Value is What the Customer Says It Is

Value, in the end, is what a customer says it is.

With all of the marketing hype now underway in the U.S. mobile market, you might think any of the four largest U.S. mobile service providers have a lead on some metric deemed important to customers.

And with the caveat that end user perception of value includes both performance (or “quality” proxies of various types) and price, plus other terms and conditions (bundle offers, discounts, contracts, usage limits, exemptions from usage charges for entertainment video, device availability), customers keep saying that Verizon has the best network, while other networks have less consistent performance.

All marketing hype aside, Verizon customers across the United States consistently say they have fewer network problems, according to J.D. Power.

Performance by other tier-one providers varies by region.

In the Northeast and West regions, AT&T scores worse than all the others. In the Mid-Atlantic, Southeast, North Central and Southwest regions, T-Mobile US scores the worse. Sprint is not at the top, or at the bottom, in any region.

But Sprint finished number two in the Southwest and West regions.

Customers, rightly or wrongly, keep saying Verizon has the best network.

Ignore Marketing Hype About Network Quality: Here is What Customers Say

All marketing hype aside, Verizon customers across the United States consistently say they have fewer network problems. Performance by other tier-one providers varies by region, according to J.D. Power surveys.

In the Northeast and West regions, AT&T scores worse than all the others. In the Mid-Atlantic, Southeast, North Central and Southwest regions, T-Mobile US scores the worse. Sprint is not at the top, or at the bottom, in any region.

But Sprint finished number two in the Southwest and West regions.

As big a problem as rural mobile coverage might be, most people--and the most demanding customers--live in urban areas. For that reason, the sheer volume of coverage or capacity problems will happen in urban areas.

That explains both moves to “densify” mobile networks, use of distributed antenna systems, use of small cells and moves to release new spectrum, share spectrum and make better use of unlicensed spectrum.

Customers living in urban areas experience the highest number of overall network problems, at 15 problems per 100 connections (PP100), compared to 12 PP100 among those living in rural areas and 10 PP100 among those living in suburban areas.

Customers living in urban areas experience more calling problems than those living in rural or suburban areas (19 PP100 compared to 13 PP100, respectively); messaging problems (eight PP100 compared to five PP100); and data problems (20 PP100 in urban areas, 15 PP100 in rural areas).

Urban areas have a much higher proportion of younger mobile subscribers who are heavier users.

The overall number of network quality problems is 17 PP100 among customers 18 to 34 years old compared to 10 PP100 among those 35 years and older.

J.S. Power looked  at 10 problem areas, including dropped calls; calls not connected; audio issues; failed/late voicemails; lost calls; text transmission failures; late text message notifications; Web/app connection errors; slow downloads/apps; and email connection errors.

Marketing, Not End User Demand, Drives Gigabit Internet Access

Competitive dynamics, and not actual end user demand, frequently drive investment and marketing decisions in the telecom business. The gigabit Internet access trend provides an example.

Gary Bolton, Adtran VP says that two years ago, service providers told him that the biggest reason for deploying gigabit service was to satisfy future customer demand.

That's still a big reason today, but now the threat of competition is an even bigger one, with close to 70 percent of respondents surveyed by Adtran indicating competition is a top reason for deploying gigabit services, up from fewer than 50 percent in 2014.

In other words, gigabit Internet access is necessary for competitive reasons--to match other market offers--instead of being driven by actual end user demand.

You might argue that Google Fiber was the immediate catalyst for a change in marketing context in the U.S. market. But it now is Comcast, rolling out gigabit services to all of its consumer locations, that is the biggest competitive driver, given that Comcast is the biggest supplier of Internet access in the United States.

We sometimes also forget that among the other changes, the new gigabit push shows the importance of “non-traditional” or new platforms. Comcast, of course, bases its attack on hybrid fiber coax, a different platform from that used by telcos globally.

And other options are coming.

Starry is but one of the service providers attempting to prove that modern, fixed wireless networks are a better way to deliver gigabit Internet access to consumers and businesses, without necessarily building fiber to home networks.

Both Facebook and Google are developing or investigation use of platforms based on use of fixed wireless. AT&T has told the U.S. Federal Communications Commission that it is going to deploy many millions of fixed wireless access paths, while Verizon also has said it is looking at fixed wireless, especially as a result of its early 5G network deployment.

