J.D. Power: SMB a Growth Opportunity; Telecom ARPU Falling in Every Region

J.D. Power Report Highlights:

Enterprises with 500 or more employees are more likely to be satisfied with their telecom service, according to a report from J.D. Power, which sees the small- to medium-size business market as a growth opportunity for telcos.  Medium-size businesses had an average satisfaction score of 787, J.D. Power said in a press release.

The J.D. Power report, which grades larger telecoms and cable companies, gives Verizon and AT&T the highest marks.

Verizon exceeded the average satisfaction level and topped the rankings for all three categories of businesses – small, mid-size and large. The company’s overall scores were 762, 816 and 821, respectively, for small, mid-size and large companies.

AT&T came in second place and exceeded the average score in the mid-size and large categories, with scores of 792 and 820, respectively. But Cox came in second among the smallest businesses, with a score of 744. AT&T followed at 730.

Cox was the only cableco to have a score above the average in any of the three categories. Among the telcos, CenturyLink also failed to have a score above the average in any category – a situation that company will want to address whenever its merger with Level 3 closes and the company becomes the most enterprise-focused of all the major service providers.

J.D. Power attributes the higher satisfaction level of the larger businesses to several factors, including higher satisfaction levels with communication, cost of service and customer service. Those companies with an account representative assigned to their business have notably higher overall satisfaction, researchers noted – and larger companies are more likely to have account representatives assigned to them.

Service providers in general have been emphasizing the business market in recent years and that emphasis seems to be yielding positive results. Scores for all the categories of companies were higher than for a similar study that J.D. Power conducted in 2015. Scores for 2015 were 783 for large companies, 747 for mid-size companies and 715 for small companies.

The business market has been a particularly strong focus for cable companies, which do not have wireless businesses but do have modern fiber network infrastructure. The J.D. Power results suggest cable companies still have a way to go in gaining business customers’ loyalty and trust, however.

The J.D. Power results suggest opportunities for service providers that can excel at serving SMBs – and tier two service providers such as Windstream  and Frontier have been focusing on that market for a long time.  So was TW Telecom (which was acquired by Level 3, which is in turn being acquired by Century Link) and XO Communications which was acquired by Verizon.

Tier two telcos were not included in the J.D. Power report.

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Telecom ARPU Falling in Every Region

Average revenue per user in the telecom industry is falling in virtually every region

Closing Comment:

Perhaps, the negative growth in telecom is causing telcos to merge to acquire scale and to go into other businesses (like Orange investing in on-line banking instead of its core telecom business).

Fierce Telecom reported on July 24th:

CenturyLink, Frontier, Windstream suffer worst 3 quarters in history

CenturyLink, Frontier and Windstream have continued to see pressure over the past three quarters as shares at each of these companies dropped dramatically due to issues at each company.

“Shares in the wireline ILEC/RLEC space (CenturyLink, Frontier, Windstream) have endured the worst three consecutive quarters in industry history, with shares plummeting an average of -20% in 4Q16, -21% in 1Q17, and -24% in 2Q17 (we note another -5% in 3Q17 thus far), mostly from Frontier and Windstream as CenturyLink shares are being supported by the Level 3 acquisition,” Cowen said in a research note.

Overall, the three companies face the industry-wide challenge of balancing strategic service growth with ongoing legacy service declines and losing market share to cable operators.

Additionally, each of these companies has been dealing with specific headwinds in their businesses. Frontier has been challenged by integrating the properties it purchased from Verizon in California, Texas and Florida, while CenturyLink is dealing with a raft of lawsuits over alleged consumer fraud issues and Windstream is seeing declines in its legacy TDM-based wholesale business sector.

References:

J.D. Power: Business Telecom Satisfaction Highest for Largest Companies, Highlighting SMB Opportunity

http://www.jdpower.com/sites/default/files/2017108.pdf

http://www.prnewswire.com/news-releases/big-satisfaction-gap-exists-between-large-and-small-business-internet-and-phone-line-customers-jd-power-finds-300491000.html

 

 

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