• Subtonomy

The Big Dig versus the Big Squeeze –

Updated: Jun 1

– how European ISPs can ensure gigabit broadband is both profitable and affordable


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2022 is the year of the Big Dig. The EU’s main goal for its Digital Decade is for all European households to have high-speed internet coverage by the end of 2025 (100Mbit/s+) and gigabit connectivity by the end of 2030. The EU is smoothing the way with the Broadband Cost Reduction Directive, a set of harmonised measures to lower the cost of rolling out broadband.


The UK may have left the EU, but it is funding a £5billion program to ensure 85% of UK premises have gigabit access by the end of 2025, reaching 100% as soon as possible, and focusing public funds on the final 20% of hard-to-reach premises.


As if laying all this fibre wasn’t a big enough challenge, 2022 is also the year of the Big Squeeze. A March 2022 YouGov study, for example, found that three-fifths of households in Europe are already feeling the pinch of higher costs, with 83% of Spaniards, 80% of Brits, 78% of German, 76% of French, 65% of Danes and 62% of Swedes saying they were struggling with rising costs. And that was before Europe felt the full impact of the war in Ukraine.


As the cost of essential spending rises, households are cutting back on optional spending – one of the reasons for the drop in subscriptions to streaming media services. Kantar found that 1.5 million subscriptions in the UK, for example, were cancelled in the first three months of 2022, with more than a third of customers saying it was to cut costs.


Despite cost-of-living rises, there’s still strong demand for fibre

While you can live without Bridgerton or Wheel of Time, most people consider broadband to be in the same bracket as electricity or food. No broadband means huge limitations on communications, access to information, the ability to work from home and access to essential services. In fact, broadband is increasingly viewed as the fourth utility after water, gas and electricity.


"Greater connectivity is not a luxury – it’s a necessity. And it is a right for everyone in the EU. Every citizen should have access to an affordable fixed data connection. It is a universal service - like receiving post or electricity." - Ursula von der Leyen, European Commission President

Broadband may be a necessity nowadays, rather than a luxury, but government figures reveal a huge digital divide. Take the UK, when the pandemic hit in March 2020 only 51% of households earning between £6,000 and £10,000 had home internet access compared to 99% of those earning more than £40,000. Governments across Europe consider it to be so important that this gap is closed that they are promoting and even subsidising gigabit fibre-to-the-home (FTTH), instigating training programmes to upskill householders, and urging the introduction of low-cost tariffs to ensure digital inclusion of the poorest sectors of the community – such as low-income workers, the unemployed, pensioners and so on.


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The affordability v profitability equation

What’s clear is that there’s a delicate balancing act between ensuring tariffs reflect the full cost of building out and operating networks (plus a fair profit margin) versus ensuring that customer tariffs are affordable in order to drive up digital inclusion. That said, broadband costs vary enormously across Europe – from EUR0.82 per Mb in the UK to as low as EUR0.018 per Mb in Romania. Prices are aligned to average disposable income, but that’s precisely what’s being squeezed currently, and average prices take no account of individual circumstances – even in an affluent country such as the UK, many people struggle to pay their broadband charges.


Figure 1: Examples of broadband costs by country

Country

Cost per Mb in Euros

Cost of typical package in Euros

Belgium

0.530

51.41

France

0.220

26.49

Germany

0.350

25.47

Iceland

0.390

64.22

Italy

0.260

25.37

Netherlands

0.290

42.57

Norway

0.300

82.15

Poland

0.027

15.78

Romania

0.018

08.30

Spain

0.092

32.10

Sweden

0.092

32.43

Switzerland

1.460

58.76

UK

0.820

35.73

Source: Cable and BVA BDRC, January-March 2022; rates converted from dollars as at 21 April 2022


But, make no mistake, whether a customer is paying for premium services or basic internet they still expect to receive the service they’ve been promised and to be supported when things go wrong.


Efficiency is key to supporting both premium and low-cost broadband

The cost of customer support can quickly spiral and transform a profitable customer into an unprofitable one – particularly for low-revenue households. The turns our attention as to how broadband service providers can efficiently support their customers to maintain their profitability while, at the same time, meeting customer expectations. Efficiency comes in two main flavours:


1. For low-spend customers or low tariff countries, efficiency is about saving money.

Here, self-service and chatbots are both cost-effective customer support options. But these channels must have accurate, reliable and up-to-date data to help resolve inquiries. If they don’t, and customers can’t find the answer they’re looking for, or aren’t satisfied with the answer provided, they’ll quickly become frustrated. Many customers will then simply ring the contact center out of desperation – raising costs and quickly making such customers unprofitable.


2. For high-spending and premium customers, efficiency is about saving time.

It’s essential that ISPs deliver a quality support experience to justify that premium price point, across whichever channel customers find convenient. If customers call the contact center, then providing agents with the tools they need to quickly resolve any problems, is an essential part of delivering that premium feel. Customer support tools though are only as effective as the data that’s available to them. And premium support also requires a seamless omnichannel experience, so data must be consistent across all support channels.

Whether service providers are trying to support low-spend or premium customers, efficient support is essential for profitable operation.


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