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Rapidly Changing Triple and Quadruple Play Business Models

It is interesting to follow what is happening with triple and quadruple play broadband prices in competitive markets.

Through triple and quadruple play, customers are increasingly getting more services for the same money. As most fixed telecoms markets are still largely monopolistic in nature, basic access charges remain high; but good prices are even available in markets with healthy wholesale competition, if one shops around.

In comparison, mobile markets are in general more competitive everywhere and cut-throat price competition is driving the markets here, again with triple and quadruple play packages—across Europe quad-play is already almost ubiquitous.

It is important to include the words ‘competitive markets’. For example, this isn’t applicable to the fixed broadband services in the USA, where triple play packages offered by the cable TV operators will cost users around $140-$160 a month. In most competitive markets that price is under $100. The exception in the USA is, of course, Google, which charges $70—add Netflix or an online cable TV package to this for, say, $20 and you are still below the $100 mark. Markets in as Australia and New Zealand are only now starting to catch up with more aggressive bundling.

The reality is that if the network is in place, there are very few extra network costs involved in delivering more services to more people; so prices between $70 and $100 will still deliver the operators a very healthy return. One of the problems with the incumbent operators is that their cost structure is often 2 or 3 times greater (or even significantly more) than those of new players such as Google in the USA and Iliad in France, and without competitive pressure incumbents are reluctant to change.

The fact that videostreaming services are now available under the $10 per month in competitive markets shows a similar picture. Based on IP transmission rather than on broadcasting transmission the network costs per extra users are almost negligible here as well. This should send warning signs to the cable TV operators in the USA, who as a matter of fact are now broadband operators. It will be interesting to see how long they will be able to hang on to their expensive subscription-based cable TV packages.

And with online self-service from the new players, flat fees and no billing, administration costs have largely disappeared for those companies who have been able to harness the e-business world.

Of course, there is nothing preventing the incumbents from moving in this direction as well, but as we have seen over the last few decades they are very slow to do this; and so far their shareholders have backed them. So they have often been asleep at the wheel.

The question is: when will this party be over? It is clear that the business models of the incumbents are unsustainable and will need to change. Increasingly we see the new players in the market offering more services that were traditionally telecoms services provided at premium prices by the incumbents.

Again, all those IP-based services (VoIP, Skype, WhatsApp, etc) add only small incremental costs to the network costs, which can be easily recouped by simply signing up more customers.

In the telecoms world, therefore, the business focus of the market has well and truly shifted to videostreaming, with as much as one-third of customers in the developed economies now using those services on a weekly, if not daily, basis. On the other hand, most cable TV operators are now de facto simple telecoms (broadband) operators also, and they will have to face this reality, which for them means an IP revolution driving content prices down in the direction of the videostreaming providers.

Competition will drive these markets more and more together, and with high-speed broadband, videostreaming innovations and much more choice the consumers are set to become the winners of the battles between the giants in telecoms, cable TV and content.

By Paul Budde, Managing Director of Paul Budde Communication

Paul is also a contributor of the Paul Budde Communication blog located here.

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