Don't Expect Quad-Play to Dominate the Telecom Space

One of the perpetual themes I encounter at the moment is the notion that the world is moving toward a "converged" situation in which individuals or families purchase all their communications services from a single operator.

In particular, there is a fervent belief that people will choose the same cellular providers and fixed broadband providers, tempted by bundling deals and wondrous "three screen" content and entertainment services.

Not only that, but these ultra-loyal users will happily spend more in aggregate, persuade their entire families to follow their lead, churn less and will be happy to have femtocells or WiFi to offload "mobile broadband" onto their own paid-for fixed connections.

For the larger hybrid operators, that is a Utopian ideal. And to be fair, in some circumstances it will actually happen.

But realistically, it strikes me as a 10-20% thing whichever way you slice it.

• Maybe 10-20% of households will have a single family plan for all mobile devices coupled to the same provider's DSL or cable or fiber
• Maybe 10-20% of fixed broadband subscriptions will incorporate a bundled "for free" mobile extension (perhaps with a detachable dongle in the gateway)
• Maybe 10-20% of triple-play (voice/Internet/TV) subscriptions will expand to quad-play with mobile as well

There are too many factors driving "divergence" here, not convergence. A partial list:

• Operator-exclusive devices like the Apple (AAPL) iPhone and Motorola (MOT) Droid will often drive operator choice, not the other way around.
• Some mobile operators have no fixed arms (eg 3, or some T-Mobile properties)
• Some mobile operators only have fixed coverage in certain places (eg AT&T (T))
• Some mobile operators have lousy coverage in certain places (or certain buildings) where their fixed arms are strong
• Devices like the Amazon (AMZN) Kindle and laptop/dongle combinations will proliferate with an unknown "Brand X" mobile operator behind the scenes, thus non-connectable into an existing household plan
• Prepay-centric markets tend to have many people with multiple devices, specifically chosen to be on different operators to enable tariff arbitrage
• Many users have company-issued devices on a different network to their personal devices and broadband
• Few users are ever willing to churn fixed broadband provider for a variety of reasons (unique content / IPTV, difficulties in switching phone numbers or email address, perception of disruption, etc)
• Unusual households (flat-sharers, students in accommodation blocks, etc)
• Preference of children to buy own devices / services with pocket money rather than as part of a family plan

You get the picture.

Now, the 10-20% of quadplay-receptive households are definitely a target worth pursuing. But let's not kid ourselves that they represent the typical future household rather than the ideal telco-dream segment. Yes, the picture will vary substantially by country and specific operator, but overall it's worth betting on divergence and not convergence (as per usual in the telecoms industry).

Comments

[DeadCellZones.com]

Highly disagree with you. Full scale femtocell deployment will change the landscape radically. 70% of mobile phones are used indoors and 75% of homes don't have perfect wireless coverage.

2009 Nov 23 07:52 PM

[Wisdom vs. Information]

"more in aggregate"? Dean, the 3X or 4X deal in the US that i have seen have lower total price.

2009 Nov 23 11:04 PM

[Jet@HK]

The only data points that I have with respect to quad play is as follows:

As of December 31, 2007, more than 79% of Virgin Media’s residential customers took-up multiple services from the company with c.50% of its customers on cable “triple-play” (Pay TV, Broadband & Fixed Telephony). However, there is no indication of cross-selling success has been extended to its MVNO.

2009 Nov 24 08:11 AM

[Jet@HK]

The ony data point that I can offer on quad play is as follows:

As of December 31, 2007 (annual report) more than 79% of Virgin Media’s residential customers took-up multiple services from the company with c.50% of its customers on cable “triple-play” (Pay TV, Broadband & Fixed Telephony). However, there is no indication of cross-selling success extending to its MVNO

2009 Nov 24 08:16 AM