Episode 190

Highlights of the Annual Rural Video and Broadband Industry Study

May 6, 2021

Episode Summary

Innovative’s annual study uncovers insights on keeping video service going, offering speed increase trials and much more. For the full report, email scottm@innovsys.com.

Show Notes

Transcripts have been lightly edited for clarity and readability.

 

Andy Johns: What are the latest trends in rural video and broadband? That’s what we’ll be talking about on this episode of StoryConnect: The Podcast. My name is Andy Johns, your host with WordSouth. And once again, I am joined by Scott Meyer, who is Director of Marketing for Innovative System. Scott, thanks for joining me.

Scott Meyer: Yes, happy to be with you.

Andy Johns: Now, Scott has been on before. You guys probably remember him. He’s one of our frequent fliers on StoryConnect: The Podcast. But the reports that he has helped develop and the information he shared with us from those reports are always some of the most listened to episodes when we go back and look at the year. So I wanted to be sure to have Scott on again. I’m looking forward to getting into the report with you here in just a minute, Scott.

Andy Johns: I did want to say before we get into it too much, just a teaser for our listeners out there that I am really excited about our series that we are doing on the customer journey. Carrie Huckeby is leading those. Those episodes will start coming out in May. So you’ll want to be sure to tune into those. She’s got some of the big thinkers and some great ideas, great minds from around the rural broadband space where she’ll be talking with them about customer experience. It’s a six-part series, and they just really cover a lot of good ground to help you really think through the entire customer journey that your customers and members are looking at as they sign-up to do business with your company. So I’m really excited about that series coming up. I’m sure you’ll want to tune in. It’ll be on the same feed as StoryConnect: The Podcast. So as you are listening here, they’ll just start showing up for you in May.

Andy Johns: So, Scott, thanks for sitting through the little mini-commercial there, but let’s get into the report. So what you got to share with us today is the Annual Rural Video and Broadband Industry Study that you guys are doing. Tell us a little bit about the study.

Scott Meyer: Ok, very good. Well, we have been doing this, actually, this will be our sixth year that we’ve done this. And we’ve always felt that there’s a lot of data out there from urban America as far as behaviors with video and broadband, but really there had been a void, until we started six years ago, with what the rural American consumer is doing with their video watching, their viewing and how they use their Internet. So we started that back in 2016. And we have continued up to this point, and we’ve been able to really gather some excellent information that — our purpose is to provide this information to our loyal customers, and even people who aren’t our customers, so that they can look at this and maybe use it to make some strategic decisions on the types of video they may offer: a traditional IPTV, cable, streaming. Or different things they can do with their broadband: expansion into more agricultural-type deliveries of broadband, as well as doing a better job at managing the in-home experience. And it’s really been a very well-received report.

Andy Johns: Excellent. Well, I know, Scott, one of the results of this study is always something that folks have been looking forward to the last, like you said, five or six years or so. So what were some of your top line takeaways? You know, when we’re looking at the study as a whole, I’m sure there’s a lot we could dive into. But, you know, if somebody asks you passing in the hallway at a conference — that one day we’ll be able to go to again — what would be your top couple of takeaways that you would tell them that you had taken away from this study?

Scott Meyer: Well, I think maybe Andy, I would like to break this down into video and then just a takeaway or two from broadband. One of the interesting takeaways from the video portion was that 49% of rural Americans today, almost half, are using some type of streaming service. But when we asked the question, how are you receiving TV service, we allow them multiple responses. So out of those 49% who were streaming, 22% of them also had other ways of getting TV. And when you add it all up, 65% of rural Americans are still, in addition to subscribing to streaming, 65% of rural Americans are also subscribing to some type of traditional IPTV, cable or satellite video. So we found that to be a real interesting takeaway. The second interesting takeaway from the video portion was when we asked demographically their satisfaction — and we use a 1 to 10 scale. One meaning “completely dissatisfied” and ten meaning “completely satisfied.” On that 1 to 10 scale, the highest satisfaction rate came from those who have streaming service and a complimentary IPTV cable or satellite service. So if we take that and just kind of make some assumptions, we believe that a customer like who you guys serve as your marketing arm or who we serve as a telecommunications vendor, we think that if you’re going to get into video and stay-in video, the best chance that you have of being successful is to give your customers a choice that best fits their lifestyle if you’re in a position to do so.

Scott Meyer: And as far as the broadband, just to kind of summarize some of the things that really surprised us in the broadband, was we found that 85% of the people who have a local cable, which could be a local IPTV company or cable company, 85% of those people use that same company for their Internet.

