Orange cuts broadband pricing following flat sales

Analysts and insiders claim Orange's 'free broadband' push left the public cold

Orange has cut its broadband pricing following flat sales figures, which analysts and industry insiders have blamed on consumer savvy and increased competition.

Parent company France Telecom released its Q3 results on Thursday, which showed that Orange's "free broadband" promotion and extensive rebranding have not had much effect on sales. Subscriber numbers went up slightly, but average revenue per user (ARPU) declined.

The figures also showed that, since the promotion began at the end of May, internet connectivity revenues have remained more or less static, with fewer customers signing up for broadband than leaving dial-up.

Orange announced a major cut in its broadband pricing on Thursday, with its standalone premium "Broadband Unlimited" package falling in price from £27.99 to £19.99.

The "free broadband" push came shortly after France Telecom merged its Wanadoo internet service provider (ISP) into its Orange brand, and immediately followed a similar offer from Carphone Warehouse. Other, similar offers were subsequently made by Sky and ntl:Telewest. As with those other offers, Orange's version called the broadband "free" because it was linked on to another subscriber service, in this case a mobile phone contract.

On Thursday, one industry insider told ZDNet UK that the public are "pretty aware of what's free and what's not free", adding that this had also "been evident with Carphone Warehouse to a certain extent". The source went on to say that there was "always going to be a big fight to sustain growth in a new brand that people don't associate with broadband".

The insider went on, "The public might be looking for something more sophisticated than 'free' — 'free' is not as potent an offer as some might think."

A similar view was expressed by Ovum analyst Carrie Pawsey, who suggested that well-publicised connection delays at Carphone Warehouse following its "free broadband" offer may have put some customers off the concept as a whole.

"Because we've been flooded with so many free offers, the customers are becoming a bit more savvy," she told ZDNet UK on Thursday, adding: "Ultimately, these products and services aren't free of charge. Operators will have to think of a new way to offer services other than 'free'."

Pawsey also warned that a severe broadband outage suffered by Orange's customers a week ago would also "have a significant impact on how their product is perceived within the market".

On the mobile side, Pawsey also pointed to the increasing success of Hutchison's 3 network which, despite early difficulties with handsets, has cheap deals and is now a more attractive proposition for customers.

"3G is some way down the line and the products and services are becoming more developed," she said. "Operators are finding they have to compete with 3 [and each other] and match those [prices]."

However, Pawsey also noted that Orange had increased its 3G customer base to almost 730,000, which led to data charges becoming an increased percentage of revenues.

Orange's recent flat showing in the UK could be a "blip", according to analyst Ian Fogg, from Jupiter Research, who told ZDNet UK that Orange's initial free broadband promotion had not been "particularly compelling" as it offered maximum speeds of only 2Mbps — it is now available at up to 8Mbps.

Fogg — who said he was "not surprised" at Orange's price cuts — also pointed out that Orange's broadband offering could have suffered when it was rebranded twice in the last two years (it was Freeserve prior to becoming Wanadoo).

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