Wednesday, September 9, 2015

Do People Want Quad Play or Just Discounts? And Does it Matter?

U.S. cable TV operators might have different opinions, but John Stratton, Verizon EVP and president of operations, is skeptical about the marketing value of the quad-play bundle, as much as telcos and cable companies in Europe and cable TV operators in the U.S. market seem to believe in it.

To be sure, everyone would agree that consumers often respond to savings obtained when they buy a bundle of services. That is the essence of the “single bill” argument: consumers see value in the price savings, more than a physical single bill for all of the services.

Drawing on its own experience, Verizon finds that consumers do not necessarily see the value of a full bundle of fixed network and mobile services.

"In our experience, beyond a bottom of bill dis count, we did not see a compelling case or the buyer moving in one direction to consolidate those services because they serve very different needs," Stratton said.

"The incentives we saw running across were very elusive so it's not at all clear to us that those combinations made sense," Stratton said. "In terms of the need to have a broad footprint of quad play assets, we don't see that as essential.

Verizon’s experience is not necessarily unusual. U.K. mobile operator 3 still is not completely convinced consumers in Europe want to buy a quadruple play bundle. Other U.K. mobile operators likewise have found that what consumers want are discounts.

Whether that is a desire for a bundle, or simply discounts, is the issue. And if that is the case, Verizon, which sees itself as a “premium” brand, would not be so happy about a marketing practice that is essentially discounting.

To be sure, one has to filter all comments from all executives. No executive ever argues its customers want something it cannot yet easily sell them. But Verizon does own facilities for mobile and triple play services, so that is not the issue.

The point is that leading mobile and telecom firms continue to disagree about the value of the quad play. On one hand, bundling is a classic “economies of scope” strategy, where providers sell more things to an existing customer base.

What Verizon largely is looking at is that triple play bundling, so far, mostly has been a packaging and discounting technique. Verizon really doesn’t like discounting.  

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