The ability to create and augment net subscriber additions within the current customer base continues to be a major challenge to the telecom industry in North America across sectors. In the United States, industry watcher broadbandtrends.com analyzed the recently released FCC broadband subscriber report for year-end 2010.This analysis points to almost equal numbers of fixed and mobile broadband subscribers, with fixed subscribers at 84.5 million and mobile subscribers at 84.4 million.

Mobile broadband user numbers have been achieved on the back of a searing 64% year over year growth rate. However, overall broadband growth has largely been flat with the 3Q11 growth figures coming in at 1%. This seems likely to remain so with widespread market penetration, lurking fears of a double-dip recession, the housing market remaining muted and mobile technologies providing progressively faster broadband requirements across with multiple devices and access points.

As an industry too, it has now for a while faced the "convergence" onslaught. Convergence driven competition seems set to only grow with companies consolidating and "crossing over" established industry demarcations through strategic partnerships and device interconnectivity.

In this environment, cable Multi System Operators (MSOs) need to and are focusing on consumer retention strategies to staunch defection and promote subscription renewals.Enhanced cloud based services are expected to help stem customer churn for large MSOs like Time Warner and Comcast overthe next 18 months (e.g., its Xcalibur search and navigation system was announced earlier in June to replace its legacy set-top guides).

However, while the case for bolstering customer retention seems intuitively sound, in practice are MSOs cutting back on customer service programs? Indeed several quarters of negative subscriber base net additions for several MSOs (and no immediate visibility to better growth rates) has induced this cautious outlook towards customer care operations considered by business leaders, in many cases, as a cost of doing business.

In this scenario and given the tough market conditions and flat growth prospects, many telecom, cable and media players are pushing their contact center providers to cut down operational service cost and capability, and hand back correlating gains to the enterprise. This, when they should perhaps be finding ways to make them more effective by leveraging opportunities to contribute more proficiently with customer churn management, customer advocacy and revenue assurance strategies.

Take a closer look at the impact that a race to the bottom is exerting on customer care costs, pricing and overall customer management strategy and capability. Are we (enterprises and providers) drawing the connection between this trend and customer attrition? Although some hourly rate reductions can truly drive optimized contact center performance by tightening processes and forcing the adoption of automation/technology, in mature stage customer service processes the benefits become less discernible.

We know from decades of experience that there are obvious trade-offs. Outsourcing providers drop rates to win/retain a client’s business, but are those cuts really worth their weight in subscribers?

With billions in customer care budgets at stake, a significant component of operating budget reductions is "passing through" to providers in the form of declining rate structures. Often being missed in this are correlating reductions that take place in such a contact center’s capability and output level metrics like CSAT (end customer satisfaction) and FCR (first call resolution). These in turn have significant potential to affect customer retention and longevity. Perhaps this is a good time to begin appropriately factoring these into the equation as opportunity costs?

Here’s another perspective. A recent Minacs case study demonstrated that higher hourly rates for best in class FCR service providers:

• Drove a 5.4% annual cost reduction over the companies producing industry average results, and
• Demonstrated a 7.1% annual cost reduction over low cost companies producing industry laggard results.

This shows that the impact to “total cost of ownership” is significantly greater, when selecting a partner that can deliver best in class results across key performance indicators (like CSAT, FCR, and NPS*), even if that partner is more expensive than its competitors delivering industry average or industry laggard results. Best in class KPI operational output also drives correlated impact on:

• reduction in churn
• increase in average revenue per user (ARPU), and
• increase in customer tenure.

These need to be calculated as opportunity costs to the results that suppliers in each of the three performance categories produce (performance leaders, average performers and laggards).

It is clear that while customer care rate drops appear to be providing savings on the operations side of customer care, if you measure the direct, long term, and adjacent impacts around total revenue potential, Revenue Generating Unit (RGU)/subscriber adds, total cost of ownership, cost of customer retention, and cost of new customer acquisitions the picture can look very different.

With penetration levels at an all-time high within this sector, it is more important than ever to fully leverage opportunities to differentiate and enhance the service that is being provided to customers. It is crucial to understand that "service" often (and correctly so) pertains to content, access, flexibility and choice. The sooner MSOs and operators start to really look at what their customer facing service partners are really capable of, the sooner will they begin to extract the opportunities that can be leveraged from aligning supplier capability and costing with their own customer and revenue retention and augmentation goals. It is imperative we compute that total impact: to determine the actual benefit or detriment to organizational bottom line performance.