Service integration is key to telco broadband subscriber gains

Sean Buckley, FierceTelecomWhen CenturyLink (NYSE: CTL) completed its acquisition of Qwest this past April, one of the glaring shortcomings that emerged in its Q2 2011 earnings report was a drop in broadband subscribers.

Stewart Ewing, CenturyLink's CFO, revealed during the Oppenheimer & Co. Technology & Communications Conference in August that the culprit was actually related to a series of promotional discount-priced broadband packages Qwest had for its traditional ADSL and VDSL2 higher speed packages.

"Our broadband churn was a bit higher than expected, which (we) attribute that to standalone sales that happened over the last few quarters at Qwest," Ewing said. "Our experience is that when you sell a customer the broadband product only when they come off a promotion they're more likely to churn."

To slow the rate of broadband customer churn, CenturyLink is actively pursuing those broadband-only customers at the end of the promotion cycles with offers for other products. These other products include the ability to bundle in wireless service via its new relationship Verizon (NYSE: VZ) and even its Prism IPTV offering in the markets where it has made the service available.

Alternatively, CenturyLink's new RBOC brothers AT&T (NYSE: T) and Verizon actually saw gains in both video and broadband, a trend that will likely be reported when the Q3 2011 earnings are released by both companies later this month.

IPTV subscriber gains, Q2 2011

Click here for details of telecom and cable Q2 subscriber gains.

As of the end of the second quarter, AT&T reported it had 16.5 million total wireline broadband subscribers and 3.4 million U-verse IPTV subscribers, while Verizon had 4.5 million FiOS Internet and 3.8 million FiOS TV connections. Of course, the gains both telcos saw in their higher speed broadband services came as traditional lower speed DSL and traditional phone service subscribers continue to see industrywide declines.

Perhaps what's more revealing about AT&T and Verizon's broadband numbers was that many subscribers signed up for triple- and quad-play packages.

Take AT&T, for example: During the quarter, the telco reported that U-verse broadband data attach rates continued to run above 90 percent and 55 percent of new subscribers took U-verse Voice. Up to 75 percent of the telco's TV customers purchased three services, with three-fourths of U-verse TV subscribers now subscribe to a triple- or quad-play service package.

Likewise, Verizon reported that consumer revenues overall were up 1.3 percent compared with the same period last year, while consumer wireline service ARPU was $92.44, up 9.4 percent compared with Q2 2010. In particular, FiOS customer ARPU continues to remain at more than $146.

But bundling multiple services on one bill is just one part of the complete broadband subscriber retention equation.

Complementing the bundling efforts, both AT&T and Verizon are focusing on providing service integration across their wireline and wireless domains. At the simplest level, the two telcos are integrating their wireline video offerings with wireless by adding application support like mobile remote control and DVR manager capabilities to more on a number of name-brand smartphones.  

Jeff Weber, vice president of U-verse & video products, AT&T, said that while offering discounts to wireless customers for U-verse is one thing, the more compelling aspect of enhancing the broadband and video experience for users is service integration.

"There's some convenience to bundling services, but people aren't going to buy wireless and TV from us for a $5 discount," he said in a previous interview with FierceTelecom. "They'll buy it and keep it for a long time for things like U-verse mobile where I can manage my DVR, side load TV shows and watch them when I am on the road or up on the plane."

Offering this ease of integration, which plays into the user's desire to have their applications and content available anytime and anywhere, illustrates the idea that telcos have to think outside the standalone broadband box to effectively battle cable.--Sean

P.S. Want another perspective on the subscriber battle between cable MSOs and telco providers? Make sure to check out our special report on how telcos are battling cable operators for broadband supremacy.