Some Telecom "Moats" Might Actually Exist

An installed base of internet access customers is not necessarily a “moat” protecting an internet service provider from losing customers, but it really helps. So, apparently, do service bundles that offer more value and bigger discounts.

In mature telecom markets, customers simply do not switch providers all that often.

According to a 2014 study by Ofcom, the U.K. communications regulator, just eight percent of adults fixed network voice customers in the last 12 months. About nine percent of broadband access customers switched in the last year.

Just six percent of mobile customers switched providers over 12 months, while just five percent switched their subscription TV provider over the same time frame.

What that means, for any mobile service provider in a mature market is that only about one half of one percent of current customers chose another provider in any given month.

Likewise, Parks Associates consumer data show that almost 50 percent of U.S. mobile phone service customers did not change providers over the last 10 years. In other words, fully half the customer base virtually never changes providers, meaning that all switching behavior is concentrated on just half the total subscriber base.

According to Parks Associates, about 25 percent of respondents changed service providers only once in 10 years.

According to a 2016 study by U.K. comparison site uSwitch, only 11 percent of internet access customers switched providers over the last year.

Some 22 percent of customers report they have not changed providers in over five years, while 35 percent have never switched providers.

That one-year level of  churn is roughly the same percentage of U.S. mobile customers who switch from AT&T or Verizon Wireless over a year’s time as well, providing more evidence that, in a mature market, customer defections are less common than most might believe.

Also, most studies suggest that customers buying bundles churn less often, as well.

In the case of fixed internet access, it appears consumers also resist switching providers because they do not want an interruption of service while new providers install the new service.

Fully 35 percent of U.K. internet users who’ve experienced a period of internet access when they tried moving providers in the past say the thought of being without internet has put them off doing it again, according to uSwitch.com.

Of the 55 percent of respondents  who reported being without broadband between providers, the average length of downtime is 1.4 days. But 10 percent reported downtime of one to two weeks without service, while six percent had to wait longer than three weeks.

Internet users in London wait an average of 2.3 days for new service to start.