Wednesday, 27 October 2010

Virgin Media Speedtest: 50mbit only 2 percent more revenue.

As you know I've been arguing for simplifying the broadband offers to the French model of 1 price that gives the highest speed to all customers. My argument being this simplifies the marketing and the back office.

Chris Marsden spotted the Virgin Media broadband subscription numbers and notices that only 3% take the 50mbps subscription. Only 90,000 subscribers are willing to pay 10 pounds a month extra for the top of the line. Only 9 percent of customers take the 20Mbps version. So a grand total of 88% take the cheapest offer. The question then is, how much this brings in extra

Top of the line: 900k extra compared to the Medium and 1,350k per month compared to the simple version
Middle of the line: 3 million a month extra compared to the medium

So roughly 52 million pounds extra a year as the result of all that differentiation. All that compared to a quarterly revenue of 660 million for the cable business. A dismal 2 percent extra these customers bring in.

The biggest problem is to assess the costs side. Is it costing them more or less than 50 million to support the complexity. But I am willing to wager it is costing them in the double digit millions to support this. Just because everything they do has to keep in mind the three offers. It's not just the back office but also the print campaign. On top of it every temporary offer to tease the customer has to take this into account. It's a proper hassle.

So if this was a speedtest, would you really be racing for the 50Mbit offer to differentiate your product?

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