The B2C market of ISPs and TV providers in the CIS countries

Though each country has unique laws, mindset, and business environment, most countries are quite similar in terms of competition for subscribers. A competition level is considered high when eight or more ISPs may serve each household. The normal level is three up to five ISPs per household. Large cities are the most oversaturated markets. What’s interesting is that Moscow, for some reasons, is missing in the list and even among the top ten regions, and until recently (2017) the level of competition here was below average. The first place in the CIS market is held by Saint Petersburg. Many companies failed to compete here and were forced to close or sell their branches. For example, ER-TELECOM (DOM.ru), one of the largest federal ISPs, invested heavily in building its own network and sales department to attract new subscribers, but eventually was forced to buy small local competitors, thereby duplicating its network, just to get a slight chance of keeping its market positions in Saint Petersburg, not to mention becoming the market leader. When working on an oversaturated market, the ISP’s chances to survive strongly depend on its sales department. For example, only Rostelecom’s sales department for door-to-door canvassing in St. Petersburg numbers 200–300 employees, ER-TELECOM has 150–200 door-to-door canvassing managers, and there are also about 10 local smaller companies, seven of which also have such departments (except for standard call centers, online sales, sales across social media, etc., and paper advertising in mailboxes or information boards in hallways). Just for information: the official population of Saint Petersburg is 5.4 million (up to 8 million with suburbs), or up to 3 million flats. In order to visit each apartment and offer the Internet access services at least every three months (it’s the most efficient frequency for direct sales), you will need 3,000,000 / 3 (cycles) / 22 (working days) / 100 (apartments per shift) = 455 employees across the city, but many houses restrict access to apartments with special intercoms, additional doors, concierges or secured internal yards. Not to mention that in some buildings a particular ISP can be a monopolist and protect its sphere of influence using administrative pressure. As a result, some customers receive calls or visits 2-3 times a month and regularly find lots of annoying leaflets from ISPs in their mailboxes. The average ARPU in Saint Petersburg is about $6.5.  

In general, RUSSIA is the most oversaturated B2C market in telecommunications (its ARPU ranges from $7 to $12, with 3,000+ ISPs in total). The harder-to-reach the regional market entry is, the higher is the ARPU. Most providers connect new customers for free (again, except for hard-to-reach areas) and may also provide the endpoints (Wi-Fi routers and TV set-top boxes) for rent in large cities. It is generally accepted that ROSTELECOM, BELTELECOM, KAZAKHTELECOM and other large players are the most aggressive competitors. But the truth is that they are rather clumsy and use «carpet bombing» (ad campaign which is, as a rule, not always effective as it aims to reach as many people as possible) without adhering to a specific small region/market; as a rule, they can be dangerous for those who try to compete with them using their own methods. They were really tough when everyone needed conventional telephony, but with the advent of mobile phones, competitiveness of these giants began to decline. Today, they remain competitive mostly due to dumping prices and administrative pressure, and try to develop new competitive advantages on the B2C market as they previously had using conventional telephony as their key lever of influence. Sales departments of many large companies are not customer-oriented and simply try to earn more bonuses for attracting new customers at any cost. This is why many subscribers who tried out the services of these giants remain dissatisfied with them for a long time and switch to smaller ISPs. But even an excellent sales department is not enough: each ISP must also continuously improve their services in order to survive on this highly competitive market. And even the prices aren’t crucial — successful ISPs begin to compete using packaged offers: Internet Access + Interactive IPTV + CCTV (Video Surveillance)or even Mobile Telephony (small ISPs establish partner programs or offer corporate prices) + Intercoms. 

For example, conventional Cable TV is no longer a significant advantage: in addition to this service, subscribers want to skip ads, watch missed TV shows, put movies on pause and so on — and not only at home on a large TV, but also while on the go from a smartphone or tablet, e.g. in a subway, while fishing or in a forest. 

Just for information: normally, growth of the customer base across multi-apartment buildings (when business processes within the company are mature) should be 1% of the installed capacity — not from the free installed capacity, but from the total one (if the penetration rate is below 50%).

Our platform called IPTVPORTAL is already used by 300+ ISPs on the CIS market. And we can prove that such metrics are achievable despite the competition level: from our native oversaturated market of Saint Petersburg to smaller towns with only two ISPs per household on average.

We have been engaged in this business since 2003 and know that the development of any Internet access market follows the same model regardless of a region or country: all market players go through the same stages of competition (±10%), all successful companies do the same things, and all unsuccessful companies do the same mistakes:

  1. Poor quality of service and unstable Internet access. Networks built without sufficient redundancy for future workloads and lacking the necessary upgrades — as a result, ISPs lose their existing subscribers due to rapid increase of new subscribers and thus rapid increase of workloads.
  2. Lack of services and customer focus (as the number of competitors grows, such ISP will simply lose all its subscribers and disappear in a matter of months). Inconvenient payment procedures, poor customer support, etc.
  3. Inefficient tools for attracting new subscribers: the costs for attraction per new subscriber do not pay for the short lifecycle of the subscriber (poor business processes and wrong priorities across sales departments). This will not affect you until any strong competitors emerge — sales departments appear only in the companies which survived in the first stiff battles for subscribers: the higher the competition, the more departments and sales areas you will have, and the more accurate calculations and plans you will need — otherwise your own sellers will gobble up your company’s profit.
  4. Focusing on a single service (Internet access only) instead of launching new related products on the market (such as IPTV, CCTV (video surveillance), hardware sales, advertising on your network or any other additional sales of services). Many ISPs are too lazy to learn something new or do it yourself — they often leave it too late and then try to keep up with smarter competitors (and usually fail).

Our company’s business is built in such a way that we earn money only when our partners earn money and grow both in terms of customer base and monthly revenues. This is why we are forced to dive deep into the ISP business and constantly search for new opportunities, business cases and business models for ourselves and our partners. All markets are quite the same in terms of competition for subscribers — the only difference is the competition level/stage: but regardless of the current competition (low, high or even absent), all market players follow the same way and do the same mistakes. Today, the CIS market in general is already saturated: almost every inhabitant uses the Internet access and TV services. The key feature of such markets is that an ISP can increase its customer base only by luring away the existing subscribers of a less competitive ISP. In particular, the IPTV market segment grows mainly by taking clients from the conventional cable TV segment, allowing you not only attract new subscribers from less competitive competitors, but also get additional revenues from the existing subscribers. And if you provide package offers, IPTV becomes an anchor service that helps reduce the subscriber churn. Taking into account that the picture quality, available set of channels and service level in these segments are generally the same, the only reason for the subscriber churn to the IPTV segment is functionality. In other words, ISPs which fail to provide their subscribers with modern functionality will leave the market very soon.

The B2C market of ISPs and TV providers in the CIS countries

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