Top digital consumer trends impacting the telecom industry

While the consumer market remains the primary revenue driver for telcos, changing communication habits and digital service demands are reshaping the landscape. Drawing on insights from Omdia’s recent Digital Consumer Insights (DCI) survey of over 20,000 consumers in 20 countries, this blog outlines the key consumer trends shaping the future of telecom.

Our addiction to online video continues unabated

Video is key to many digital applications, and we are consuming more of it than ever. Based on Omdia data, at the end of 2023, the average daily TV and video viewing time for major developed markets was 370 minutes, an increase of 30% since 2013. Over 50% of this time was online. This is backed by the DCI survey that showed a continued increase in viewing online video. 56% of respondents had increased their use of online video services such as Netflix - 19% significantly so. In addition, 58% of respondents had increased their use of other forms of social online video content such as YouTube - 20% significantly. All these figures have increased compared to the same survey in 2022.

Increases are especially acute in the 19 to 24 and 25 to 34 age groups, which, when combined, stated a 64% increase in usage of OTT video apps such as Netflix and a 68% increase in more social video apps such as YouTube.

Broadband is the service least likely to be cut, but media is where consumers will spend more

Although the smartphone is an essential consumer device, the majority of online video and other media applications are consumed in the home via a fixed broadband service. It was during the COVID pandemic that consumers realized just how reliant they had become on fixed broadband. In the latest DCI survey, only 1% of respondents with home broadband are now likely to cut their service, and only 8% are looking to cut monthly spend. However, only 20% stated that they are looking to increase their broadband spend, the lowest response of all the services listed. Where consumers are more inclined to increase their spending is in media services, especially around gaming.

Fixed-broadband speed has dropped in importance, replaced by high-quality Wi-Fi

Ever since broadband was first launched, marketing has been focused on speed. Consequently, broadband speeds have increased exponentially. However, as high-speed services become abundant, consumers become resistant to offers simply pushing just more speed. This is clearly shown in the DCI survey, which shows that as the respondents’ broadband speeds increase, their demand for even higher-speed services dwindles.

However, the survey also shows that regardless of their broadband speed, a high-quality home Wi-Fi experience is appreciated by all respondents. 85% of respondents ranked a good Wi-Fi service as important (i.e., 8 or more out of 10), and this result was consistent regardless of what speed of service they were on. Investing in, and promoting, a high-quality home Wi-Fi experience is therefore now essential to broadband operators.

Cybersecurity is the most important broadband value-added service (VAS)

Fixed broadband is central to telcos’ fixed line businesses, but with markets heading towards saturation, it is critical that telcos look to either increasing average revenue per user (ARPU) or moving into new growth areas.

When it comes to broadband value-added services, then a comprehensive whole-home cybersecurity service is the broadband value-added service that consumers are most willing to pay for, with 77% of respondents to Omdia’s DCI survey stating they would be happy to pay more for a comprehensive solution. It is also clear from the survey that certain segments are keener than others (for example, parents with young children) and there is a clear correlation between the number of connected devices in the home and willingness to pay.

Speed still rules when it comes to 5G though

On the mobile side of the telco business, speed remains king. For 81% of DCI respondents, gaining a faster mobile data speed is the main reason for upgrading to a new 5G service. Additionally, a faster speed is the feature that consumers are also most likely to pay extra for on mobile. In the DCI survey, speed accounted for the top three responses as to what consumers would pay extra for on mobile. The most popular response, by some margin, was an overall faster speed with 63%, followed by a ‘VIP download’ speed feature at 30%, and then a temporary speed boost option at 29%.

It’s not all about download speed - uplink is gaining traction

Download speed remains important to consumers for many applications, video streaming especially. However, with the rise in popularity of other applications such as social media, videoconferencing, cloud gaming etc., upload speed capability is also rising in importance. In terms of fixed-broadband features, upload speed was just behind download speed in terms of importance, with 38% of respondents ranking it as 10 out of 10 in importance versus 42% for download speed. On the mobile side, 19% of respondents stated that they would pay extra for a VIP uplink speed feature.

Loyalty schemes are effective differentiators, but can be confusing

Many mobile operators offer some type of loyalty scheme and, overall, these do seem to have a positive impact when it comes to which mobile operator to choose. In the DCI, 35% of respondents stated that loyalty schemes have some influence over mobile service purchasing decisions, with 28% stating that it influences it highly. However, only 36% of respondents stated that they make use of their telco loyalty scheme, with the main reason for not using it (44%) being that they don’t know how. Of those that do use it, the majority (58%) stated that they found it of value with relevant and valuable discounts on offer, with a further 36% stating that it was at least of some value. Once they are onboard therefore, consumers do seem to value their telco loyalty schemes and this is likely to have a positive impact on churn. To maximize the impact of such schemes though, telcos must look to make their schemes less complex and far easier to use.

Consumers still don’t really get the smart home

The main barrier to greater smart home uptake is that consumers just don’t understand the true benefit of such solutions. For smart devices, typically between 30% to 60% of DCI respondents stated that they didn’t see a need for them. For smart home services, the figure was 40%. Omdia believes that this is largely because, in most cases, there is a viable non-smart alternative solution that is far cheaper. If service providers wish to sell more smart home products, then the value of such solutions must be increased, and then that value must be made crystal clear to the consumer.

High cost is the next biggest barrier – but don’t make smart home cheap

In the DCI survey, cost was the second biggest barrier to greater smart home devices or services adoption. A smart lightbulb, for example, can be 5 to 10 times more than a standard lightbulb. Without a clear reason as to why such premiums are worth paying, then cost will always remain a significant barrier to greater smart home uptake.

Vendors can obviously look for ways to reduce costs, but this is often to the detriment of the quality, and hence value, of the final solution. To really shift the dial, Omdia believes that rather than purely focusing on reducing costs, the focus should be on increasing the value of smart home use cases. To achieve this, vendors and service providers should concentrate on improving device integration and reducing technology fragmentation as this will allow for increased number of use cases, greater personalization, and UI simplification. Initiatives such as Matter may help in this regard, but work is still likely to be required to make developing more personal use cases more effective and simpler to set up and use.

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