Analysis: People power still rules in the ISP world

 

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Posted on 30 Jan 2007 at 16:57

Who cares?

Why should service providers care about the fallout between agreeing to acquire and the actual acquisition?

Because the consumer pound is a lot mightier than many think.

Firstly, and most obviously, it is now far easier for DSL customers to switch providers. Last year, communications watchdog Ofcom, launched a consultation with the aim of making it mandatory for ISPs to issue consumers with migration authorisation codes (MACs) so that they can more easily make the move.

But perhaps, more importantly, every business decision maker in the country is a consumer first and foremost. If they receive a bad deal when they're spending a little there is no way the service provider in question will be the lucky recipient of their lot.

Only last week Ofcom published the findings of its review of the niche ISP market, which revealed that these players, who boast a collective turnover of £1.15 billion, provide services to 30 per cent of businesses and five per cent of consumers in the UK.

The Ofcom study also revealed that 16 per cent of businesses and two per cent of households use a net connection supplied by a niche player.

Learning from the misfortune of others

Pipex is not the first ISP to be bitten by acquiring a company with disgruntled customers and it won't be the last. But there are lessons to be learned.

Customer service shouldn't just be targeted at users once they're already safely within a company's clutches, according to Richardson.

'Damage limitation [is key],' she said. 'Companies should try to ease the transition period and not make changes unless they are for the better. For example, if someone has had a bad experience and their ISP gets acquired even a phone call could help.'

It's also a case of not only knowing how many customers you have, or will have through acquisition, but knowing who those customers are, adds Richardson.

'You need good customer segmentation to fully understand [customers]. That's such a common mistake and can also be problematic in knowing who customers are and trying to assess their needs,' she said.

With analysts predicting more market consolidation around the corner, this issue may rear its head again and become more than a minor irritation for service providers and users alike.

'There's absolutely bound to be more consolidation,' said Richardson.

'And it's now even more difficult for the smaller players to exist as in the longer term it's not just about broadband and internet access, it's about services. The bundling aspect also hits smaller players. There are now less 'point' services and more merging of providers and what they can offer.

'Mobile companies are moving into broadband and ISPs are moving into VoIP and potentially IPTV so they are all competing against each other. It is part of a major shift happening that is causing a big rumpus in the market. The fact that they are all moving into each other's spaces looses the common contact with customers.'

Richardson concluded: 'Until recently BT still had a phone line with customers so still had a point of contact. With unbundling that goes out the window and that contact is lost.'

Author: Maggie Holland