Andy Johns: Interesting. That’s a key point.

Scott Meyer: Yes, very. Yes. And really the takeaway from that is that there’s a trend, there’s a movement, there’s a lot of discussion about companies just exiting video altogether. And there’s valid reasons for exiting video: content costs, ever-changing technology, not knowing from one month the next what new streaming service is going to come online. But the risk that a local video operator that has broadband as well runs by getting out of video, runs the gamut right now not only of regular competitors, other cable companies and satellite, but now we have low-orbit satellite. We have the Elon Musk project. And when we do that, if they don’t have something to keep them attached, with like a video play would do in a bundle, then they run the risk of just totally losing that business altogether, and it’s quite likely that they would lose that business altogether. So that’s one of the Internet takeaways. A couple of other things that I think were, again, a takeaway that’s nothing new; we’ve done this before…

Andy Johns: Let’s go back Scott, if we can, because I think that’s a really big point, and something that both the telcos that we work with and the electric co-ops who are getting into broadband, that’s a question we hear a lot about folks whether or not to do TV. So to restate that fact again, to make sure we get it right. You said 85% —  well, I don’t want to repeat it wrong, so do you mind repeating that one again?

Scott Meyer: Sure. Well, yeah, and let me frame the question up. This was the question that was asked. “For Internet, do you use the same company that you would use for TV service?” We had 803 respondents, and the percentage indicating that they did use the same, 85% were local cable. 77% national cable. 31% satellite dish, which is not overly surprising. But an overall percentage, 48% use the same company that they use for their TV service.

Andy Johns: Ok. All right. So what that says is a pretty significant number of folks there. If they just for whatever reason — whether it’s ease of use or billing or whatever — it seems like are preferring to stick with the same provider for both video and Internet. So that’s interesting. And that percentage number was what again?

Scott Meyer: 85% for local cable providers.

Andy Johns: Ok. All right, very interesting. OK, well, sorry to get us sidetracked there, but I did want to restate that and make sure because I think that will be news to a lot of folks. So that’s interesting.

Scott Meyer: Sure. Yes. And given the fact that we had over 800 respondents, that really does lend to a high degree of accuracy. The other really interesting takeaway from the Internet perspective, and we’ve asked this question over the years, but we did see — and this could be a pandemic-driven response too — but we asked the question, how interested would you be in a free trial of faster Internet for one month to see how it impacts your online experience? And we had a very high rate of responses for this as well, 738. And overall, 36% — over a third — said that they would like a taste test of their provider’s fastest Internet. And why is this important? It’s important because when that free trial ends, absolutely there will be a percentage of those people that will pay that service provider extra monthly dollars to keep that faster Internet. And that’s a big deal. That’s increased annual revenue that could be significant for most companies.

Andy Johns: Absolutely. So that’s big. And this is a little bit tougher to do in a podcast where we’re not able to show folk those numbers up there. But so, 36% of the folks answered that question that, yes, they would like to try a one month trial at the top speed. And folks out there who have done this before probably know what take rate they usually get when they give people a sample like that. The example I use, and forgive me, Scott, if you’ve heard me use this one again, was the way when they were building the Lincoln Highway from coast to coast in the United States, they didn’t have the money to build the whole thing. So what they did — and it was used with Rockefeller money and Carnegie money and all that, you know, the usual suspects there with projects in the early 1900s — but when they’re building it, they went ahead and built sections of it instead of just building, okay, we can only build 500 miles from Washington, D.C. out to wherever Illinois. They were trying to go all the way to San Francisco. So what they did is they paved with the new nice roads a couple of miles between a lot of big cities. And so when the folks from those cities would travel, they would get that sample of the new nice, smooth roads. And all of a sudden they started demanding more of it from their cities. And that’s how they got the whole highway funded from one side of the country to the other. And it’s a long way of getting back to the idea that, you know, we’ve seen over and over again with folks, that we work with giving people a taste of what the Internet could be like with, you know, the higher speeds they have available. That’s how you get people a lot of the time to really realize what they’re missing out on and how good their experience could be. So sorry for the history lesson there, but I think it’s applicable.

Scott Meyer: It is very applicable, Andy, and you know, the thing of it is if I personally was in a position of management at a service provider, if not annual, it would be a biannual promotion that I would run. Because we’ve seen this time and again, and I’ve actually presented this over the years at various conferences. And I’ve done a raise your hand if you’ve done this promotion. And it’s surprising, I get a very small handful, not very many. And then when I ask the follow-up question to those that raise their hand, did this increase your annual revenue? And every single one of them said yes, that it did.

