There is little doubt now that the telecommunications industry is a tumultous and precarious place to be. On the wireline side, baby bells and cable companies are engaged in a necessary but costly arms race. Both are forced to invest in increasing broadband capacity and coverage while simultaneously facing increasing competition from wireless service providers. At the same time, baby bells and cable companies are invading each other's space with baby bells beginning to offer television service, and cable companies offering voice services via VOIP (Voice Over Internet Protocol) as part of their offer.
In the past couple of years, we have seen the rise of the triple play bundle:
- Multi-channel Television
And the rise of the quadruple play through MVNO's (Mobile Virtual Network Operators) or partnerships:
- Mobile Phone
- Multi-channel Television
The wireless carriers are smart to sit back and let the baby bells and the cable companies (and even the satellite operators) fight it out and here is why:
Which of the quadruple play of services (Voice, Mobile Voice, Internet, TV) are consumers most likely to abandon?
The answer of course, is traditional voice services, and it's already happening. Many of you probably know someone (or are someone) that doesn't have a traditional phone anymore - now having just a mobile phone. Why are people abandoning traditional phone lines?
Abandoning the fixed line telephone provides an opportunity to save money, and a large number of mobile phone calls are made at home anyways. I can understand the attaction as I've got the cheapest service Qwest
offers in the Seattle area, and it costs me about $25 per month ($300/year).
We use the landline for local calls, our mobile phones for long distance calls (especially during free nights/weekends), and Jaja
or a calling card for international calls. We've maintained the traditional line for improved call quality, redundancy, call comfort, and to reduce brain radiation. But, with mobile call quality constantly improving and the convenience of a bluetooth headset (with lower emissions), I'm starting to wonder if we should cut the chord. We could save that $300/year we spend on a land line, or invest part of it in a bigger mobile plan.
People dumping landlines in favor of mobile telephony, hurts the baby bells more than it helps the mobile operators. People dumping landlines typically have mobile phone contracts already, and may not spend spend more as a result of dropping their landline. There is also more competition amongst mobile operators, unlike the tacit collusion that exists amongst the cable companies and baby bells.
But not even the Internet or Television honey pots are safe as revenue sources for the baby bells and cable companies and here is why. Imagine the following scenario:
- Consumer purchases an Apple iPhone (or equivalent) with an unlimited data plan
- Apple delivers wireless modem functionality via software update, allowing the iPhone to cable to a laptop or a desktop and deliver Internet Service (effectively for free)
- AT&T and other mobile providers upgrade their networks and Internet access speeds
- Consumer can now not only dump their landline, but also their DSL or Cable Modem
Taken a step further, television shows are free on network web sites like ABC
. The ABC model of providing their shows free on their Web site for free (supported by advertising as always), will only spread. It is better for both advertisers (they can sponsor shows as the only advertiser and create richer interactions with viewers) and consumers (reduced quantity of commercials). The network also wins because they can archive all of their shows up on their web site and continue to earn advertising revenue - forever. The power of the long tail will fatten the television content providers' wallets, while threatening multi-channel television service providers.
You can see where I'm going...
In this increasingly mobile world, consumers will come to choose mobility as the primary reason for purchasing access to a network, and entertainment applications will be provided over the Internet. This will not happen overnight though:
- Mobile Voice transition is already starting
- Mobile Internet transition will come next (helped along by municipal and advertising-supported WiFi and WiMax networks) over the next 3-5 years
- In 5-10 years the cable companies and multi-channel television will become irrelevant unless they manage to establish themselves as content portals before their current customers abandon the service
Now, you may say that people will not want to abandon their high-def televisions and surround sound systems for watching television in a little window on their laptop, and you're right.
Television provided over the Internet will be viewable on mobile devices, laptops and desktops, and
the TV set. The timing is not right yet, but it will be in the future when people are mentally ready and the offerings are right. The Apple TV is the first step down this path, but it has bombed because it was launched too soon. People are not ready yet, and it is not the ideal solution. The concept will succeed eventually though.
In 3-5 years, TV's and laptops/desktops will come standard with WiFi and/or WiMax antennas and enough flash memory to store as much content as the current AppleTV. TV manufacturers may even create content portals that their televisions will connect to by default for their menu of entertainment options. Don't be surprised if Apple gets into the television business to build these types of devices. Apple already builds a 30-inch Cinema Display
so it would not be much of a leap.
As a consequence of changes in people's behavior and improving technology, the mobile phone will be seen in the future as our mobile access point to content that we use for:
- On-device content execution
- Laptop/desktop content execution
- Content execution via TV/Home Stereo
What will the network operators (cable companies and baby bells) strategic response be?
Labels: Braden Kelley