What is 'best practice' for broadband customer retention?

Martin Scott

Welcome to the Analysys Mason podcast. I'm Martin Scott, a Research Director at Analysys Mason, and I head up our consumer research related to fixed broadband, TV, video and gaming. Today, I'm here with Dongye Liu, a Research Analyst in our Consumer Services team who specialises in the broadband market. Hello, Dongye.

Dongye Liu

Hi, Martin.

Market dynamics and churn factors

Martin Scott

So, Dongye, today we're here to talk about broadband churn. We'll be discussing some of the key results from our newly published report on operators' fixed broadband retention strategies. The full written version of that report is available to access and download from the Analysys Mason website.

Now, churn isn't a new phenomenon. It's perennial, by which I mean, that as long as there have been subscriptions and competitive markets, you have customers that leave you for rival providers. So why are we talking about churn right now?

Dongye Liu

Churn reduction is an important element of fixed broadband operators' strategies, particularly in developed markets with limited opportunities to attract first-time broadband customers because the market is saturated. In the report, through a set of case studies, we've analysed how operators balance various approaches and tailor their strategies to meet specific market conditions and customer needs.

Martin Scott

We could also note that external market factors affect this. So consumers' sense of value for money fluctuates over time, depending not only on things like macroeconomic conditions and the cost of living, but also on local competition.

Dongye Liu

For example, if we look at what's happening in the US with fixed-wireless access, or what might happen in some European countries with disruptively cheap plays from the likes of Iliad and Digi, market disruption is still possible. And when it occurs, you need to know how to defend your market share.

Martin Scott

Well put. So, Dongye, which operators were included in this report and why?

Operator selection and performance

Dongye Liu

We selected operators based on their fixed broadband churn performance between 2022 and 2024. Not many operators publicly report churn rates, but our annual consumer survey of 18 500 consumers allows us to track intention to churn over time. We chose five operators that have outperformed their competitors on this metric. They are Bouygues Telecom, Movistar España, Rogers Communications, Telstra and Vodafone UK.

Martin Scott

One of the things we found in our research into consumer behaviour is that you can't just look at results for 18 countries and say, now, which 5 companies have the lowest churn out of this long list of all of the customers of all of the companies for the interviews that we ran? Or which companies have the highest NPS? They should be our examples of best practice.

Dongye Liu

Exactly. Satisfaction measures like churn intention and NPS are highly country-specific. In some countries, NPS is naturally higher, like in the US. And in other countries, churn intention is lower - in Australia, for example. That's not because US operators are doing a better job than everyone else or that Australian operators are doing a worse job, it's just down to differences in consumer behaviour.

Evaluating operator strategies

Martin Scott

So that's why we look for each operator, and how it performs in the market compared to its in-market peers. So, for example, in the UK, churn intention has fallen year-on-year following the highs of 2022. But what's really interesting is how much faster Vodafone's churn rate is falling than the rest of the market.

So, Dongye, how did we evaluate operators' strategies and what were the main findings of our work?

Dongye Liu

We identified that operators usually use a mix of strategies across five elements. The first element is structural changes. This includes mergers and acquisitions that can create service synergies like a fixed operator buying a mobile customer base or a larger incumbent buying a fibre altnet. Rural footprint expansion also tends to improve churn at the company level because these consumers usually have fewer choices. All five operators in our report have relied on structural changes to improve churn rates, which provided a significant, although finite, boost to retention.

Martin Scott

So, to paraphrase, their churn improved as a by-product of them getting new first-time fibre customers that they probably tied into new long-term contracts.

Pricing and bundling approaches

Dongye Liu

Exactly. Another area that operators are increasingly focusing on is quality of experience and innovation. Strategies in this area include providing a newer generation of Wi-Fi customer premises equipment to multi-gigabit speeds, fibre-to-the-room enhanced service reliability and speeds, or AI-powered customer service. For example, Telstra offers Wi-Fi 6 to all its home internet customers and offers 4G back-up in case of a fixed network outage. Vodafone UK also migrated all its customers to ultra-high-capacity networks and launched multi-gigabit speeds supported by Wi-Fi 6E in July 2024.

The third element was pricing and bundling approach. Operators can engender a better sense of value for money, either by reducing prices or by adding extra services and features that enhance the value of a bundle. Fixed–mobile convergence is a key part of this play and generally improves fixed churn.

Operators that focus on this strategy element include Bouygues Telecom. Its BIG marketing strategy focuses on reducing churn and increasing upsell through FMC and multi-play bundling, in particular through the sale of multiple mobile lines, which encourages households to consolidate their services with Bouygues. Its B&U Pure Fibre offer also provides excellent value for money, which was well-received in a market sensitive to price due to rising inflation.

