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Prices softening in SMB market

Thu, 06/19/2008 - 8:50am
Brian Santo

There’s not enough evidence to definitively state that there’s a price war going on, but some service providers are cutting the fees they charge small- and medium-size businesses (SMBs) to maintain market share in an economy that is lagging.

As a result, SMBs spent less money in 2007 than during the previous year on communications services, according to J.D. Power and Associates’ “2008 Major Provider Business Telecommunications Study.”

Approximately 81 percent of SMBs are spending less than $1,000 per month for data services, compared with 76 percent a year ago.

Frank Perazzini, director of telecommunications at J.D. Power, said of the price cuts, “Data services are increasingly vital to business operations regardless of size, and the ability to receive more services for less money helps these businesses cut costs without reducing headcount.”

The study also finds that the rate of switching providers among SMBs and large enterprises has declined slightly since 2007. In 2008, 14 percent of large enterprises switched providers, compared with 17 percent in 2007. Among SMBs, only 8 percent switched providers in 2008, compared with 10 percent in 2007. Additionally, 38 percent of large enterprise customers report that it would be "somewhat difficult" to switch providers, compared with 22 percent in 2007.

"Switching data service providers is not always cost effective for large businesses that have many employees and locations to consider," Perazzini said. "Unless a business is assured a highly favorable price and superior service, the additional costs and coordination, combined with the current economic struggles, make it more likely that many businesses will wait to change providers until they have a handle on the economic outlook for their company and the major providers in the industry."

J.D. Power did not say that this trend was a direct result of bundling. The company did find, however, that the number of SMBs that intend to bundle telecommunication services has increased to 50 percent, up from 48 percent in the 2007 study.

Meanwhile, let the bragging begin: In the business services market, Cox Communications ranks highest for customer satisfaction among the SMB crowd, and Qwest took top honors for making enterprise customers happy, according to the J.D. Power report.

The research company surveyed customers of AT&T, Qwest and Verizon on the telco side, and Comcast, Cox and Time Warner Cable (TWC) on the MSO side.

The study measures customer satisfaction with providers of telecommunications data services, such as cable modem, DSL, T1, T3/DS3, Ethernet and frame relay. SMBs are defined as companies with two to 499 employees, and large enterprise businesses defined as companies with more.

J.D. Power measured six factors, which themselves were ranked in order of importance: performance and reliability, sales representatives/account executives, billing, cost of service, offerings and promotions, and customer service.

In the SMB market, Cox excelled in five of six factors, lagging only in promotions. Cox was followed by Verizon and TWC. Next, in order, were Comcast, AT&T and Qwest.

In the large enterprise business segment, Qwest was followed by Verizon, AT&T and Comcast. Cox and TWC were not ranked, J.D. Power said, because the sample size of customers was too small.

More Broadband Direct:

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• Prices softening in SMB market

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• Dish Network shares slump on heels of AT&T debt repurchase

• ADC's Expo dance card includes VOD, SDV, DOSIS 3.0

• Optimum Lightpath, TWC share MEF award

• Mobile WiMAX products ready for prime time

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• CableCares raises more than $900K for NoLa

• iSuppli: IPTV not stealing N. American satellite subs . . . yet

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• Broadband Briefs for 6/19/08

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