Andy Johns: Absolutely. Well, let’s get into a few of the other things. I know one of the things this study always looks at is the number of folks who are, when we’re talking about non-streamers, which continues. You know, many of us have been using things like Netflix for, I don’t know, seems like years now. But there are other folks, and I think you had mentioned the study found there’s still a lot of folks that have not jumped into the world of streaming entertainment yet.

Scott Meyer: Yeah, and, you know, and surprisingly, everyone when we asked the question, which best describes how you receive service in your home, we had 807 respondents, so everybody responded, and the breakdown was 26% of streamers [said] that they don’t have any other service. 22% of the streamers had TV service like we mentioned, cable, IPTV, satellite. But then 43% of rural America have no streaming service whatsoever.

Andy Johns: Say that number again. 

Scott Meyer: It’s 43% of rural Americans do not have any type of streaming service whatsoever. And I think it just proves the point that we believed all along. It’s not that rural America isn’t streaming because the data shows that they are. It’s just they’re not heading that direction in as fast of a rate as people in more urban areas, which, again, I think there’s a lot of this that is affected by demographics as well. The older Americans, they’re starting to stream. And it’s kind of like the comparison back when, you know, in the early days of cell phones and smartphones and now, I mean, you can go to any senior citizen center and you can see an elderly person banging away on their smartphone. I mean, they’re going to get there, but it’s just not going to happen as fast of a rate as maybe in other areas.

Andy Johns: Sure. And this may be out of the scope of this study, but were there any conclusions drawn there? Is it an access issue? Is it a just interest issue? Did the study get into anything about why folks might not have tried streaming at this point? Because I feel like the information or the knowledge and the streaming companies have put a whole lot of money into making sure that everybody is aware of it. So were there any conclusions drawn or anything in this study to look at why?

Scott Meyer: Well, I think we can actually draw a fair conclusion from this, and I’ve personally, because, you know, Innovative Systems, we have 800 customers, a large market share. By customers, I mean service providers — different privately-owned communication companies, telecommunications co-ops. So I got a chance to go to conferences or even now virtually speak to a lot of our service provider customers. And they’re telling us that that 43% of non-streamers that have a traditional service, that’s what they want. They’re not ready yet for an app-based product, which requires them to possibly change input on their television, which requires them to manipulate apps, which is a different environment that they’re not used to. And it’s more a matter of choice than not having the access to it.

Andy Johns: Ok, yeah. For folks that have been flipping that channel for, you know, in a similar way for decades, it is a pretty big switch to ask them to access a different app for every different program they want to watch or that kind of thing. I can understand that. Sounds like there’s still some work to be done on the marketing communications front, because what we’ve seen is that streaming is one of the top reasons why people are willing to upgrade to those higher speed packages in addition to work from home and, you know, school from home and those sorts of things. So getting folks to utilize at a higher rate of people using the streaming services would seem like a good way to get people to upgrade to those higher speeds.

Andy Johns: Like everything else, Scott, you know, there’s really no corner of anything, and it seems like modern society where the pandemic from 2020 and still going here in 2021, didn’t play some part of a role or influence some stats. So what are some ways that you can look at this study and say that you think, you know, Covid and all of the ripple effects and everything there of stay at home orders and all that, what did that say? Or where can you see that influence on the results of this study?

Scott Meyer: Well, that was one thing that we did is we did ask a subset of questions relating to the pandemic, not only in the video behaviors of rural America, but also in their broadband behaviors. And I’d like to start with the video, and if you want to comment after that, we can move to the broadband. That’s up to you if you feel we should dive deeper. But what we found, and here’s how the question was framed “how has the pandemic affected your TV and video watching?” And we had almost everybody from the study that 800+, we had 778 respondents, and 30% — a third — said that the pandemic caused them to watch a lot more. 29% said the pandemic caused them to watch a little more. And only 37% said it had not changed their viewing behaviors at all.

Andy Johns: Interesting, that’s kind of a higher number than I would think because I had just assumed everybody was watching more TV at this point. Maybe that says too much about what we’ve been doing during the pandemic, but that’s interesting.

Scott Meyer: Yeah, well, 59% because of the pandemic, watched more television, and we have another study that we do, which we’re not going to talk about in this podcast. So hopefully we’ll talk about that maybe later this summer, we have a channel stats report. We receive data from over 75,000 set top boxes across rural America, and that did coincide as far as viewing time spent with this particular data set in our study.

Andy Johns: OK, got it.