That said, there still are many--mostly smaller--service providers basing their gigabit networks on fiber. Cable TV hybrid fiber coax networks soon will be the main U.S. suppliers of gigabit services.

Consumer Satisfaction Seems Directly Related to Consumer Demand

You might not be surprised if told people who are most enthusiastic about a particular product are most satisfied with their purchases, while people who are less involved with that same product will report they are less satisfied.

That essentially is what a J.D. Power video entertainment satisfaction survey suggests.

Overall satisfaction with paid streaming video service is highest among cord stackers—customers who subscribe to a traditional cable/satellite service in addition to streaming video service—according to J.D. Power, and lowest among consumers who have abandoned linear video subscriptions, or people who never have bought a linear video subscription.

Conversely, overall satisfaction is lowest among cord cutters (802), followed closely by cord nevers (807), while satisfaction is highest among cord stackers (826) and cord shavers (822).

Satisfaction in all measures is lower among customers who do not have cable/satellite TV than among those who do, J.D. Power reports.

In other words, people who buy the most entertainment video tend to be more happy with streaming video, while people who buy the least are less satisfied.

In common sense terms, people who value video entertainment buy more of it, while people who value it less buy less. People who value entertainment video also seem more satisfied. Those who value entertainment video less seem less satisfied with streaming video.

But that might simply reflect appetite for the product: car enthusiasts are likely more satisfied with any number of vehicles. People with little interest in car ownership likely are less satisfied with any number of vehicle choices.

TDM Network Operating Costs Rise, as Stranded Assets Grow

source: CenturyLink

With the caveat that carrier costs include lots of allocated expense that some would note is discretionary, CenturyLink makes the argument that operating costs per access line are climbing steadily, which is what one would expect for any network with growing stranded assets.

Simply, fixed costs are borne by a smaller number of customers over time. That does not necessarily mean that operating costs for each special access line are going up by the same amount, or at the same rate, but the principle should hold.

CenturyLink’ says its operating expense per access line increased by more than 50 percent from 2007 to 2015, from approximately $650 to nearly $1,000.

source: CenturyLink

CenturyLink’s ILEC operating expense per business data service (BDS) circuit also has increased, from $18,831 to $20,832, just from 2011 to 2015.

That should not come as a surprise. TDM service demand is falling, for all U.S. tier-one service providers in the "telco" segment.

source: Telco 2.0

For its part, AT&T has been reporting for some years distinctly different growth trajectories for “strategic business services” and legacy services based on time division multiplex.

Verizon has a bigger problem. Its business segment revenue is declining, period. In the second quarter of 2016, global enterprise revenue dipped 3.3 percent, year over year, for example.

The larger point is that business data services are a legacy service, delivered on a legacy network that will be completely decommissioned at some point in the not-too-distant future. As demand shifts to the next-generation networks, the stranded asset problem gets worse.

source: Telco 2.0

Verizon, AT&T are Top-Ranked Business Telecom Providers, Says J.D. Power

source: J.D. Power

Verizon is the top-ranked telecom services provider in the large enterprise segment, while AT&T leads in the small and medium-sized business segment, according to J.D. Power.

In the large enterprise segment, Verizon is the highest-ranked provider, with an overall score of 827 out of 1,000.

AT&T is the highest-ranked service provider in the small/medium business segment, with a score of 803 out of 1,000.

source: J.D. Power

Cable companies--with the exception of Cox--rank lower in all segments.

The 2016 U.S. Business Wireline Satisfaction Study is based on responses from 3,324 business customers of data and voice services at very small businesses (companies with between one and 19 employees, with a corporate service plan); small/medium businesses (companies with between 20 and 499 employees); and large enterprise businesses (companies with 500 or more employees) in the United States.

Small Business Spending Less on Telecom; Enterprises Spending More

Small business customers are spending less than they did in 2015, J.D. Power says. The average monthly amount spent on data service has declined from 2015 in the small/medium business segment (-$147).

But very-small businesses increased spending slightly, while large enterprise businesses boosted spending about $390 a month.

The top reason businesses chose their current telecom services provider is network quality and network speed (35 percent).

The core reasons for switching providers include obtaining better pricing (68 percent); better/more reliable service performance (28 percent); and favorable pricing options (24 percent).

The main reason businesses contact customer care is network-related: report an outage, service disruption/disconnected or poor/bad reception (26 percent). The next-highest contact reason is to inquire about a product or service (14 percent).