UK Post Office Launches Commoditized Comfort Broadband Aimed at Late Adopters

| October 26, 2007 | Consumer Broadband Services - Europe | Competitive Intelligence Report

| Analyst: Ben Tudor

Current Perspective: Positive/Neutral
Vendor Importance: High
Market Impact: Moderate

Event

October 24, 2007 – The Post Office, part of the UK’s Royal Mail Group, will launch two broadband products, targeted at customers between 50 and 65 years - a group that tends to be excluded by other providers. Users will be able to buy the service at 14,000 local Post Offices nationwide. The two products – Broadband Standard at GBP 15.95 and Broadband Extra at GBP 25.95 per month align with the Post Office’s HomePhone. Backhaul, support and CPE will be provided by BT Wholesale in a five year deal.

Analytical Summary

• Current Perspective: Slightly positive on the Royal Mail’s launch of a broadband service, because it aims at an untapped audience and offers the convenience of paying at a local post office counter. The age group targeted will be more comfortable with an established brand, and aggressive pricing helps too. However, the commoditized service comes at a high price for the Post Office and has no unique selling features.

• Vendor Importance: High to the Post Office, as the company needs to adapt to the changing needs of its customers – and can also capitalize on brand loyalty in a commoditized market. The product targets the people that use the Post Office most regularly, and offers the option to pre-pay for broadband and phone use over the counter, important for those that don’t trust direct debit and prefer to deal in cash.

• Market Impact: Moderate on the broadband market in the UK, because the ‘big six’ ISPs in the UK account for 80 percent of customers, and the Post Office is unlikely to change this with a white label service bought off the shelf from BT. Early trials in 124 Post Offices have been positive, with 1,000 customers in two weeks, but it remains to be seen how this will translate into sales after launch. While the Post Office hopes to capture a new segment of the market, there’s a strong chance that once this new customer segment gets used to broadband Internet, they will shop around for better deals once the 12 month contract term is up.

Recommended Competitor Actions

• Rival service providers should work with organizations that have traction with 50-65 year olds. For example, Saga already offers holidays, insurance and a number of other services to over-50s, as do plenty of other companies. Offering a white label Internet service through one of these trusted brands could reduce the Post Office’s impact. The same goes (as mentioned above) with partnering with firms that have an established high street presence.

• The likes of BT, Plus and Orange should emphasize customer satisfaction with their existing services. ISPs need to make installation, subscription and help lines easy for older users – unless those levels already exist, in which case they should make a lot of noise about it. Particular emphasis on problem-solving and troubleshooting – and emphasis of this in marketing and press activities – will attract technophobe consumers.

• Competitors need to differentiate themselves with features and content. The Post Office is offering plain broadband with the option of voice. Every one of the big six offers more than this, be it video on demand (BT Vision), combined TV and Internet (Sky Broadband) or mobile telephony (Orange). The Post Office’s offering seems stuck in 2004, and much could be made of this.

• An alliance with a utility provider could create a rival widespread local distribution system. The postman comes to your door every morning, so why not get broadband via your friendly milkman? Competitors should look creatively to other services and utilities that are in regular personal contact with the older generation.

Recommended End User / Customer Actions

• Consumers who have historically been wary of broadband, or flummoxed by complicated or disingenuous offers from ISPs should definitely consider Post Office Broadband. At the very least, it’s unlikely to be worse than BT’s own services, since it’s actually BT providing the service.

• More educated consumers - including those who are experienced broadband users – will probably not stand to gain quite as much from choosing Post Office Broadband.

CLIENTS ONLY

Current Perspective

Competitive Positives and Concerns

Recommended Vendor Actions

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