Poor Customer Satisfaction Does Not Always Lead to Churn Behavior

For whatever reason, another survey of consumers shows that Internet service providers and linear TV providers are among the lowest-ranking entities, in terms of perceptions of customer service.

Mobile service providers, airlines and rental car agencies also rank relatively low, a finding other studies also tend to confirm.

But those perceptions are not always directly related to customer churn  rates, even when consumers say they are quick to change suppliers when customer service is deemed inadequate or faulty.

Despite the fact that mobile service providers tend to rank relatively low in satisfaction surveys, churn rates in the U.S. market, for example, are relatively low, at least for some of the leading providers. For AT&T and Verizon, for example, churn rates are lower than one percent a month, a rate many would consider quite low for a consumer service.

Higher churn rates obviously lead to lower customer relationship durations.

Surprisingly, then, AT&T and Verizon mobile churn rates are quite low, compared to some other consumer products, but quite similar to churn rates for many common products.

Sprint and T-Mobile US have higher churn rates, if now approaching the lower rates seen by AT&T and Verizon.

U.S. credit card companies typically have annual customer churn rates of around 20 percent, a monthly rate of about 1.7 percent.

European cellular carriers experience annual churn of between 20 percent and 38 percent, between 1.7 percent and three percent a month.

Many retail banks have annual churn rates of between 20 percent and 25 percent, or about 1.7 percent to two percent per month.

Even when they say they will switch suppliers within a day or week of a poor customer service experience, that obviously is not how consumers act. They obviously do not act as they say.

Costs of switching likely provide one explanation. While the costs of switching fixed services providers might be relatively low, it is not frictionless, as consumers frequently have to pay install charges, equipment rental or other upfront charges.

For smartphone account owners, especially those which are multi-user or multi-device accounts, switching costs are substantial, including a need, in many cases, to replace multiple smartphones, each representing $600 or more in costs.

That is one reason why mobile service providers now frequently offer payments of up to $650 when consumers switch suppliers. In many cases, even a $650 subsidy does not cover the cost of buying new devices and terminating device payment plans.

For many consumers, there might also be a belief that switching to another provider will not, in fact, lead to better experiences, as all the suppliers--or most--within a category are deemed to be roughly equivalent.

To some degree, the fact that legacy U.S. mobile air interface standards are bifurcated might have something to do with the churn rates. To some degree, half the market uses GSM, while half the market has used CDMA. Switching across air interfaces necessarily entails scrapping the existing devices and buying new ones.

The bottom line is that, at least for mobile services, relatively low satisfaction does not lead to the churn rates one might expect. That is at least partly because switching costs are substantial.

The latest survey tends to confirm that behavior.

source: [24]7

Industrial Internet of Things Market Growing 7% Annually

The global industrial internet of things (IIoT) market is set to grow faster than seven percent, on a compound annual growth rate basis, to 2020, according to Technavio.

Asia Pacific (Asia) will be the biggest market for IIoT, according to Technavio.

The IIoT market in Asia was valued at close to US$38 billion in 2015 and is expected to reach over US$54 billion in 2020.

Though most would expect China, Korea and Japan to be leading growth markets, India also is predicted to be a driver of much growth.

The global IIoT market will drive US$132 billion in revenue by 2020.

Mobile, Fixed, Other Markets Face New Disruptions

Movement into adjacencies always is a key competitive issue within any ecosystem, as it turns former customers into competitors. That happens with chipsets, applications, access, transport, advertising and other support services.

Also, the most-dangerous competitors are those from “outside” the traditional domain. Skype,, Amazon, Alibaba, Netflix, Google Fiber, cable TV entry into voice and business services, XBox, PayPal, M-Pesa, Amazon Web Services and iTunes are among the obvious examples.

Some now think a big further move in the e-commerce business will happen, as logistics functions perhaps are internalized by the likes of Alibaba and Amazon.

source: Bloomberg

No ecosystem now seems safe from movement into adjacencies. In the U.S. mobile market, entry by Comcast and other cable TV operators will be an important example. In the high speed access, growing presence of Google Fiber and other third party Internet service providers is going to challenge prevailing notions of how many providers are sustainable, long term, in the fixed network business.

We once widely believed the answer was “one.” Over the last couple of decades, the number has become “two.” What Google Fiber and others pose is a new question. In some markets, is the viable number actually “three?”

That would represent a major business model challenge for the incumbent suppliers, as any major change in market structure always entails.

