Service providers need to put more service into the broadband arena and reposition themselves in order for the market to expand, according to the chairman of the Service Provider Industry Association (SPAN), John Kranenburg.
He said broadband had quickly entered the mass market and caught ISPs off guard. As a result, he was concerned that it was still being thought of as an infrastructure, when it needed to be marketed increasingly as a service.
“ISPs are not yet utilising the full market potential," Kranenburg said. "Uptake will be stymied unless service providers stop promoting a ‘one-size-fits-all’ position for broadband services, start better differentiating services, and explaining the differences to customers.
“If there is no change in the market positioning of broadband by service providers, disillusioned customers will walk away.”
Kranenburg said there were a lot of uneducated consumers in the mass market who thought broadband would automatically deliver a complete range of services.
“This perception is potentially damaging to the industry because broadband is merely an access ramp and the services come additionally and depend on a number of applications and factors,” he said. “With mass market status, service providers must invest more in responsible market education.”
In addition to offering education and product differentiation, Kranenburg said service providers should also work more closely with application providers and resellers.
“The issue of network matching should be seen as an opportunity rather than a problem,” he said. “By helping customers realise the benefits offered by new advanced IP-network based applications, such as voice and video streaming, the service provider industry will open the opportunity to become the service integrator of choice within the mass market segment.”
Kranenburg suggested the issues of service and innovation applied particularly to smaller ISPs, who would no longer be able to rely purely on reselling because prices were dropping and creating margins pressure.
He said smaller ISPs were better positioned then larger counterparts to be an interface with the public, respond to requests and target niche markets.
“Smaller ISPs have built their business by being responsive to early customer demand, and need to continue this responsiveness,” Kranenburg said. “They are ideally placed to be resellers for other ready-made broadband-enabled services from providers such as Optus and Comindico but can also have more of a direct interface with the public and cater to early adopters in the marketplace. They could effectively become the responsive retail layer, which every healthy market space needs.”
A potential market that smaller ISPs could target, he said, would be small business, with custom-designed services such as online accounting packages.
Managing director of Pacific Internet, Dennis Muscat, agreed that ISPs were not yet fully utilising the broadband market potential.
“At the moment we are all after land grabs, so to speak," he said. "We are all busy trying to chase the low paying customers, and that needs to shift for the market to expand. Like in all open markets, the ones that go down the path of trying to meet with what the big telcos are doing will just go down.”
Muscat said the company still had further to go in order to fully capture the market, but insisted Pacific Internet was already customer focused and responsive.
“Half of our business is customer service and although it’s expensive, it pays you back in the long run,” he said. “Based on the findings from our barometer [online broadband survey], we are currently targeting SMEs and offering them custom services. What we are hearing from them is ‘don’t get cute or fancy. Just provide value for money’. They are not necessarily after the cheapest price, but they want good service for a reasonable price. Smaller ISPs are naturally set up to offer this.”
But the Australian Internet Industry Association’s CEO, Peter Coroneos, said Kranenburg was a little ahead of the times.
“Right now all the evidence says that supply can’t meet demand," he said. "Down the track, when we reach saturation, then we might need to develop stronger and targeted marketing propositions. But now, here, in May 2004 we need to meet the demand and not expand the market until we have done so."
Managing director of Netspace, Stuart Marburg, also expressed doubts and said concentrating on niche markets was not a complete answer for small ISPs.
“Targeting niche markets would make us marginal players,” he said. “We are customer-focused and have come up with innovative approaches, but that’s not enough.”