Wednesday, 7 March 2012

Bundle providers steal O2 Broadband subscribers

WHAT's wrong with Be and O2 Broadband?

That's the question executives at Telefonica must be asking themselves after the ISPs' quarterly figures showed a 27,600 drop in customer numbers.

This is the third successive quarter in which Telefonica, which owns the O2 broadband and Be broadband brands, has suffered a net drop in its user numbers; the comms giant has lost 46,300 broadband customers since January.

Turning tables

Telefonica's results don't give separate details for the two broadband businesses, making it hard to tell which areas have been hardest hit.

In either case, though, it's a strange turn of events for an ISP that prides itself on being one of the UKs most consistent broadband providers, both in technical and customer service standards.

When Telefonica acquired Be Broadband back in 2006 it cited "Be's superior broadband operations and services" as the factors which would to enable O2 to launch a "high-quality broadband capability" to its UK businesses.

At first O2 succeeded, building a fiercely loyal customer base which quickly outgrew the number of subscribers on Be's books.

It managed it by offering the Holy Grail of broadband deals: cheap, unlimited downloads, fast speeds and free top-notch customer service.

O2 mobile users also got, and still get, a £5 per month discount, making it even cheaper.

Since then, though, there have been a few changes: several price hikes have led to a significant increase on those initial market-beating deals and the provider has taken away its promise of completely unlimited downloads.

For some customers, this was enough reason to jump ship but broadband analysts reckon this isn't enough to explain the reduction.

Bundles of strength

While O2 Broadband have been busy losing customers, BT, Virgin Media and Sky have all been merrily adding users left, right and centre.

The reasons behind the changes are not completely clear although it is highly likely that new services and strong offers available from these providers are responsible.

"As the owner of the UK's highest quality ADSL2+ network O2 attracted customers looking for the fastest, best quality broadband available: now those people are finding they can go to Virgin Media, BT Infinity and even to Sky Unlimited," said Julia Kukiewicz, editor of Choose.

"Some of those same providers, as well as brands like Plusnet, are also offering cheaper services than O2. It's just a very competitive marketplace right now and O2 have been sitting back."

BT Broadband is doing well pushing its BT Infinity broadband packages out to new customers and using its advantageous market position to get an (enormous) head start on other providers in the superfast broadband market.

At present, BT has around 300,000 subscribers on its superfast Infinity service, nearly half of O2 and Be Broadband's entire customer base.

Virgin Media is also seeing steady growth for its 50 MB and 100 Mb superfast services further suggesting that O2's lack of a superfast option could be holding it back.

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