Martin Scott

Those three categories (making structural changes, focusing on improving QoE and working on that sense of value for money) were common across all of the players. And then we also had a couple of other areas where a subset of the players were doing something interesting that we thought seemed to have helped them. What elements of strategy did they deploy?

Loyalty programmes and customer retention

Dongye Liu

Yes, so the next element is loyalty programmes. That is, operators offering exclusive benefits to incentivise repeat purchases. It also increases the cost to consumers of churning because they would have to give up accumulated benefits and rewards.

Although this approach is not universally adopted, it is important for some operators such as Telstra. We believe its loyalty programme, Telstra Plus, has helped it to position itself as a premium player and to successfully retain customers during price increases between 2023 and 2024.

The last element is value-added services. It is less popular than other elements, and its impact on churn varies by market. For instance, Movistar has seen success with its value-added services, but this is not a universal trend. The effectiveness of value-added services in reducing churn appears to be subjective and influenced by market conditions.

Lessons for operators

Martin Scott

Yes, I think we often answer these sorts of questions with, well, it depends on local market conditions. But the real value in our analysis is working out the common lessons that can be applied from looking at what other companies have done. So, what are the lessons for operators?

Dongye Liu

We believe operators should leverage any opportunistic gains from fibre footprint expansion or M&A activity to build a strong foundation for retention strategies. These actions can provide a significant short-term boost to customer retention by converging customer bases and capitalising on synergies.

Martin Scott

That's right. However, because these benefits are likely short-term (for example, you can only migrate a customer to fibre for the first time once), these kinds of steps should be viewed as foundational towards developing longer-term strategies focused, we think, on service quality and innovation.

Dongye Liu

Yes, so it's important to invest continuously in QoE improvements and technological innovation to sustain lower churn rates in the long term. Despite the upfront costs, operators that prioritise QoE improvements such as upgrading to the latest Wi-Fi standards or implementing AI-powered customer service are likely to see sustained benefits in customer retention.

Martin Scott

Yes, I was talking to an operator about this the other day, and they have a lot of old Wi-Fi 4 equipment that's about 10 years old still in circulation. The benefit to operators that are doing that is that if you're operating in a country that charges a monthly rental fee for the equipment, it's hugely profitable to keep those old modems going. However, if you're in a market like the UK, where you aren't getting a monthly rental charge for equipment, then it makes more sense to push QoE and new routers. I'd say the case for improving QoE is becoming more compelling in most circumstances these days.

Dongye Liu

Then finally, thinking about those case studies where loyalty strategies did seem to make a difference. We do think that operators can better tailor bundling and loyalty incentives to meet diverse customer needs. Offering attractive bundles and loyalty incentives can help capture and retain different customer segments. Operators should analyse their customer base to design tiered service offerings and loyalty programmes that cater to both high-value and cost-sensitive customers. This way, they can effectively enhance perceived value and reduce churn.

Martin Scott

Thanks so much, Dongye. The report that we've been referring to today is called Fixed broadband retention strategies: case studies and analysis. You can find it on analysysmason.com and it's available to subscribers to our Fixed Services research programme.

Dongye, if you had to pull out one further interesting lesson from the report, what would it be?

Dongye Liu

Well, I found Rogers’s flexible and inclusive pricing strategy very helpful when it comes to building scale. The operator launched a low-income affordable plan called Connected for Success in November 2023, which offers high-speed, low-cost internet, TV and mobile services. This initiative enhances customer satisfaction and reduces churn by providing an alternative to traditional wireline broadband services. Even though the average ARPU might be low, the sheer volume of low-income households can create a significant revenue stream and customer base. These households could become main targets for future upsell opportunities as their circumstances change.

So what about you, Martin? What interesting lesson did you find?

Martin Scott

I like what Bouygues did in France with how they approached loyalty incentives. So loyalty incentives don't have to mean earning points like with a loyalty programme like Telstra Plus, which is also in the report. Instead, Bouygues implemented loyalty incentives like progressive discounts depending on how long you've been a customer. They froze modem rental charges when a customer re-contracted, so you weren't facing an ever-increasing modem rental charge over time. Those kinds of things can enhance long-term customer loyalty and, in turn, reduce churn. It can be relatively easy to implement such an approach, and it can be adapted to various market conditions.

Right, that's all we've got time for, so once again, I've been Martin Scott.

Dongye Liu

And I've been Dongye Liu.

Martin Scott

We hope you've enjoyed listening to us discussing best practices in home broadband churn.

It's worth mentioning that we will soon record a webinar version of the report, which will also be available to subscribers, so please keep an eye out for that.

We'll also be adding that to our list of presentations that clients can request to have tailored to their specific situation, so if you like what you've heard and you want us to come and run that as a presentation for you, we'd be happy to talk further.

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