Connected Consumer Survey 2018: fixed broadband retention and satisfaction in Australia and New Zealand

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1 Connected Consumer Survey 2018: fixed broadband retention and satisfaction in Australia and New Zealand Inigo Barker

2 2 About this report This report focuses on aspects of Analysys Mason s Connected Consumer Survey that relate to the behaviour, preferences and plans of consumers in Australia and New Zealand. In particular, it focuses on the behaviour, preferences and future plans of fixed broadband users. GEOGRAPHICAL COVERAGE Developed Asia Pacific Australia New Zealand The survey was conducted in association with Survey Sampling International (SSI) between July and September The survey groups were chosen to be representative of the broader online consumer population in Australia and New Zealand. We set quotas on age, gender and geographical spread to that effect. There were a minimum of 1000 respondents per country. KEY QUESTIONS ANSWERED IN THIS REPORT What are the most significant drivers of Net Promoter Scores (NPSs) for fixed broadband operators and which operators are particularly effective at scoring highly and why? What are the most significant drivers of fixed broadband churn and how can operators most effectively approach customer retention? Which value-added services have a measurable effect on customer satisfaction and churn intention? WHO SHOULD READ THIS REPORT Product managers and strategy teams working for fixed operators that are launching new broadband products aimed at the retail market, or operators designing their response to those of their competitors. Marketing executives and product managers for operators that are making decisions about the service design and its impact on customer retention of broadband bundles.

3 7 Customer satisfaction levels in Australia and New Zealand are lower than those found in other countries but incumbents perform quite well against rivals locally Assessing customer satisfaction is complex. NPSs, which measure consumers willingness to recommend a service to their colleagues, are one way to assess this. 1 In both Australia and New Zealand, altnets outperformed incumbents in terms of NPSs, more so in Australia than in New Zealand. Beyond this, comparing NPSs across different countries is generally inadvisable given that cultural aspects (which we cannot account for) probably play a part in shaping NPSs in different countries. At an individual country level, the following points stood out. In Australia, incumbent Telstra underperformed on NPS. Telstra s price and customer service satisfaction scores were the lowest in the market. Telstra respondents reported spending 13% more than the market average in order to get speeds that only matched the market average (the average speed reported by respondents that were Telstra customers was 53Mbps). Poor price satisfaction in part stems from relatively uncompetitive prices for some Telstra packages (for example, triple-play services) as well as high one-off fees. Also in Australia, operators Vocus (Aus) and Optus, for which respondents reported an average speed of 54Mbps, had the two highest satisfaction scores in terms of reliability, customer service, price and usage restrictions. Figure 3: Net Promoter Score (NPS) for fixed broadband providers, by operator/operator brand 2 Australia New Zealand TPG Telecom Vodafone Telstra Vocus Spark iinet Optus Vocus 2degrees Net Promoter Score (NPS) Source: Analysys Mason In New Zealand, Spark performed well for NPS compared to its peers, but 2degrees led all others in satisfaction scores for all service aspects that we examined (that is, speed, reliability, customer service, price and usage restrictions). In particular, Spark customers were dissatisfied with the price they paid. Spark respondents reported spending on average NZD96 (USD64) for their service compared to a market average of NZD90 (USD60). To reduce its dependence on wholesaler Chorus, Spark has been trying to migrate low-usage DSL customers to BFWA by offering capped BFWA packages at the same price as comparable capped FTTH offers. 1 Respondents were asked to assess the likelihood of their recommending their provider on a scale from 0 to 10. NPS is calculated by subtracting the share of detractors (those that rated their operator 6 or below), from the share of promoters (those who rated it 9 or 10). 2 Please refer to the appendix for sample size and relevant survey questions.

4 10 Service speed and reliability are also important elements of overall customer satisfaction; attitudes in New Zealand appeared more polarised than in Australia Speed and service reliability were also important in both markets but in Australia other service factors stood out. These nuances became clearer when we explored the direct relationship between satisfaction with different aspects and NPS on a country level. In Australia, as in New Zealand, customer service had the strongest link with satisfaction in both cases, this is perhaps partly because there are more potential points of failure in wholesale-dominated markets like these. Second in importance in Australia was speed/reliability we noted NPS generally increased by speed bracket although an NPS dip for the 24 50Mbps bracket suggests that the case for wholesalers like NBN to position their tariffs to encourage migration to higher speeds must be qualified. 1 Beyond this, usage restrictions and price were of similar importance. Most operators market data caps and this practice is increasingly problematised by data-intensive online behaviours. We also found that price variance was high; by operator, average prices ranged from AUD57 (USD42) to AUD83 (USD60). Figure 8: Results of statistical regressions on satisfaction with specific aspects of service against willingness to recommend a service provider, by country 2 Customer service Speed and reliability Australia New Zealand Price In New Zealand, while customer service had by far the highest correlation with NPS, speed was also important more so than in Australia. Indeed, in New Zealand, NPS uniformly increased by speed bracket. 1 The Ultra-Fast Broadband Initiative (UFB) has had a crucial role in driving available speeds (respondents self-reported average speed was 95Mbps), but there was significant speed variance from operator to operator. Usage restrictions Source: Analysys Mason 1 In Australia, NPS was 1 for panellists on less than 24Mbps, 7 for panellists on 24 50Mbps and +17 for panellists on more than 50Mbps. In New Zealand, NPS was 28 for respondents on less than 24Mbps, +10 for respondents on Mbps, and +18 for respondents on more than 100Mbps. 2 Please refer to the appendix for sample size and relevant survey questions.

5 Contents Executive summary Improvements to customer service are most strongly correlated with increased satisfaction Price is correlated with churn on a regional level but the picture is more nuanced on a country level Value-added services are not delivering the benefits they could Methodology and panel information About the authors and Analysys Mason

6 30 About the authors Inigo Barker (Analyst) is a member of the Consumer Services research team in London and works on the Video Strategies research programme. He previously worked in trade publishing and editing. He holds a first-class BA (Hons) degree in Classics from the University of Cambridge.

7 31 Analysys Mason s consulting and research are uniquely positioned Analysys Mason s consulting services and research portfolio CONSULTING We deliver tangible benefits to clients across the telecoms industry: communications and digital service providers, vendors, financial and strategic investors, private equity and infrastructure funds, governments, regulators, broadcasters, and service and content providers. Our sector specialists understand the distinct local challenges facing clients, in addition to the wider effects of global forces. We are future-focused and help clients understand the challenges and opportunities that new technology brings. RESEARCH Our dedicated team of analysts track and forecast the different services accessed by consumers and enterprises. We offer detailed insight into the software, infrastructure and technology delivering those services. Clients benefit from regular and timely intelligence, and direct access to analysts.

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