Verizon 750-Mbps Symmetrical Access Will Still be About the Bundle
Verizon’s new 750-Mbps symmetrical internet access is going to illustrate the importance of retail packaging in the internet access business. Some might argue that the upgrade, while significant, still leaves Verizon trailing other offers by gigabit providers such as Comcast, Google Fiber, AT&T or other independent internet service providers.
Some might argue the potential impact is significant, since the bulk of activity is likely to happen around all triple-play offers sold by Verizon, not just the internet access product line. One of the lessons we seem to have learned in the still-early days of gigabit internet access is that such offers actually stimulate upgrades of the less-capacious tiers of service. In other words, the main revenue and subscriber impact of a new gigabit offer is likely to be higher sales of products offering less raw speed. Most consumers do not buy the highest tier of service.
The other important issue is that most U.S. consumers buy bundles of various sorts. So the important upside is not sales of stand-alone internet access services, but sales of bundles (triple play or dual play).
Verizon sells what many would consider value-rich bundles that vary largely, but not completely, vary by headline speed. And while most consumers likely will find any of the lesser-speed packages fully functional, Verizon makes purchase of a full triple-play bundle, at any speed tier, a value-laden pick. So it will be with the symmetrical 750-Mbps
Priced for consumers at $149.99 a month for standalone service and $169.99 a month for a triple-play bundle with TV and landline phone voice service, the packaging likely creates a new way of establishing value.
The price differential between internet-only service and the triple-play bundle is just $20 a month. Without question, the triple-play bundle offers much higher value, compared to buying 750-Mbps on a stand alone basis. Verizon takes the same approach for its other packages, as well.
To be sure, consumers will be evaluating the new offer carefully, as Verizon currently is running a triple play offer including symmetrical internet access at 150 Mbps, TV, and home phone all for $80 a month for the first year, with or without contract. Contract customers pay $85 a month for the second year.
Verizon also sells a $50 a month double play including local TV and symmetrical 50 Mbps internet. Some would argue that those price points and included services represent a rather-significant amount of value for the price.
By way of contrast, it is easy to pay $80 or more per month to buy a single service such as DirecTV, or $130 for a dual-play asymmetrical internet package with downstream speeds of 100 Mbps. For perhaps $150 a month a consumer can buy a triple-play package (asymmetrical internet) with reasonable speeds.
Initially, the symmetrical 750-Mbps service will be available to about seven million Verizon customers in greater New York City, northern New Jersey, Philadelphia and Richmond, with more markets to follow in 2017, Verizon says.
For a firm that always touted the superiority of its network, the emergence of gigabit offers from Comcast, Google Fiber, AT&T and other independent ISPs is a challenge, as those offers undermine Verizon’s “best network” positioning. So it always was inevitable that Verizon would change its offers.
Now the issue is how the new offer encourages new customers to buy Verizon services, and what percentage of existing customers will see the top-end offer as worth buying.
Cable TV operators, the leading U.S. internet service providers, cannot, at present offer such symmetrical speeds, so several segments of the customer base will see clear advantage for the new Verizon offers.
You might argue that the primary value will be for consumers with high uploading requirements. But the biggest single segment of the audience are consumers who want a triple-play bundle (or even an “internet-plus-linear video” bundle and are willing to add fixed network voice if it doesn’t cost much) for a reasonable price.