The Old Bundle is Dying: ISPs are Turning to New Bundles

This is an excerpt from Parks Associates research service, Smart Home and Security Tracker. Want a Demo of this service? Contact me [email protected] for more information.

Residential broadband growth overall is set to slow by over 50% in the next few years, with much of the new subscriber growth going to new provider types such as MNO fixed wireless providers. The residential internet space is more competitive than ever before, as fiber rollouts and 5G network buildouts pressure the market from both the high and low ends. Consumers as a whole are less willing to pay for the highest quality of service than they were during the height of the pandemic – ISPs must be prepared to increase the value of their offerings or risk growing churn.

ISPs need to differentiate based on the reliability of their networks, the usability of their apps and websites, and the additional services they offer. Bundling is increasingly important to attract and retain subscribers, but also allows ISPs to grow their share of the $340B+ home services market – including home internet, mobile, home phone, security, and pay-TV and OTT video services. While the importance of broadband to consumers has not decreased, inflation and a potential recession may trigger consumers to downgrade their plans or switch providers.

To help drive increase customer satisfaction and drive stickiness among subscribers, ISPs are launching new services that capitalize on the value of their networks. This includes services such as OTT video services, managed Wi-Fi, whole home cybersecurity, or smart home functionality as part of the bundle.

Comcast and Charter Spectrum have introduced MVNO mobile services, which have been highly popular among their subscriber bases. Many ISPs are offering value-added services either for an additional fee or as part of a broadband service tier. These typically build on the core value proposition of connectivity.

Consumers value more and more services from one provider

Consumers report the most satisfaction with a combination of traditional and VAS services. When only receiving VAS and no traditional services, receiving multiple VAS helps to further boost satisfaction.

• Subscribers with 5 or more VAS services have an average NPS of 43
• Higher downlink speeds are also associated with a higher NPS, with Gigabyte subscribers reporting a NPS of 28 on average.

Streaming video services are popular among all demographics of internet service subscribers regardless of age or income level. Those with children at home are somewhat more likely to receive streaming video from their ISP than those without children, but a large percentage of those without children still receive the service.

Other services are more highly adopted among the tech-forward segments of the population, including younger and higher-earning households as well as parents. Smart home households are particularly interested in VAS offerings, especially around home networking.

Smart home households and remote workers are two market segments that ISPs target heavily due to their need for quality internet connections and networking equipment.

Many VAS offerings are available free of charge

Free services may be offered to ISPs’ entire customer bases or included in certain service tiers to help differentiate offerings. These services offer benefits including improved customer satisfaction, fewer truck rolls (in the case of technical support), and differentiation against competitors and other tiers of service.

Adoption of paid services are more common among younger consumers, higher-earning households, those with children at home, and smart home households. Smart home households are particularly interested in smart Wi-Fi capabilities and remote access and automation tools, while parents are particularly interested in parental control capabilities and data use management tools.

While few consumers pay for technical support and monitoring services, these services have proven invaluable for ISPs in lowering customer support calls and reducing truck rolls. This has led to an overall increase in customer satisfaction as well as reduced operating costs.

Consumers value streaming video, smart Wi-Fi, and technical support

Bundling together multiple value-added services offers a large boost to subscriber net promotor scores, with the greatest increase among subscribers with 5 or more VAS. Consumers report positive NPS with bundles of two or more services, are neutral with one service, and have negative NPS with no services.

Consumers are increasingly expecting their ISPs to offer value-added services, leading to the impact of some of these services declining over time. ISPs that do not offer value-added services risk negative customer perception and satisfaction and face a higher degree of churn.

Wi-Fi 7 is here, but Wi-Fi 6 has the advantage

Wi-Fi 7, which was released in January 2024, represents significant advancements in wireless networking technologies. It supports significantly higher data rates, potentially reaching up to 46 Gbps, which is nearly five times that of Wi-Fi 6. Wi-Fi 7 also boasts improved latency, and additional network band (6 GHz), and better spectrum efficiency. However, the move to Wi-Fi 7 will likely be slow, as Wi-Fi 6 will satisfy the needs of most residential users at a lower cost. Additionally, incompatibility with older devices may impede features or performance.

Two recent releases from TP-Link show the stark differences between Wi-Fi 6 and 7:

• Deco XE70 Pro AXE4900 Tri-Band Wi-Fi 6E Mesh System, offering high-speed connectivity of up to 4.9 Gbps across six streams and coverage spanning 7,200 square feet. Leveraging Wi-Fi 6E technology, it uses AI-powered Wi-Fi Mesh optimizes network performance. The system includes premium security features and is available at a promotional price of $299.
• Deco BE75, a Wi-Fi 7 tri-band mesh router capable of delivering high-speed internet across three frequency bands. Priced at around $529, the router comes with two units to establish a mesh network and features multiple high-speed ports for wired connections and includes security encryption standards such as WPA-Personal, WPA2-Personal, and WPA3-Personal.

The advantages of both Wi-Fi 6 and 7 over previous Wi-Fi generations is the capacity to handle traffic seamlessly. The average home now has 17 connected devices, and half of consumers report problems with their Wi-Fi network. Several conditions cause some households to be more likely than others to have problems. These include children at home, high diversity of usage, heads of households with low educational levels, and the presence of 3+ smart home devices in the home. Manufacturers and service providers have an opportunity right now to gain additional revenue through services that keep home networks working properly, and the current Wi-Fi generation is well suited for those services.

This is an excerpt from Parks Associates Smart Home and Security Tracker. This annual service, including monthly and quarterly deliverables, provides market intelligence on the competitive US Smart Home and Security landscape by sizing and forecasting the overlapping markets and providing an analysis of key industry trends, market shifts, and player announcements on an ongoing basis.

It also provides competitive analysis of key product categories in the Quarterly Market Update: Platforms, Products, and Forecasts (Excel).

Market Trends & Competitor News – The monthly report below covers announcements from major industry players and highlights the potential impact it will have on the market.

o?? It helps competing brands understand how the actions of different companies may impact their own bottom-line.

o??The research includes insight on the activity of major tech giants in the smart home space, Amazon, Google, Apple, and Samsung

o?? It also includes insight on the activity of and the major smart security providers and platforms ADT, Alarm .com Comcast, Brinks, Vivint, SimpliSafe, and others.

Market Platforms and Products Landscape – Part of the quarterly deliverable, this deliverable provides an aggregated view of the primary market activity surrounding a specific product category. It includes

o?? new product releases

o?? major feature updates to existing products

o?? tracks announcements of new market products

Smart Home and Security Device Product Forecasts – Delivered 2x a year as part of the Forecast Landscape, this research provides a 5-year forecast of unit sales and revenue for the leading product categories in the smart home market through 2029. It helps brands assess market growth rates. Forecasted devices include

o?? Smart video doorbells

o?? Networked cameras

o?? Smart door locks

o?? Smart smoke/CO detectors

o?? Smart garage door openers

o?? Outdoor lighting fixtures with cameras

o?? Smart water leak/humidity detectors

o?? Smart water shut-off valves

o?? Smart Thermostats

o?? Smart lights

o?? Smart plugs/power strips

o?? Smart lighting control systems

o?? Smart in-wall outlets/switches/dimmers

o?? Smart sprinklers/irrigation controllers

This is an excerpt from Parks Associates research service, Smart Home and Security Tracker. Want a Demo of this service? Contact me [email protected] for more information.