can gather a wide variety of information
bits and smartly suggest conveniences and values that
customers can easily say yes to. A message on a
monthly bill can recommend a more economical
phone plan based on average calling times, locations
and patterns that are specific to each household. Settop boxes can receive localized data and custom
messages on topics that may be of specific interest to
a particular consumer niche. Data mining and usage
in this area is recognizably sensitive, and it needs to
remain separate from advertising ploys and the sales
side of the business. Telemarketing is often the
antithesis of consumer convenience.
Tie it all Together
Likewise, local accessibility comes into play when
looking at cable’s core: hip and talked-about
brands and the programming that drives consumer
demand. The industry’s most notable brands need
to be tangible to the general public, as it’s the
content (not the technology) that consumers flock
to. Programmer support is traditionally focused on
the customer service representatives – with
incentives and programmer participation solely
concentrated on up-selling customers to new, more
expensive video packages. Consider what
programmer/operator combinations could do if
they really put their minds to it: cross-platform
promotions where entertainment program Web
sites (attracting thousands of loyal viewers) can
interface with the viewers’ local broadband
provider to send program information and
reminder messages to individual set-top boxes.
Beyond that, think about the potential of adding
PDA or wireless messaging options to the mix.
The navigation flexibility of the broadband
platform is key and offers a consumer-friendly
edge over cable’s competition.
The most important factors in addressing each of
these areas are education and communication.
Customers can’t and won’t sign up for service if they
don’t know about it, or if they don’t know what it can
do for them. Given the industry’s spotty reputation
for follow-through, efforts can be risky. Some of
cable’s most notorious nuisances continue to plague
the industry (i.e. outages, especially during upgrades)
and without any information on the end benefits and
value of broadband (why it’s worth it), customers are
frustrated and too often defect. Once they’re
committed to the technology, broadband providers on
both the programmer and operator end have to
commit to consumers – and perhaps then consumers
will be more willing to commit to them in return.
About the author:
LaRae Marsik is a co-founder and partner at
October Strategies, Inc., a strategic communications and
business consulting firm based in Denver, Colorado.
Or perhaps we can borrow from our inter-industry
playbook. Headliner bands and top comedians
often appear on behalf of top programmers for
industry fund-raisers, so why can’t specific
operators call upon that same model and partner
with key programmers to offer exclusive
© Copyright CTPAA 2002