Telecom regulators should broaden their lens for more consumer value

06 March 2019 Consultancy.eu

Governments and regulators that want to create value for consumers in the telecom space and society need to take a much broader lens than just the price levels, according to a new study by global strategy consulting firm A.T. Kearney. 

Telecommunication services have over the past years evolved to become one of life’s necessities. The technology has transformed the way people live their lives, the way they communicate and share knowledge; it provides access to key services, and enables employees to work remotely. In fact, telecom services and internet connectivity is so important nowadays that many people would rather give up on key lifestyle needs such as holidays, chocolate or sex before having to forego broadband access. This importance is further illustrated by the rapid rise of the smartphone revolution: in most Western economies, over 85% of the 18+ year population owns a smartphone.

Much of this massive value is however ignored in most regulatory regimes, according to researchers at A.T. Kearney and Liberty Global, who teamed up to co-create the report ‘Viewed through the lens of the consumer’. The researchers assert that when assessing telecoms markets, regulators and governments would do well to let go of the old mantra that consumers are primarily interested in pricing. 

“The common perception is that price and the competition level in the markets are the most significant factors for consumers,” said Stef Oud, a partner at A.T. Kearney, to Consultancy.eu. “And while these factors are important, accounting for between 30% to 35% of the consumer’s overall demands, our study shows that the larger remainder is attributed to other factors.

Factors contributing to telecom value creation (by country)

To come to their findings, the researchers* surveyed the opinions of more than 8,000 consumers in eight European countries: Belgium, France, Germany, Ireland, Netherlands, Poland, Switzerland and the UK. They asked consumers to identify the value they assign to broadband services across three categories. Price & Flexibility refers to the monetary amount consumers have to pay for telecom services and flexibility, with respect to the ease at which consumers can switch providers (contract duration, ease of switching etc.).

Collective benefits captures among other things the quality of network coverage and the level of innovation, while individual benefits span aspects including speed of services, customer service quality and the availability of tailored bundles for mobile subscriptions. 

Not surprisingly, price and price-related elements (e.g. such as number of months-for-free and promotion prices) are found to be very relevant for a consumer at the moment of purchase. Typically, the importance of price typically ranges from 30% to 50%, depending on country flavours. In Germany, pricing and flexibility related components accounted for 28% of the total influence mix, in France 30%, in the Netherlands and the UK 29%, and in Poland 30%.

A broader lens

“But consumers are not constantly in ‘purchasing mode’. In fact, they spend most of the time using the network and services. So it's the benefits that come into play in the latter phases that dominate,” said Oud. Collective benefits such as coverage and quality of connections came out on top as the most important consumer determinant, followed by individual benefits like a tailored bundle and speed of the network.

“If the ambition is to arrive at policy regimes that create benefits for both society and consumers, governments and regulators are advised to successfully balance all prevailing factors valued by consumers – including coverage, network quality, innovation, speed, (contract) flexibility – rather than narrowly focus solely on the price of telecoms services.” concluded Oud. 

The report, which launched in the run-up to the Mobile World Congress in Barcelona, caught the eye of several leaders at the annual get-together for top executives in the telecommunication industry. Among others, the CEO of LG highlighted the importance of the findings to mainstream commercial models in the industry. 

* The authors of the report – Stef Oud, Hans Boezel, Hanno van der Zwan and Frank Bilstein – work for A.T. Kearney in the Netherlands and Germany.

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