Broadband profits very thin as providers fight for business

Competition for broadband customers is now so intense that service providers’ profit margins are being cut as thinly as possible.

New research by broadband analysis company, Point Topic states that broadband alone is not enough to attract and retain customers. Due to price cuts and declining volumes of broadband sales an increasing number of operators are moving into the arena of bundled services.

“Customers are being offered good value with these bundles,” says Pamela Varley, Analyst at Point Topic, “but the operators are having to cut their margins to the bone to provide them.”

Their study of 250 broadband operators across the globe shows that in Western Europe the standard DSL double-play offer (broadband and voice) is now marketed for an average of $58 per month (£28.77), which is only $6 (£2.97) on top of the average standalone broadband service at $52 per month (£25.97). In general, the standard DSL double-play bundle is between 11 per cent and 20 per cent more expensive than the average broadband-only package.

“Despite the limited extra revenue, operators find they have to offer bundles because it’s a great way to increase stickiness, that is, to retain customers,” says Varley.