Sunday, October 12, 2014

Quadruple Play Strategy Nears End in U.S. Market

The ability to create a quadruple play network based on ownership of both mobile and fixed assets is a key objective of several tier-one service providers in Western European markets.

The basic approach is for a mobile service providers to buy out-of-region fixed network assets to create a quadruple play offer including mobile services, entertainment TV, fixed Internet access and fixed network voice. 

Vodafone’s moves to acquire cable operations Kabel Deutschland and Ono in Spain provide an example. 

BT offers a mirror image of Vodafone’s moves, as the former fixed network provider now hopes the creation of a new quadruple play offer including Long Term Evolution mobile services, fixed network voice, video entertainment and high speed access will boost revenue per account and slow fixed network voice line churn rates. 

Though 60 percent of U.K. consumers buy a bundle of some sort, the “typical” bundle is a dual-play bundle of fixed network voice and high speed access, according to Ofcom, the U.K. communications regulator. 

Some 27 percent of U.K. households buying a bundle purchase the voice-plus-broadband package. About 21 percent buy a triple-play package including video entertainment as well as voice and high speed access. 

Just three percent buy a quad play package, and those customers largely are Virgin Media (Liberty Global) customers, it appears. And that is the attraction for BT. Very low adoption of quad play packages suggests most of the market still is available.

It is not as easy to create such a quadruple play offer in the U.S. market, though. For starters, U.S. regulators would not allow AT&T or Verizon to acquire significantly greater fixed network assets.

Nor would either be allowed to buy more mobile market share from the other two big national providers, Sprint or T-Mobile US. 

That is one reason AT&T is attempting to buy DirecTV, the biggest U.S. satellite entertainment video provider. It is among the few ways AT&T can increase its quadruple play profile without running afoul of regulator opposition to additional market share in the mobile or fixed network businesses.

The point is that although additional asset purchases by Western European mobile or telco service providers remains possible, the largest U.S. providers now have essentially reached their limits.

AT&T and Verizon will not be allowed to grow much larger, in terms of subscribers served on their respective mobile and fixed networks. 

Sprint and T-Mobile US have been barred from merging, and neither has the capital to buy significant fixed network assets, even if they had the appetite. 

Changes for Sprint and T-Mobile US will involve potential action by new firms such as Comcast and Dish Network.

Future Verizon and AT&T growth will have to come from international asset acquisition or major moves into new lines of business using existing assets. 

That is why there is such high interest in the Internet of Things and machine-to-machine businesses. 

The quadruple play strategy has almost run its course for AT&T and Verizon, though there is room for Sprint and T-Mobile US to make changes. 

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