Broadband Companies Conditioning Customers To Be Disloyal

from the not-great-for-growth dept

Wed, Sep 13th 2006 6:30pm — Mike Masnick

While the press has talked up the supposedly "low" prices of DSL these days, it continues to be very misleading. First off, the rates are "promotional rates" that only last for a short while and then go up. They also usually require something else to be bundled (i.e., you don't get cheap DSL without a phone line, and you don't get a cheap cable modem service without cable TV). However, there's another side to it that people are beginning to notice. Since the rates are often promotional for new customers, they actively encourage churn instead of loyalty. We're still surprised to see more industries don't recognize the importance of rewarding loyalty. The cost of customer acquisition is quite high. But, instead of looking at ways to keep existing customers happy long term, paying off the investment in acquisition, these companies are taking their existing customers for granted, always focusing on the number of "new additions." It's a short term view that could mean long term trouble... should there be enough competition to merit it. Unfortunately, the competition right now is so weak, that it's a case where the "churn" is just back and forth from bad to worse and back again -- each time with the companies paying the acquisition costs yet again (and never really getting the long term payoff that a loyal customer would provide).

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23 Comments

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Anonymous Coward, 13 Sep 2006 @ 6:55pm

So that's why $600 cel phones are still free.

Very insightful article. Churn baby Churn
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Sanguine Dream, 13 Sep 2006 @ 6:56pm

It's so simple...
The reason DSL providers do is that it allows them to claim they are the "fastest growing" provider. For some unknown reason they think we (prospective) customers are more intersted a large number of new customers than a large number of loyal customers. Until that perception is changed we will continue to be raped by DSL providers.
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Grandfather Time, 13 Sep 2006 @ 7:14pm

its all about numbers...dont let a copany claiming to be #1 fool you, AOL has done this for years, and the only thing they get a #1 in is marketing, because they used to send you around 60 something free triial discs a year....
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dorpus, 13 Sep 2006 @ 7:35pm

The White Ghetto
We live in a society with a pretense of "choice", "freedom", and "competition". Whites are consigned to accept their fate at the hands of extortionate broadband providers, blacks are consigned to accept their fate at the hands of extortionate Pakistani grocers. Dissidents who raise their voice politically are branded "anti-capitalist" and imprisoned.

http://studentaffairs.sass.uab.edu/kscope/index_Page312.htm
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Izzy, 13 Sep 2006 @ 7:41pm

Customer Retention 101
I couldn't agree more. I had Time Warner broadband for 7 years and they did nothing but increase my bill every six months or so. People who just signed up were getting phenomenal deals and I, a loyal customer, was paying the highest price of everyone. I finally got fed up and moved to fiber optic when it became available but I would have stayed with Time Warner had they treated me better. This seems so elementary. I don't understand why their high-priced consultants don't tell them that.
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Sohrab, 13 Sep 2006 @ 7:51pm

I couldnt agree more. If anything, the longer you stay, the better insentive you should have because they can then relly on that $50 a month coming from you.
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- David Bullock, 13 Sep 2006 @ 11:50pm
  
  Re:
  by Sohrab on Sep 13th, 2006 @ 7:51pm
  
  I couldnt agree more. If anything, the longer you stay, the better insentive you should have because they can then relly on that $50 a month coming from you.
  
  My ISP (Dreamhost) does this actually. When you signup you get a base rate of service (storage/bandwidth). As time passes each and every week/month your bandwidth and storage capacity is increased (and they show this counter on your admin panel). BRILLIANT.
  
  I doubt I'll ever use the capacity, but it's comforting to know it's there, and that I can continue to use my capacity in new ways without having to be concerned that I'll overflow my ever growing quota.
  
  It also means it's going to take quite a bit to convince me to switch providers when my 2 year subscription comes due. I'll have a highly elevated level of service that I will be increasingly unwilling to throw away and move to another ISP.
  
