ANALYSIS

Service Providers Compete on Technology – Why Not Support?

The competitive environment that characterizes today’s broadband and value-added services landscape benefits the growth of many digital lifestyle products and services. Consumers are also primary beneficiaries of increased competition among carriers. Case studies reveal that when at least two service providers on relatively equal footing in terms of offerings are actively battling to acquire and retain customers, the end results tend to be 1) lower prices; 2) additional value-added offerings, and 3) improved customer support.

At the same time, however, the increasing complexity of IP (Internet protocol) services, home connectivity and convergence — all associated with today’s bundled services strategies — stands as a significant risk to deteriorating customer service and increased customer support costs. The bottom line is that if broadband service providers are going to rely on more advanced services and customer premises equipment to support their service strategies, they should carefully consider how they are going to account for the inevitable increase in customer support costs wrought by both increased and longer phone calls to their help desk agents. Additionally, the increasing numbers and types of value-added offerings paradoxically create greater expectations from the consumer for support and hand-holding.

Service Providers and Customer Support

Until now, the growth of certain digital lifestyle product categories — and specifically home networking — largely has been driven by a direct consumer pull. In other words, as the average number of home computers in households increased, and as broadband Internet access became much more prevalent (it is expected to surpass 50 percent penetration in U.S. households this year), consumers increasingly saw value in purchasing and installing home networking equipment that allows them to share the broadband service among the distributed home computers, and various other IP devices. The growth of households with home networks (from fewer than 3 million at the end of 1998 to more than 30 million at the end of 2007) was led by consumers and was mainly a pure retail strategy. Service providers have had little influence up to now, but this scenario is about to change.

As broadband and television operators in particular seek to differentiate their basic packages and offer new connectivity-related services to their product mix, the demarcation point will move farther inside the home. In the old days, a service provider’s demarcation point was clearly defined as the side of the house where the network interface device (NID) was located. If customers wanted any assurance that problems inside the home would be addressed, they purchased an additional service (if one was even offered) — an inside wiring insurance plan. Now, however, the lines between the termination of the service provider’s access network and the customer premises equipment are blurring — thanks to the customer’s desire for home networking and the service provider’s desire to offer more compelling services.

This action is being taken for several reasons. First, history suggests that an investment in more advanced customer premises equipment such as a DVR-enabled set-top box increases average revenue per user and heightens the chance that customers will connect to more services initiated from the service provider’s head-end (video-on-demand and other interactive programming exemplify this concept).

The second reason that service providers are taking much more of an active role in deploying home networking equipment is their desire to take a much more proactive role in the provisioning, installation, configuration, monitoring, and troubleshooting of the in-home network and its attached devices. As our research from the report “Networks in the Home: The Global Service Provider Play” shows, broadband service providers areresponsible for supporting the home network and the services that run onit, regardless of whether they were actually involved in deploying it tothe home! So, while in-home connectivity remains a very viable revenue generating application (enabling multi-room entertainment or voice service, for example), the short-term requirements from service providers are going to revolve around ensuring that their customer support costs do not balloon out of control, while still keeping their customers content.

Advanced Devices

To account for the new services that the broadband carriers will deploy, home networking and customer premise equipment will evolve beyond basic broadband and data sharing to include new voice applications (voice-over-WiFi and/or mobile-to-fixed-line-handoff services) and distributed entertainment. We see opportunities for more advanced set-top boxes and other third-party storage devices (such as media server network attached storage devices) to fulfill a dual role of providing secure backup and distributing entertainment content in and outside of the home.

In addition to supporting the value-added services, the home networking and customer premise equipment will also evolve as the carrier’s requirements for more proactive provisioning, installation, monitoring, and troubleshooting grow. We fully expect that this equipment — as deployed and managed by the service providers — will need to account for the following requirements: 1) It will need to be deployed more quickly and with enhancements for so-called “zero-touch configuration;” 2) It will enable the service provider to easily upgrade customers to additional value-added services — on the customer’s budget and desire; 3) It will proactively monitor the devices on the home network and perform basic upgrades in firmware; 4) It will troubleshoot and automatically fix common problems with network equipment; and 5) It will offer a much more proactive view for customer service agents in the event that a subscriber calls the help desk.

In Conclusion

Service providers are facing a paradox as they approach the development and deployment of digital lifestyle solutions including bundled services packages, interactive and bandwidth-intensive entertainment offerings, converged communications services, and home networks. On one hand, these offerings are absolutely essential to their ability to differentiate themselves from other providers in a growing competitive market. They will also serve as the cornerstone for creating greater value to their customers and their businesses, as they can expect an increase in subscription as well as ad hoc spending from their customers (for value-added features such as on-demand content or other offerings).

At the same time, the data clearly define some worst-case scenarios in customer support challenges. Although call volumes escalate very quickly, customer support managers are under increasing pressure to reduce their costs before they scale out of control. Achieving this goal will require new investment in automated and proactive monitoring across their entire network, from NOC (network operations center) to — and into — the home. It will mandate that they are active participants in the development of industry standards and closer partnerships with a variety of industry players — from those developing customer support software for the operation support system (OSS) to companies developing network enhancements and improvements to network efficiency, to the customer premises equipment manufacturers, who are more responsible than ever for guaranteeing a certain level of intelligence in their end products.

The ideal customer support system will span the entire range of the service provider’s network and should include capabilities that scale from simple automated troubleshooting solutions to adaptive, automated systems management components, all the way to advanced knowledge databases that help customer support agents build more collaborative capabilities in customer problem solving.


Kurt Scherf studies developments in home networks, residential gateways, digital entertainment, technology development in the housing market, and residential and building management and controls at Parks Associates.


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