Scott Meyer: And moving over to the broadband as far as pandemic-related, one of the things that really did surprise me, the question again, most were, well, there’s two things. Let’s start with the work from home, which really kind of relates to broadband, because really for most people, the work from home, we need a decent broadband connection. So, again, we had the majority of our 800 respondents, 726 responded, when asked the question “does someone in your household work from home who did not prior to the pandemic?” We broke this down by demographics. 48% of the 18-24 year olds, and some of those could have been students, they work from home. 43% of 25-34 year olds, which are less likely to be students and more likely to be people that had regular jobs, 43% are working from home, and 35% of 35-44 year olds work from home and previously did not. And then 26% of 45-54 year olds work from home and prior to the pandemic did not. So those are quite large percentages of people that basically were not leaving their home anymore, but were working there.

Andy Johns: That’s remarkable, and it’s important to remember that when we’re looking at those stats, these are stats from the rural markets like you talked about. This doesn’t include your big metro areas that New York and some of those had the really, really big stay at home orders. Those are all the percentages coming from the rural markets, which in my mind makes those numbers even more surprising that they’re that significant.

Scott Meyer: Absolutely, but, you know, I want to dove tail this second pandemic-related question around broadband that makes it even more surprising. You would think that with that huge percentage of people working from home that they a lot of them would have increased their broadband speed. But that was exactly the opposite when we asked the question, “has your household paid extra to increase your Internet speed since the pandemic began?” We had 715 respondents and 83% of them said they did not pay to increase their Internet speed, while only 17% said they did pay to increase. And we do have some assumptions on that.

Andy Johns: Yeah, that’s interesting. Let’s go into that a little deeper.

Scott Meyer: Well, I think part of it relates to the fact that as a telecommunications vendor, Innovative Systems really works hard to try and touch our customers as much as we can. Talk to them, find out what they’re going on. If they’ve got some problems that we can help them with our O.S.S., our voice or video platforms, we want to hear what we can do to help them. But in the course of those conversations, what we were finding out is that there was a hesitancy by rural service providers to actively promote selling faster Internet. And the hesitancy could be in part that they didn’t want to prey on everybody’s misfortunes due to the pandemic. But we’re not quite sure why. But it just we got this feeling that a lot of our customers, they just didn’t want to go there. And, you know, obviously, that’s a conscious decision that’s made. But I think on the other side of the coin, a tactfully crafted message of improving the experience, giving your students a better opportunity to learn, a better connection to their office, if it’s done tastefully, I think that they could have probably done some messaging to get that number of 17% yes increase during the pandemic to a probably quite a bit of a higher number.

Andy Johns: And I wonder, too, because the question asked specifically if they have paid extra for an upgrade, and I know there are a lot of the providers that offered some kind of free upgrade. Some folks are doing it just for teachers. Some folks are doing it for different segments. But there were folks that had the free upgrades for a little while, too. So I wonder if — I don’t know how that may play into it as well. But that’s a good point, because I know a lot of the folks we talked to, you know, they weren’t wanting to run big campaigns about upgrade your speed so as not to seem like you talked about being advantageous over something like that.

Scott Meyer: Right. And to your point there, there was definitely some companies that did provide increased speeds at no extra cost. But from what we saw, a lot of those, that was not a perpetual thing. It was a short-term thing, and it just makes me kind of wonder, you know, if down the road is, as it seems like where we’re at right now in the stream of time, that a lot of the restrictions, health restrictions and things like that are starting to be lifted. And that’s another debatable topic, but that’s not what we’re here for. These people are going to have possibly have a need to continue to have higher speeds, but we just didn’t see that they paid for it in the first quarter of 2021.

Andy Johns: Got it. And that’s an interesting point, what you just said there. So the survey was pertaining to whether or not they paid for upgrades between January 1st and March 31st of 2021, or would that question have applied to…

Scott Meyer: That’s correct. That’s basically correct.

Andy Johns: So there may have been people that upgraded speeds last year when school went back in August or something like that would not show up in that 17% number, correct?

Scott Meyer: It’s possible. Yeah, it’s possible. I think that this is one of these questions where the benchmark for when we get into the next year 2022, we should be able to see some good comparative data that maybe make a better decision.

Andy Johns: Interesting. OK, well, that’s already a lot of good intel that this report has provided for folks. Is there anything else? I don’t want us to run too long here. We could certainly talk about broadband trends. And, you know, we were talking about it before we pushed the record button. And I imagine we’ll be talking about it some after we stop recording, because that’s what you and I both do all day. But are there any other, as we wrap up here, takeaways or anything else that we haven’t gotten to yet that you wanted to be sure to mention during the podcast?

