ISPs Are All Prisoners. Their Marketing Dilemma.

IanFogg | July 31, 2006, 12:18 PM

European ISPs are stretching the usage of words such as "free" or "unlimited" or "up to 8Mbps" in their marketing to gain (a brief period of) competitive advantage to acquire new customers.

Even this temporary advantage will only be realised if that ISP's competitors don't immediately adopt the same tactics. But market pressure will force them to do precisely that. This is an industry issue; it is not the fault of any particular ISP player.

For consumers to be able to choose between different services -- on the basis of either price, the value of bundles, or high speed or better quality for additional cost -- they need fair service descriptions. Consumers need market transparency.

Otherwise, ISPs that employ a clear, literal and conventional usage of words such as "unlimited" will find consumers picking similar sounding, but inferior, rival broadband services at a lower price. This will accelerate downward pressure in broadband pricing, which no ISP wants. It will also reduce consumer choice as ISPs will have little incentive to offer high quality broadband services.

This is the classic prisoners' dilemma (also see here for more explanation). For the ISPs to escape the prison of their current marketing approaches they must work together. If just one major ISP breaks ranks, they will all have to follow to remain competitive.

There is another way. A country's ISP association, or regulator or advertising standards body could intervene to enforce minimum standards that would benefit all ISPs as well as consumers. But for this to happen quickly and effectively, the industry must want central co-ordination to happen. These kinds of conversations are already taking place, but not yet to this extent.

The goal should be that ahead of the launch of new broadband services, the ISPs explain the new offerings to the regulator or advertising body, and agree the ground rules for marketing. The rules must be in place in advance of the product's availability. At the moment, such rules are lagging market innovation, which is hurting the efficient operation of the broadband market and damaging ISPs' revenues.

Read more:
- JupiterResearch's European Broadband Forecast which includes a broadband access revenue forecast.
- A related blog entry of mine: The Mis-selling of Up to 8Mbps Broadband.
- Or, my US colleague's view of actual vs marketed US broadband speeds.