  - Dave
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Joe bob, 13 Sep 2006 @ 8:29pm

Its what we do with comcast high speed internet and cable. They offer a promo for 60 bucks or so for 6 months no contract. We can cancel after 6 and just switch names, or it will go up to 150 a month (rape)
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- RoyalPeasantry, 13 Sep 2006 @ 10:30pm
  
  Re:
  ;) I didn't even bother changing my name when I canceled and resubscribed to get the promo price. Course I did change addresses.. but they still knew it was me because I found out that they owed me $34 when I signed up again.
  
  Of course, when the cable guy came last week I found out just how stupid their tech guys can be (no offense, I'm sure some of you really know what you are doing). So he finds the cable box and tries to figure out which one went to our apartment. When he couldn't do it, he assumed that we wern't wired and told my roommate that we would have to get permission from the landlord for him to drill holes and install new wires.
  He didn't even CHECK the wires inside the house, just assumed that they where all for the satalight dish because thats where they appeared to come from.. Unfortunatly I wasn't home to call him an idiot and show him the THREE possible ways to hook it up WITHOUT drilling any holes that I found in about 5 minutes.
  
  I WANTED to do a self install.. they told me I couldn't. Something about having to remove some kind of block on the line. Seemed fishy to me..
  
  Ah well, gave me a chance to look around the cable box. I should be able to steal my neighbors cable TV (with their permission..) without too much trouble. ;)
  
  This was from Charter by the way.
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DSL Hater, 13 Sep 2006 @ 8:36pm

DSL Prices
I have had SBC/ATT for a couple of years...when my first promo price was up, I called them and asked what they could offer me. They initially offered to kick me in the ass as I went out the door, but as soon as I actually called in to cancel, they offered me the promo price for another year. I just did this for the second time last month, and they kept me at $27.99 for a 6 meg/700kbps line, so, perhaps, you just need to do as I have.
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wayne, 13 Sep 2006 @ 8:44pm

shouldn't
DSL Hater quote "I have had SBC/ATT for a couple of years...when my first promo price was up, I called them and asked what they could offer me. They initially offered to kick me in the ass as I went out the door, but as soon as I actually called in to cancel, they offered me the promo price for another year. I just did this for the second time last month, and they kept me at $27.99 for a 6 meg/700kbps line, so, perhaps, you just need to do as I have.",

the thing is hater, you shouldn't have to, dont get me wrong ill be doing this my self with my company soon here, but i think ever one will agree its just the matter of not having too, my company (excuse bad spelling plz) should just always give me at least a decent deal if not close to the starters price, a good example would be after being with them for a year charge like 40.00 a month for being a loyal customer, instead of the 50.00 you where being charged , and give new sign ups a rate of like 30.00 for the first 3 months,
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icepick314, 13 Sep 2006 @ 8:58pm

prices
also with keeping up with lower prices, long time loyal customers should get better customer services like priority service when the equipment breaks or no wait call-in access numbers....

customer service is seriously lacking in huge US companies....this is why i love NTT here in Japan...100mbps fiber optic to my house, hadn't had to call in for any problems, when i did had to call for billing question, it was solved in 15 min after leaving my home number to Japanese operator, then having English speaking operator to call back to my home...

US companies should take lessons from whoever is teaching Asian companies their customer service etiquettes...
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Ivory Bill, 13 Sep 2006 @ 8:58pm

This works for me....
I have had TimeWarner's RoadRunner cable internet access for eight years. The rate I normally pay is around $50/month. However, I have been successful every eighteen months or so in getting the $30/month six-month promotional rate (supposedly for new subscribers) by calling customer service and asking them for it. If they give me any trouble, I remind them that SBC (now AT&T)/Yahoo offers six months at $20/month. They find the notion of losing a subscriber so costly that they have given me the promotional rate every time.
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- Luci, 14 Sep 2006 @ 1:27am
  
  Re: This works for me....
  Actually, I used to work for AT&T for their cable modem offering. You might not realize this, but RoadRunner is owned by Comcast/AT&T, now, so they really wouldn't be losing a customer. The customer service in the RoadRunner markets is local instead of national, something I really wish they had done with all their markets.
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ANON!, 13 Sep 2006 @ 9:01pm

Comcast
I've been with Comcast for a while now. I can't stand even the speed of most DSL packages, as I was spoiled by a T1 cluster as my university :(and packet shaping):

I had 6 months of 6m/384k cable for $29.99 about 8 months ago. I decided to add on limited basic cable tv for $13, and they told me that bundled they'd knock off another $10. I made out for a total of $33 (plux taxes!!!) for then...

