Friday, December 26, 2008

Is Triple Play Still A Viable Business Model ... For Both Provider And Consumer?

The bundling of High Speed Internet, Phone, & Cable TV was on the fast track in the public eye (US) .... is it still? Or is it being overtaken by "over" hyped marketing and economic issues?

How, why, and what do you see as reality vs perception. What does the future hold ... near and far?

Like a lot of advertising bundles "Triple Play" has gained a place in the consumers consciousness. But my perception is that consumers are frozen in place by the idea that they're contracting long term (1 or 2 years) for something they may regret in the not too distant future. There may be a slowing of adoption due to economic issues .... but a provider who can address price, quality and the concern over long term contracts should see a steady adoption of triple play services.

I don't think there is much of an issue with respect to the longevity of the bundles. What I think does cause a stir though is the price hike at the end of the promo period. If the pricing is right, people would renew and if the provider does their research, they could have competitive offers to retain clients. I think the model of having cheap service for a period with a looming hike later can be a big deterrent.

Another angle to look at it though is the customer service aspect. If people feel they'd be stressed trying to get different providers to take ownership of their issues if something goes wrong in an unbundled, multi-provider setup, that could be a reason for people to stay with the bundled service despite the cost.

Now yes .... it is largely marketing hype. But truly how many consumer's do you know that actually know the term "triple play"? This is largely a term for the industry itself. What is being marketed to the consumer is a "one bill and one payment" option for a plethora of services.

Here's a breakdown of the factors involved for providers, consumers, and the future of "Triple Play" itself.

1) FOR THE PROVIDER

If it is a legacy carrier that has to substantially upgrade its network in order to provide triple-play services, the business model would be a high risk one depending on all the variables in the market they're in (demographics, price point, positioning, competition, etc).

If it is a new provider than can take advantage of the various wireless broadband spectrum available that offer reliable TV service, then it would be a better situation since the network would be purpose-built for triple / quad play from the ground up. Depending on the wireless spectrum the carrier gets licensed for, this network can be deployed to cover large areas at relatively low costs.

It is a viable business model for the company only when the customer sees value in the wireline telephony component. Companies which correctly packaged and priced various triple play offerings have been extremely successful in growing overall subscriber units (not just phone customers), revenue, ARPU and operating cashflow. But the trend is definitely shifting. In the growing world of cord cutting consumers, more and more customers simply don't use or see value in wireline service for personal, practical and economic reasons.

Because of this rapidly evolving trend, telecom companies are less able to spread the bundle discount across three products and will need to develop a new pricing solution that is attractive to cord cutting customers in the very near future. The ideal alternative will be for those MSOs who are able to leverage a wireless solution as a third element alternative to the triple play. Ultimatey, femtocells or some other similar disruptive technology could provide the longer term solution.

In summary, triple play offers are valuable tools to the business arsenal of the telecom industry, but wireline's days as a substantial driver of triple play consumer behavior are likely numbered.

2) FOR THE CONSUMER

Many consumers are getting tired of the fact that triple play bundles do not live up to expectations. Many prefer the pricing and / or the quality of the individual services from other companies, rather than getting everything from one carrier for a single price. Carriers engage in constant price-based advertising and relentless marketing campaigns which only further cause confusion in the consumers' minds, and many just end up making a choice due to frustration. Triple Play is still a viable option for consumers who don't want the fuss of paying multiple bills, with the convenience of all services from one company. At the end of the day, all consumers want a good triple-play / quad-play service, but each individual service has to be of a high QoS.

A number of factors potentially come between "you" and "your" desire to get the cheaper rates that "triple play" offers:

a) Emergencies and Blackouts:

While you know there is a 911 (or E911) service available through cable, the fact that the cables don't carry current means that the phones will be down in the event of a power outage. Not very useful for, say, calling PSE&G to tell them there's a power outage. The fact that there's a short-life battery available to provide power doesn't really reassure me. Not sure how to work around this one.

b) Rate hikes at the end of the promo period. Not much more to say about this one.

c) Inertia + annoyance:

Right now many folks have cable and internet through their cable company, and phone through the phone company. Many endure their cable company calling them sometimes four times a week, and mailing at least once a week, trying to get them to switch. If you have to try that hard to sell something to "you", it's not that good. And even if it is that good, you're pissing people off with all the phone calls.

d) Reliability - not of the service but of the servicers:

I've had some good customer service experiences with cable companies, but often they've been much worse. If you're without TV for a day, or internet, you can deal. But if you need to have a phone, you need to have a phone. Scheduling something for next tuesday between 9 and 3 .... that you probably won't show up for anyway ... isn't going to help the customer when they're waiting for a job offer or a call about a sick relative.

e) Alternative sources for TV content:

Most people are not there yet, and neither is the industry (see IPTV). But I can see a future 5-10 years out in which we may get all or most of our programming from (legit) Web downloads. At that point, why would you need cable?

If you want to sell me a plan, this is the stuff (more or less in order of importance) that you have to overcome. So far, I'm not seeing cable companies doing that job.

3) THE FUTURE

With the advancements in wireless broadband technologies, triple play and quad play has already become the must-have for new ISP's and new telecom companies, especially in developing countries around the world. The technology allows for small telcos to become full service providers, and compete against much larger entities.

Overall .... Triple Play is a positive for providers from both a marketing sense and cost effectiveness of their networks. Delivering more than a hyped package .... but true quality at a reasonable cost is the key for consumers. As with most things both the provider and consumer needs must be mey for a viable future. But in the end .... the customer is king.

For a quick and easy tool to see what options you as a customer have in your specific area .... use this convenient online search and compare portal:

Bundled TV, Cable, And Phone

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