AVC Tackles A Challenging U.K. Satellite Broadband Market

AVC Broadband Managing Director Frank Tyler is confident the operator can build a profitable business but it is unlikely to reach the 80,000 subscribers it initially targeted for 2004. The operator, in conjunction with SES Astra, offers consumers a broadband Internet via satellite service, and it is targeting a section of the U.K. population that is unable to access terrestrial broadband services.

While reluctant to give the exact subscriber numbers in the first few months of operation, Tyler told Satellite News in an exclusive interview that, during the next 12 months, he expected the company to amass tens of thousands of subscribers. That projection appears to indicate that the operator is likely to be well short of its 80,000-subscriber goal.

However, Tyler still is happy with the operator’s performance so far. Circumstances have changed since the initial forecast.

“BT made certain announcements at the beginning of the year, which changed the climate considerably but strangely enough, it has given us a bigger focus on where we can go,” Tyler said. “For example, BT announced 570-odd exchanges that will never be enabled — which is around 100,000 homes. On top of that, there is a 3 percent to 10-percent ADSL black spot, which translates into about 750,000 homes. That is now our market. We are broadly pleased with the numbers we’ve got back at the moment.”

Installation for the service usually costs around $319.7 per consumer, although the recommended price is more than $450. The price for the service is $54.8 a month, with a speed of 512 Kbps. The company is reviewing its pricing strategy, and Tyler hinted there are likely to be developments in this area during the next few months.

Leveraging Partnerships

AVC Broadband, which is part of AVC, clearly has a challenge on its hands to build a profitable business. The company wants to leverage its unique position in the U.K. market. AVC is a partner with BSkyB, and it performs around 300,000 BSkyB customer installations a year. The fact that it does these new installations for Sky across the U.K. is a huge advantage when offering a satellite broadband service.

This relationship also gives AVC a key competitive advantage to succeed in a difficult marketplace. “We have a help-desk infrastructure, and an installation infrastructure that we can leverage,” Tyler said. “If you are starting from scratch, and you are doing a nationwide satellite broadband product, I think it is very difficult. If you are saying you are nationwide, and you want to serve people at opposite ends of the country, you need to have a presence there, no matter how many customers you have. It is very difficult to jump in the way we did in January and be nationwide if you haven’t got the advantages that we have.”

The relationship with SES Astra also helps. Tyler explained, “The fact is the ASTRA satellite is a unique selling point. One of the other things people are worried about is having two satellite dishes or having a larger dish. If they already have a satellite dish, all we have to do is change the LMB (Low Noise Blockdown Converter). That is a massive thing. That is crucial, really.”

Key Relationships

With the relationships with BSkyB and SES Astra in place, if anyone is going to succeed in the U.K. consumer broadband marketplace with a satellite offer, it is likely to be AVC. However, it clearly had a baptism of fire in the early months.

Marketing the service is key. SES has made a considerable investment in marketing, and Tyler admitted the operator is “in the process” of finding out what types of marketing are working. “We need to get to rural areas. We have run some campaigns in East Anglia (southeast England) with a reasonable amount of success. We have taken out a lot of advertisements in the PC press, and those are still running,” he told us. “We’ve run local newspaper and local radio advertisements into East Anglia. We are doing lots of the country shows, nearly every week throughout the summer. These shows are attracting rural people, and some have been more successful than others.”

Consumer Acceptance

While the operator is present at a number of U.K. regional events, the key will be to gain consumer acceptance for the service. “The purchase of broadband is beginning to become more sophisticated,” Tyler said. “At one time, all people looked at was price. Lots of companies were going in at a very low level, and then when [customers] looked at what [they] got, the price was more than [they] thought.”

He continued, “People are more sophisticated about those things now. There will be other technologies and as they use the service more, there will be more consumer acceptance towards new technologies, such as satellite.”

Overcoming any negative perceptions of satellite broadband also is key. “We will overcome any negative perception in satellite broadband by getting a critical mass of customers. Once you have got those and they are happy customers, things will be fine,” he said. As things stand today, AVC enjoys a low churn rate — about 2 percent – resulting from ramped-up customer-care efforts.

With a more sophisticated U.K. marketplace, another key will be to boost the quality of service. AVC has a partnership with U.K. ISP Euphony to boost its service. “They provide us with an ISP, so we can provide to our customers a very cheap ISP,” Tyler said. “They can get ISP connectivity for 50 hours a month, and we will look to extend that.” He also mentioned “doing some other stuff around the satellite,” which could cut down on ownership costs.

(Frank Tyler, AVC Broadband, 011 44 1438 794100)