In addition to the urgency of creating new revenue sources, operating costs have to be taken down even more than had seemed possible in the past.

Liberty Global, Vodafone Combine Operations in Netherlands

Liberty Global and Vodafone will merge their operating businesses in the Netherlands to form a 50:50 joint venture creating a national communications provider in the Netherlands with video, broadband, mobile and business segment service capabilities.

The business will operate under both the Vodafone and Ziggo brands and will have over 15 million revenue generating units, of which 5.3 million are mobile, 4.2 million are video, 3.2 million are high-speed broadband and 2.6 million are fixed-line telephony.

The new venture will allow the partners to measure customer demand for quadruple-play packages combining fixed network video, high speed access and voice with mobile service, all as part of a single offer.

Compared to European operators, U.S. service providers have been much less convinced that most consumers want to buy all four services from a single provider.

Among other things, marketing challenges are an issue, since mobile service tends to be available nationwide, while the fixed services sold by any single provider are available, if at all, to less than a third of all U.S. homes. That complicates national advertising and marketing operations.

But U.S. cable TV operators are likely to test that assumption, as they tend to market locally, meaning national offers are not a practical issue.

Also, many tier-one European service providers do already operate nationally, for both fixed and mobile services. U.S. regulations are not likely to change, in that regard, in one respect. Though mobile operators can lawfully sell their services nationwide, regulatory authorities still have acted to keep any single provider’s installed base below about 33 percent.

source: Strategy Analytics

Eagles, Jackson Browne Tribute to Glenn Frey

Eagles and Jackson Browne tribute to Glenn Frey, a founding member of the Eagles who passed away recently.

source: Billboard

Singapore to Test "Three or Four" Market Structure

With the caveat that it is unnatural to expect market leaders to welcome new competition, even less to welcome fierce competition, Singapore Telecom says it is concerned that issuing a fourth mobile license for Singapore will damage supplier sustainability over the long term.

The reason is obvious: the new provider is expected to spark a “lower price” battle that will damage service provider gross revenues and profit margins.

Would-be licensee MyRepublic says it will focus on innovation, not price competition.

Few observers likely believe that will initially prove to be the case. Most attacks by upstart mobile carriers globally have involved “innovation” around price, even if other elements, such as a reliance on Wi-Fi access, device bundling, contracts or zero rating sometimes also are introduced.

There is yet no consensus on “ideal” mobile market structures that encourage rapid innovation and yet also produce enough revenue and profit that all the suppliers can exist on an on-going basis. Some believe the “best” number is three; others believe “four” is the optimal number.

Those beliefs are unlikely to be changed much as we move towards 5G, which will mix and match access methods in new ways that blur the differences between fixed and mobile operators.

As always, how one defines a particular market is key. Over time, various “mixes” of virtualized mobile access and retail packages will increase the number of potential competitors able to enter and compete in “mobile” markets.

Though the ultimate sustainable market might still entail a small number of share leaders, a larger number of smaller sustainable competitors might be conceivable. And, for shorter periods of time, a larger number of leading contestants might also exist, until market pressures force a few from the market.

In the U.S. fixed network market, as well as a growing number of European markets, there is a parallel development. Where it once was believed only a single operator was viable, it now is seen that, in some markets, at least two providers can sustain themselves.

The latest issue is whether, in some markets, the number might actually be “three.”

Maybe "More Moore" is No Longer the Issue

Perhaps the progress of Moore's Law, based on silicon technology, does end at some point rather near in time.

Perhaps no replacement substrates  (germanium, for example) can be commercially developed. Perhaps no replacement architectures  (optical, biological or quantum) can be commercialized soon, either.

Even in such a dire situation, how much will it matter? It is hard to say. Much computing these days takes place in huge data centers, where heat and energy consumption arguably are bigger problems than processor speed or the cost of memory.

Likewise, end user device preferences arguably are more centered on battery life, weight, device size and aesthetics than raw processing power.

We might be at a point where adapting processing to match the key apps actually will become more important (low power consumption already has become key).

And since today’s smartphones already process as fast as supercomputers used to, it is not clear how much “more value” faster processors provide. That has been true for quite some time in the personal computer space, for example.

Faster connections arguably improve experience and capability more than processor speed or locally-resident memory.

Some of us would still bet on human ingenuity to reignite another round of Moore’s Law advances, though. Still, the fact remains: raw processing speed is no longer the chief constraint on application or device value. Instead, it is human creativity which now is the gate.