Dec 2, 2008 1:01 PM,

Surviving the Recession: The Residential Market

By Carol Wilson

[Note: This is the first of a 5-part series exploring how service providers can best navigate the slow economy.]

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After years of selling faster speeds and more high-definition TV channels, Comcast is now pitching cheaper services, offering a triple-play bundle of basic voice, video and data offerings for less than $30 each, with the promise that this isn’t introductory pricing that goes up later. Qwest Communications last week rejuvenated its cheapest broadband offerings, pitching 1.5-megabit-per-second DSL at $14.99 a month and 7 Mb/s at $24.99 a month.

Realizing consumer budgets are under stress as more people lose their jobs and more homes face foreclosure, telecom service providers are shifting their pricing and marketing strategies. But are lower prices enough to retain customers? This is a critical issue for telecom companies in particular, since they already face accelerating access line loss and declining DSL sales. Poor performance during the recession could risk losing ties to some households altogether and make for a much bleaker future.

How can a telco survive the recession and even consider strengthening market position and consumer loyalty? Here is some of the industry’s best thinking on the subject:

1. Focus on broadband service. This is now the most critical consumer offering. “We have seen the dramatic emergence of broadband as the service consumers will spend money on,” said Rory Altman, Director with Altman Vilandrie & Co., industry consultants. Telcos should retain and even try to grow their broadband offerings, with better pricing, special retention offers for existing customers who try to cancel, and service packages that either bundle broadband with wireless or sell broadband “naked” without a wireline phone.

“Everybody sells DSL without voice,” Altman said. “I think you are going to see them market that more aggressively.”

Kurt Scherf of research firm Parks & Associates agrees. “It’s the broadband connection that is going to be that important connection,” Scherf said. “If they lose that, they’ve really lost the ability to go back and serve that customer. They have got to tout the comparable or even better broadband speeds to their customers as a way to compete against cable’s core competency.”