Understanding tiers of service offerings for ISPs: Why are they important?

The main task of ISP business owners is to deliver fast and reliable internet service to their customers, while also ensuring their profitability. One effective strategy for achieving this is developing tiers of service, which allow internet providers to offer customers varying levels of service at different price points. In this article, we'll explore the benefits of tiered service models for ISPs and why business owners should consider implementing them.

What are service tiers?

Service tiers play a crucial role in the ISP industry by allowing businesses to effectively manage and prioritize their resources to ensure that their critical services remain available and functioning, even in the event of a system failure or outage. For instance, a Tier 1 service would be considered the most crucial, and any issues or errors must be resolved immediately to prevent significant disruptions to the ISP's operations or its customers' experience. On the other hand, Tier 3 services are considered less critical, and any issues or errors in these services may not require immediate attention and will not cause significant effect on the network.

Classification of service tiers

Service tiers can be divided into 4 categories: Tier 1, Tier 2, Tier 3, and Value-added services.

Tier 1 service is the backbone of an ISP's business and includes critical services such as internet connectivity, website hosting, etc. These services are essential to the ISP's operations, and a failure in any of these services can have significant negative impact. For example, if an ISP experiences an outage in their internet connectivity service, customers will not be able to connect to the internet, which can result in loss of productivity for businesses and frustration for individual users.

To avoid these scenarios, ISPs prioritize Tier 1 services, ensuring that they are always up and running. They allocate their resources, including technical expertise and support, to maintain the uptime of these services. Additionally, ISPs may offer service level agreements (SLAs) to customers for Tier 1 services, which guarantee a certain level of uptime and response time in the event of an issue or outage.

Tier 2 services are important services for an ISP, but they are not as critical as Tier 1 services. These services may include video streaming or gaming services, which are important to customers but are not essential to the ISP's core business operations. A failure in a Tier 2 service can be quite frustrating for customers, but they can still interact with the system.

For example, if an ISP's streaming video service experiences an issue, customers may experience buffering or lower video quality, but they can still access other services such as internet connectivity. Despite being less critical than Tier 1 services, ISPs still prioritize Tier 2 services to maintain the quality of their customer experience. It is important for ISPs to allocate resources to ensure the uptime of these services and provide technical support to customers in the event of an issue or outage. ISPs may also offer different packages that include Tier 2 services, such as a premium video streaming package with higher video quality or additional features.

Tier 3 services are generally considered to be the least critical of all the service tiers. These are services that may have minor or unnoticeable customer impact, and can include basic internet access or other low-priority features. Customers may not even notice if a Tier 3 service is failing, as it may not have a significant impact on their ability to use the internet or access other services.

Examples of Tier 3 services could include:

• Basic internet access, such as low-speed or low-bandwidth connections that are not used for mission-critical purposes
• Basic hosting services, such as shared hosting plans that are used for non-critical websites or small-scale projects
• Basic voice services, such as low-cost VoIP services that are used for personal communication

While Tier 3 services may not be critical to the overall operation of an ISP or the experience of its customers, they still require some level of support and maintenance. This could include regular monitoring for any issues or outages, as well as periodic updates and upgrades to ensure that the services remain reliable and up-to-date.

Value-added services (VAS) are an additional tier of services offered by ISPs. These services are not essential to the core business operations of an ISP, but they add value to the customer experience and can be a source of additional revenue for the ISP. These services may be offered as add-ons to existing packages or as standalone services, depending on the ISP's business model and customer needs.

Examples of VAS could include:

• Additional cybersecurity services and content filtering, that provide additional protection for customers' devices and data.
• Cloud storage services that offer customers additional storage space for their files and data.
• Managed services that provide customers with additional technical support and maintenance for their devices and networks.
• Wi-Fi hotspot services that deliver pay-as-you-go internet services.

Value-added services can be an important way for ISPs to differentiate themselves from their competitors and add value to their customer offering. It's important for ISPs to carefully consider which VAS to offer and how to price them, as these services can have a significant impact on the customer experience and overall profitability of the business. Thus, studying their target audience is a crucial factor for successful launch of VAS. By balancing the needs of their customers with the demands of the market, ISPs can create a value-added service offering that provides both value and profitability.

bitConnect, a South African ISP, created customized packages designed for specific groups of customers, providing creative cybersecurity options. Read the full bitConnect’s success story to learn more about how their customers started to apply for the security VAS by themselves during the sign-up for Internet services.

Benefits of tiered service models for ISPs

Marketing different service tiers to customers can be challenging. However, by studying their customer needs, ISPs can cater to a more diverse group of potential subscribers. Not everyone needs the same internet speed or features, and offering different service plans can meet the varying needs of customers. For instance, customers who only use the internet for browsing and sending emails may not require high-speed internet, while gamers and content creators might need high-speed internet with low latency. By providing different service plans, ISPs can cater to a wide range of customers with different needs and budgets, which can result in higher customer satisfaction and loyalty, as well as increased revenue.

ISPs can use the different service tiers as a way to manage customer expectations. By clearly communicating the features and speed of each tier, ISPs can ensure that customers have a better understanding of what they are paying for and what level of service they can expect.

Furthermore, tiered service models can help ISPs remain competitive in the market. In today's market, customers have many choices when it comes to selecting an ISP, and offering a variety of service plans can differentiate ISPs from their competitors. By offering unique features and service plans, ISPs can attract customers who are looking for a particular service or feature that their competitors do not offer. For example, some ISPs offer unlimited data plans or bundled services such as internet, cable, and phone services, which can attract customers who are looking for a one-stop-shop for their internet and entertainment needs.

Lastly, tiered service models can help ISPs manage network traffic and maintain network stability. By offering different service plans with different speeds and data limits, ISPs can distribute network traffic more evenly, ensuring that heavy internet users do not slow down the network for others. This can improve overall network performance and reduce the number of customer complaints related to slow internet speeds or service interruptions.

Conclusion

It is essential for ISPs to differentiate their service tiers so that customers can choose the package that best suits their needs. To differentiate their services, ISPs can focus on the features and benefits of each tier, such as speed, data caps, and customer support. They can also offer promotions and discounts for higher-tier services to incentivize customers to upgrade. By offering different service tiers, ISPs can cater to a wider range of customers, from those who prioritize speed and performance to those who prioritize cost-effectiveness.