...then it shot up to $53! OUCH.

I tacked on another $10 for SpeedTier, which got me 8m/768k. Two months into that, and I love it!

I feel like I sold my soul. Just called and they put me on a new 6-month promo for $19.99 internet, plus $13 tv. It's the same damn deal I got 8 months ago. It only took 30 seconds or so... just say the 3 magic letters - A-T-T.

Hopefully they weren't smart enough to downgrade me back to 6mbps cable! :D
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Brandon Phipps, 13 Sep 2006 @ 9:04pm

Although the typical tyrannical business model, which apparently reigns unchecked upon the American and world public, seems to dominate not only the press, but our every day waking lives; it become apparent that the human factor must be firmly factored into the equation. An example presented for the ever present erratic variable…my cable installer, who happens to be a typically, independently contracted employee, installed my cable internet for a nominal charge of 60 dollars / month. A minimal charge for anyone who has seen the bill for a Telco’s T1, which ranges in the area of 1500 / month. He “failed” to install the cable filter onto the circuit. This for only the nominal price of a beer and a “nice rip off some very well procured kind”…those in the know will understand the pun. The modern business model has removed us from the obvious business model of the past…scratch my back…and I will share my hook up with you. Peace in this time of confusion. Brandon
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Under Cover Coming..., 13 Sep 2006 @ 9:27pm

Brandon Phipps
I hope you were using a fake name! Did you grow it at home?
Let's seal the deal, OK? Pass it to the right...
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DasGrmn, 13 Sep 2006 @ 10:37pm

True True True
I don't understand why DSL would do that either. I've seen people getting around the "new customer discount" by simply pointing out the obvious while stumping the customer service.
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Anonymous Coward, 14 Sep 2006 @ 3:24am

5 yrs with telus.... 35-45 bucks adsl + phone = 100$+
1 yr with shaw 45$ + cable digital = 100$+

now i have voip 24$ unlimited calls in north america
they phoned me last week and now offer the broadband service bye bye to shaw or telus

and lots of ess everything sucks tv...cheers.

= save 50 $
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Comcrap customer :(, 14 Sep 2006 @ 4:07am

Comcast is the SBC of current day
After playing the name change game with comcast I wanted to see how much they were making. Go check out the profit statement. They are making a killing. Like SBC did before the 90's. SBC has been eliminated from my home and someday comcast will be also.

The biggest problem in in some areas we have no choice if you want cable and internet then you get rapped by comcast. I feel there is a growing number of people that hate comcast enough to drop them at the next best choice. I will.

Then we have voip. They offer voip at about 35 month. Far better then the sbc of 68. But shop around. You can get viop service for less than 24 from vonage and packet 8. again rape.

Are they making us disloyal or just to hate comcast?

Personally, it is hate comcast. Why be loyal when you have such crap service.
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Caldwell, 14 Sep 2006 @ 8:21am

Always ask for a lower price !
...'Ivory Bill' is quite right -- your broadband provider will usually give you a discounted rate to stay with them if you 'press' them a bit ... and politiely signal them that you're about to switch to a less expensive competitor.

HINT: ... speak to the "Sales/Marketing" agent at your current broadband provider, rather than the normal 'Customer Service Agents'. The sales-guys do understand how tough it is to get new customers -- and they have the authority to offer low 'promotional-rates' even to existing subscribers.

-----------
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Xenohacker, 14 Sep 2006 @ 8:23am

If Thats What They Want
Cancel service every three months and get it again a day later for cheaper... Ok I got it :-)
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John Duncan Yoyo, 14 Sep 2006 @ 8:59am

I get a slight discount for getting the cable modem plus the lifeline cable service versus just having the cable modem. My suspiscion is that they make it up on the advertising rates and would rather have me as a counted cable subscriber.

I have DirecTV for my TV watching and maybe use the cable TV once every few months.
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