Broadband Communities writes about the conundrum of promotional broadband pricing…

It’s time to rethink the way broadband deployers use promo pricing. Regulators are annoyed. Customers are fighting back. Bankers are confused. Most importantly, the old promo tricks don’t work as well as they used to, and churn has been increasing.

The article outlines brief history of promotional pricing…

Historically, carriers relied on promotional pricing to snag new customers and encourage testing of add-on services. But the promotions were always short-term because there was little competition. The impact on carriers’ revenues and profits has become much higher than immediately obvious, as “introductory” pricing periods have crept up from a typical three to six months, to a full year, and as new customers are typically renters. Under today’s conditions, if your promo price is 50 percent off, your average price over the course of a customer’s two-year lease is only 75 percent full price.

That can translate into a 50 percent or more drop in profit. Aside from the revenue, marketing costs are tricky to calculate. On the one hand, good promos bring in more customers. But they also mean more customers have to be recruited once a promo period ends. My monthly cash flow and revenue models allow quick calculations of the consequences.

Customers are far less sticky than they once were, because so much content now comes in over-the-top. Customers buy content directly, rather than through the carrier. Even PBS has entered the game, offering online content directly to regular contributors.

Hence, promo prices may be self-defeating. In my own large condo building near Boston, my neighbors regularly switch between Comcast and RCN every year or two to get low promo pricing, even though the services are different. RCN serves scheduled TV programming through TiVo, allowing far more upload bandwidth with a slight degradation in quality. RCN prefers that users purchase a cable modem. Comcast discourages it. I get monthly mailed offers and the carriers host parties in the lobby.

Impact on local content..

Local channels help keep customers from buying bare broadband. But the local channels’ key differentiators – local news and weather – are disappearing. Sports channels can often be purchased separately. Why should consumers pay extra for local channels in the years ahead?

And factors in the industry…

‘The Big Three’ cellular carriers (AT&T, T-Mobile, Verizon) are indeed raising their prices with confusing promotional terms, and possibly illegal pricing changes. But the big three also rent their systems to low-price, low frills operators like Consumer Cellular. Major carriers have historically used local providers to supplement fiber backhaul but are now adding more fiber themselves.

Satellite is a near-monopoly right now – Starlink has a big lead in technology and in the sheer number of satellites in orbit. But it is only fully usable to a limited number of users in a given locale at the same time, and it already is priced higher than fiber or fixed wireless where available. Still, as many as 5 percent of all USA customers may eventually rely on low earth orbit satellites.