Mobile Substitution for Video and Internet Access is Coming
Mobile substitution, initially cannibalizing fixed network voice, now is on the cusp of taking usage away from subscription video and internet access as well.
T-Mobile could bypass the fixed broadband provider in the home and also enhance indoor wireless coverage, BTIG analyst Walter Piecyk thinks, as T-Mobile US launches a proposed video subscription service.
Mobile substitution has been growing for decades. Few now remember it, but the AT&T Digital One Rate plan--which abolished the difference between domestic local and long distance calls--fueled the switch to mobile voice, which already had been underway.
It can also be argued that Digital One Rate eliminated the difference between fixed and mobile voice usage entirely.
And one can argue that mobile substitution was precisely the plan.
Some at the time criticized the plan, but the elimination of distance as a cost barrier to domestic voice communications further boosted the value of mobile voice. Notably, consumers liked the service so much they temporarily boosted usage enough to cause network congestion.
Recall that also happened when AT&T launched the Apple iPhone, and more recently as demand for its DirecTV Now service has caused congestion issues.
It is no coincidence that long distance minutes of use and use of local networks for consumer calling began to fall right around the time Digital One Rate was launched.
In the U.S. market, domestic long distance began to fall in 2001, about two years after Digital One Rate was introduced, and then matched, by the other mobile service providers.Voice revenue fell in tandem.
The key observation is that, every now and then, a huge shift in technology, retail pricing and packaging, new devices and new application use cases can radically reshape communications markets. As mobility has become the preferred way for consumers to use voice, it might increasingly become a preferred way of consuming subscription video and internet access as well.