Scott Meyer: Well, just a couple of things. And again, kind of attaching to some other data that we’ve already discussed here today. Half of rural customers, according to this study, bundle their Internet and their TV. So I think that’s something, again, going back to people’s decisions to exit video need to very carefully well thought-out decisions. Have you hired a focus group to come in and survey your customers and talk to them and see how they feel about that, and responsibly weigh the risk of how it might impact your revenue? The other thing that I thought was interesting was — and we didn’t talk about this much but we’ll talk about how they can get the complete study here just a few minutes — but 60% of the respondents that had managed Wi-Fi, and it was a very low number to begin with of that 60%, they felt that the service was very valuable to have. Managed Wi-Fi, everybody that’s listening to this knows that that’s where the service provider usually has everything inside the home, including the router. They manage the experience, and it definitely does increase the value of the service for the customer. And very strong feelings from rural America that managed Wi-Fi is a valuable service. So this is an opportunity, obviously, for rural service providers, talking about increasing speeds to generate revenue. A managed Wi-Fi service would also be another opportunity. 

Andy Johns: On that one, sorry, that was 60% said it was very valuable. So I guess that would be the highest option. And so there were others that might have thought it was, what, somewhat valuable or somewhere in there. So, yeah, that’s a pretty strong statistic.

Scott Meyer: Yeah, it really is, and but those are the ones that have had it, and they understand it. So there’s still a — I don’t have the number right in front of me — but a very low percentage, I think less than like 25%. And again, I’m talking off of what I can kind of remember. Only maybe a fourth of rural America even has a managed Wi-Fi service.

Scott Meyer: But then the final thing that I did want to mention that I thought was really interesting, another pandemic related question, is that 51% of rural Americans are using video conferencing more than they did before the pandemic. And again, that does talk to the fact that, as we all know, when you’re using video over the Internet, you need more bandwidth. So that goes back… 

Andy Johns: Up and down.

Scott Meyer: That’s right. Up and down. Very good point. So when you look at that fact that well —  and actually that’s a demographic breakdown. 51%, ages 18-34. 41%, ages 35-54. And 29%, ages 55+. So over a third of the people 55+ plus started using video conferencing. And all I can say about that is we know how live video was affected by the Internet. But for many, especially in that older demographic, that higher price to pay for connecting with their family and friends by Zoom, which is what people are primarily using, they’re tolerating it now. And as they have grown more comfortable using it, they’re going to keep using it even after hopefully the pandemic ends. They’re still going to use it because they’re used to it now. And there is another opportunity for service providers to educate customers on the benefits of faster Internet that they may not subscribe to.

Andy Johns: Excellent. I think you closed on what I think is a really strong point there, that it just comes back to customer education. This study helps look at what people are needing and wanting, what they’re demanding, and then how they’re responding to that. And there’s room on all the margins all the way around those stats for folks at the providers to do the education, to step up, to make them realize that, hey, you started using video conference for the first time. Your upload speed is pretty low. We can make it a much better experience for you if you would upgrade to higher package. So a lot of customer education that sounds like is still to be done, even if there are some very encouraging trends in there. 

Andy Johns: Well, the last thing as we close here, how can folks get more information, if they’ve heard a little bit of this — and I know it’s a little tough when we’re going through all these numbers, if somebody is listening while they’re washing dishes or mowing the grass or driving to work, maybe a little tough to catch all those numbers. How can they get more information about the results of the studies that you guys put together?

Scott Meyer: Well, and I’m sure when you edit this package together, you can probably be able to put my email address on the screen, but this is just a sampling. That report is over 60 pages. So we didn’t even scratch the surface on the data today. It’s fascinating data. We do this for our customers. But even if you’re in the video business, or broadband business and are a provider, if you’re not a customer, we welcome you to send me an email to request the report, and we’ll send it electronically this year. My email address is scottm@innovsys.com.

Andy Johns: Perfect, and we’ll be sure to put that email address if you are driving or mowing the lawn, that would be a dangerous time to try to write down an email address. So we’ll make sure to go ahead and include that in the show notes for this episode. Well, Scott, thank you, once again, for dropping that knowledge on us here with this episode. It’s always interesting to see what the studies find. And thanks again for the work that you guys do in making that happen.

Scott Meyer: You’re welcome. My pleasure. Thanks for the interview, Andy.

Andy Johns: He is Scott Meyer, Director of Marketing with Innovative Systems. I’m Andy Johns with WordSouth. And until we talk again, keep telling your story.

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