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From Triple-Plap To Quad-Play: Strategies, Business Models, And Best Practices
Pyramid Research, Inc., Sep 2007, Pages: 100
Multi-play business models continue to gain in popularity across the telecom and media space. At the end of 2006, more than 40% of Canada’s households subscribed to a triple-play package, according to data. Similarly, British regulator Ofcom recently reported that nearly 40% of British households subscribe to some form of packaged bundle.
The trend has been fairly sweeping, shattering traditional service lines and compelling players with gaps in their portfolios to scramble to offer their own competitive bundles. Satellite players are starting to offer VoIP, and steadfast pure-play mobile operators like Vodafone have felt compelled to get into the broadband business. Multi-play hardly solves all service provider problems: it is costly and complicated, and for telcos at least, will not help margins in the short term. Yet it is also positive for revenue growth and a major step toward applications-blending — and inevitable for any player with any pretension to market leadership.
Building on an in-depth review of service provider multi-play marketing and performance, our analysis makes the following salient points:
- As traditional barriers to entry are shattered and revenue mainstays commoditized, multi-play has become indis
pensable to service providers in the telecom and media space. The pure play isn’t dead, but it will find the road ahead substantially tougher. At worst, service bundling appears to slow subscriber churn, and at best allows
the provider to drive revenue through market share gains and increases in average revenue per customer.
- To fill the gaps in their portfolios and offer multi-play, service providers have three major options: build, partner,
or acquire. Building is costly, but arguably the best option; acquisitions are similarly costly, but for many inevitable;
and we see service bundling partnerships as useful, but mere stop-gaps.
- We believe there should be a rethinking of the concept of quad-play toward a more flexible approach to bundling.
More than a single-bill value proposition, quadruple play in our view promises operators the ability to build a more
powerful multi-play offering.
- Multi-play offers are generally positioned to enhance the competitiveness of operators’ core services and preserve
core revenues. While this has worked for broadband and cable providers, we doubt the effectiveness of bundles in
pushing PSTN voice. Protecting the PSTN, as many carriers continue to do, has slowed multi-play uptake.
- More players are pushing “free” services within bundled packages, accelerating service commoditization; the
economics of free offers are not attractive, but their impact is unmistakable.
- For telcos getting into the TV business, the role of VoD in pay-TV adoption can be significant, particularly in markets where uptake has been slow. However, we are highly skeptical of VoD-only content models.
- Service bundling is merely a step toward applications convergence. Multi-play bundling thus become platform-agnostic — accessible from any device — and focused on the applications.
- Regulation has emerged as one of the key challenges to multi-play in mature and developing markets. The
regulation challenge usually boils down to a number of key issues: technology moving faster than regulation,
regulatory turf wars, and concerns around market power and competition.
- The impact of multi-play on the bottom line has been mixed. Cable providers generally see improved bottom-line
performance; for fixed-line incumbent telcos, bundled services do not slow the deterioration of fixed margins, and
in some cases exacerbate it. Pure players limited by their technologies to providing fixed-line services face rising
Capex and Opex, whereas alternative carriers are better positioned, owing to networks configured from the start
to offer multi-play.
- By our estimates, the number of triple-play subscribers worldwide grew 65% in 2006, to nearly 22.7m; we are fore
casting the global triple-play subscriber base to grow to nearly 95m by 2011, or around 17% of the global broadband
subscriber base. Western Europe and North America will drive this growth, with Asia following closely behind.
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