Sky hopes Ofcom broadband reforms will attract more customers
British telecom companies have long been dogged by a reputation for poor customer service and complicated processes.
This week, the industry braces for the introduction of the long-awaited ‘One Touch Switch’ (OTS) regulation, set to launch on Thursday after multiple delays.
The new rule, introduced by Ofcom, aims to streamline the notoriously cumbersome process of switching broadband and home phone providers. Under OTS, consumers need only to contact their new provider, who will handle the switch, eliminating the headache of liaising with both old and new suppliers.
But questions are emerging about how prepared the industry is. Last week, the regulator admitted it does not have “sufficient confidence that all customer switches will be able to follow the OTS process” by the 12 September 2024 deadline.
Amber Pine, managing director of Sky Broadband and Mobile, confirmed to City PM that, towards the end of trials, Sky was making around 60 per cent through the new system, and was ramping this up to attempt 100 per cent of switches at launch.
“We see about a million customers a quarter switch across different internet providers,” Pine said, adding that a more important statistic is that two-thirds of customers don’t bother to change providers.
“So we really want a one-touch switch to help us get those customers to switch,” she said.
Over 85 per cent of UK broadband customers are served by the ‘big four’: BT Group, Sky, Virgin Media, and Talktalk. Sky, the second largest broadband provider with 6.7m customers, trails only BT, which has 9.3m. Virgin Media follows, with around 5.7m, according to Uswitch.
Pine hopes that simplifying the process will counter the “apathy” many customers feel toward switching providers.
Telecom industry at a ‘tipping point’
However, research from Deloitte shared with City PM reveals that 42 per cent of households don’t know their broadband speed, a sign that many consumers are already content with their current service. Paul Lee, global head of TMT research at Deloitte, argued that the telecoms industry may be at a tipping point.
“After decades of supply (as measured by speed) struggling to keep up with demand, the industry is now facing the converse, with speeds, for both fixed and mobile, overshooting demand,” he said.
The research pointed out that faster speeds may no longer be necessary, as household sizes are declining across the UK, with more single and dual-occupancy homes. “Consumers now have the bandwidth they need, and speed is no longer a differentiator,” Lee explained.
And there are no guarantees that OTS will prompt a wave of switching, even when consumers are promised a quick and easy exit. Ofcom’s Switching Tracker shows that broadband switching rates have remained stagnant since 2020, with only 10 per cent of customers switching providers annually.
Sky’s Cityfibre deal
It comes as Sky plans to shift 80 per cent of its customer base to full-fibre by 2028 and has struck a deal with Cityfibre, a rival to BT’s Openreach network.
Commenting on the rationale behind the deal, Pine said Sky has increasingly been leaning into an internet protocol (IP) streaming model for its Sky Glass TVs and Sky Stream service. “Both those products rely on broadband,” she explained, “and if we can offer full fibre with those products.
“So we wanted to get into more homes and the way to get into more homes is the biggest alternative network that there is out there, and that is, at the moment, Cityfibre.”
Cityfibre, which currently serves 3.8m homes, aims to reach eight million by 2025, which could provide a boost to Sky’s expansion plans.
“It acts as a real complement to the network we already have with Openreach and their full fibre network as well. So we see it as a community to get into more homes, more homes with full fibre as fast as possible.”