Will Broadband Prices Differentiate even more and become dynamic over the Next Decade?

Broadband pricing will unlikely follow a static trajectory over the next ten years. Unlike industries such as air travel, housing, or fashion, where dynamic pricing models adjust to demand and cost fluctuations, broadband pricing has remained relatively rigid. However, focusing on more granular pricing and promotion strategies to find the right balance for growth could redefine the landscape as the industry evolves.

Price differentiation, still rare in the U.S. broadband market, is becoming increasingly critical with significant investments in fiber infrastructure, particularly in rural areas. The varying costs associated with fiber buildouts in different geographies, long drop cables for some customers versus proximity to fiber infrastructure for others, highlight the need for flexible and reflective pricing models.

Drivers for Price Differentiation and Dynamic Promotions

Dynamic pricing, prevalent in other sectors, holds immense promise for the broadband industry. A further differentiation in pricing and promotions will likely be driven by factors such as:

• Geographic Location and Competition: Locations requiring higher capital investments and limited competition versus locations with fewer investments and more competing infrastructures.
• Volume and Bulk Agreements: Large-scale partnerships, bulk agreements with high adoption rates and/or guaranteed revenues, or due to a shared and optimized wholesale infrastructure.
• Customer Perception on Broadband: People's willingness to pay for high-end Broadband services still varies greatly. Price points will increasingly reflect this with a variation in speed and the level of customer support provided to get subscribers onto the network and upgrade over time.
• Brand differentiation and Quality: Just as in other industries, established and trusted brands can command premium prices. Customers will pay a premium to get a specific brand or ensure quality and reliability.

Pricing Trends in Global Markets

United States
Broadband prices in the U.S. are significantly higher than in Sweden, influenced by investments in customer support and service experience. The emphasis on customer satisfaction has contributed to relatively high NPS (Net Promoter Score) scores. However, opportunities for automation and self-service remain underutilized. Many customers also prefer resolving issues instantly online, upgrading services, or changing addresses without speaking to a person.

Substantial investments in rural broadband infrastructure will make adopting a differentiated pricing model and a more dynamic promotion strategy crucial to sustaining a network expansion with high adoption rates and acceptable financials.

Sweden
In contrast, broadband prices in Sweden are much more differentiated and, on average, a lot lower but have shown a recent upward trend. The telecom sector in Sweden is at the forefront of fiber broadband coverage with highly automated operations. However, they have struggled with poor customer service and lower NPS scores than their peers in the US. Despite being highly digitalized and tech-savvy, Swedish customers sometimes prefer personal interaction when resolving issues—a process hampered by overreliance on automated ChatBot systems.

The upward trend in pricing is likely to continue as an improved customer experience becomes a central priority for market players.

Lessons and Opportunities

For the U.S. Market

• Implement location- and service-quality-based pricing models and differentiated promotions to reflect network investments, competition, and customer perception. Focus on self-service solutions, address-specific service models, and automation to enhance customer experience.

For the Swedish Market

• Take inspiration from U.S. innovations in customer experience to improve service visibility and overall customer satisfaction.
• Introducing price differentiation aligning with service quality, customer expectations, and willingness to pay.

Future Focus

Both markets can learn from each other and stand to benefit from improved customer experiences and sophisticated pricing and promotion strategies, but in different ways. Robust software solutions can facilitate these transformations, enabling operators to optimize operations, enhance satisfaction, and cater to diverse customer needs. The broadband industry can achieve sustainable growth and adaptability in an evolving market by embracing pricing and customer interaction innovation.