Monday, May 19, 2014

Will Fixed Network Voice Be Big Loser in Transition to New Triple Play and Quadruple Play Packages?

source: broadbandgenie
The triple play (fixed network voice, video entertainment and high speed access) and quadruple play (mobile service, fixed network voice, video entertainment and high speed access) bundles have been a mainstay of service provider strategy in recent years.

But both triple play and quad play are changing in ways that might be quite negative for fixed network voice, and highly favorable for fixed network high speed access.

Consider only the impact mobile has had in the voice business. For many users, mobile now is the way they consume voice services, making the fixed voice service superfluous. 

So fixed network voice might not be an anchor of tomorrow's triple play bundle. Instead, mobile services will replace fixed network voice, creating a new triple play offer based on mobile, broadband access and linear video.

In a related way, mobile Internet access might emerge as a new key anchor for bundles. And that's where the difference between a triple play and a quadruple play becomes a matter of semantics, to a large extent. 

A consumer of a triple play bundle (mobile, video entertainment and fixed Internet service) might be said to be buying four key products: mobile Internet, fixed Internet, voice and linear video entertainment. 

One might otherwise call that a functional quadruple play (voice, video, high speed access and mobile), even if the formal offer is mobile, video and broadband access. 

The corollary implication is that the enduring value of a high speed access connection is lots of bandwidth at an order of magnitude lower cost than use of a mobile connection.
source: Nielsen

That will occur if and when linear video significantly is displaced by over the top delivery. Video is an application with bandwidth requirements an order of magnitude or more greater than all other applications.

So if significant viewing time is shifted from linear video delivery to over the top Internet delivery, the amount of Internet bandwidth required by many consumers will shift dramatically.

That will put a premium on Internet access services able to deliver lots of bandwidth at the lowest possible cost.

And that means the fixed network becomes more important, as it can deliver much more bandwidth, at lower costs, than the mobile network, as end user demand grows by an order of magnitude or perhaps two orders of magnitude.

One might argue that the cost of providing a gigabyte of consumption is an order of magnitude cheaper, using a fixed network, compared to a mobile network.

To be sure, what use of one megabyte or one gigabyte of Internet access actually costs an end user is a statistical issue.

The monthly price for use of any mobile or fixed high speed access connection is fixed. And that is one way of highlighting the cost of using a gigabyte of Internet data.

But the actual “price per use of a megabyte” depends on actual consumption, not the retail price to have access to a fixed bucket of usage. Likewise, the cost to supply a gigabyte or megabyte of usage is determined by actual usage.

In other words, a mobile service might feature a price of about $6 per gigabyte to $10 per gigabyte of mobile usage, for a 5-Gbyte bucket of usage. But it a user actually routinely uses only about 2 Gbytes a month, the effective cost is about $15 per gigabyte.

source: Nielsen
A fixed network service might retail for a price of about $50 a month, with usage buckets of 300 Gbytes, or virtually unlimited access, in some cases. The nominal price might be 17 cents a gigabyte.

But if a user consumes about 30 Gbytes, the effective price might be $1.67 per gigabyte, or less than two tenths of a cent per megabyte.

The point is that fixed network voice might cease to be an anchor component of a triple play bundle, its function replaced by mobile service. 

At the same time, if and when over the top video entertainment becomes a major development, the value of fixed access will soar, almost linearly with the amount of streamed video being consumed by the typical consumer.

For the first time, we might see an evolution of the component parts of a consumer "triple play" service, as well as a blurring of the value of a triple play that makes a "quadruple play" different.

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