The most advanced quadruple play territories in the world are Canada, the UK, France, Hong Kong and Taiwan, according to the Rethink Research Associates Quadruple Play ‘Method or Madness’ report, out last month.
But at the same time the biggest quad play strongholds are all places where services are exceptionally cheap, with these quad play services all available for well under $100 for all of the basic four services ‘ mobile voice, fixed telephony, TV and broadband ‘ although each operator has offerings that go way above the basic offerings.
This is the pricing for basic fixed voice services, around 400 minutes of cellular voice per month, a basic TV bundle plus the price of two paid VoD films per month, and the middle speed internet connection, usually above 2 Mbps, all converted into US dollars.
And according to the report, quad plays tend to occur where cellular voice penetration is 75% or higher, where it has multiple suppliers, and where fixed line penetration is above 85%, and where broadband is delivered on more than 30% of those fixed lines. It is also essential to have a vibrant Pay TV market usually where Pay TV penetration is above 20% of households All of these conditions have to be met before it is economically viable to launch Quad play services. Also cellular growth must be operating below 7% to 8% per annum, or else cellular operators will not yet turn to expensive coalitions with fixed networks, and instead will keep trying to get growth out of highly profitable cellular markets.
In effect, it is competition that creates quad play as an option, not the desire of an operator to do a good job, and quad play services are not lightly entered into, and can be considered the ‘last chance saloon,’ for operators surrounded by highly competitive services.
In countries like Switzerland and Belgium, where there are incumbent operators that already have all four services (see chart in pdf version of this article) but which do not suffer from highly liberalized markets with plenty of competition across all four services, prices stay high and quad play discount packages are almost impossible to find.
But where there is a mismatch, with quad play operators offering prices down below $100, and incumbents (such as Virgin versus BT in the UK) offering high prices for discrete offerings, markets are volatile and incumbents will end up becoming undermined by quad package pricing.
In Germany and the USA there are high price conditions that are ripe for players to undermine incumbent telcos either through quad play offerings or even just triple play services such as those provided by cable. This high pricing makes it clear why the US cable operators are seeking a mobile arm (Sprint’s Pivot) to eat away at the overpriced US operators AT&T and Verizon. It is this condition that accounts for why such operators suffer such high churn rates, such as AT&T and Deutsche Telekom.
The report goes on the demonstrate that once a territory meets all these conditions and a quad play is launched, the fourth service can acquire new customers at an average rate of 5% to 6% of the carrier’s total existing customer homes per annum. The only problem with this is that it sustains revenue in a falling market, and total revenues only rise by a few percent a year due to essential pricing cuts and bundle discounts, which of course is better than them falling.
The report points out that the Quad play is just as much about branding, and putting the advertising power of four separate services behind a single brand, and tries to place a churn reduction value on such banding.
The cheapest (and therefore strongest) quadruple play services in terms of price come from Chunghwa Telecom in Taiwan, and PCCW in Hong Kong and both Orange and Virgin Media in France and the UK. However a batch of Canadian operators, some coming from cable backgrounds and some from telco backgrounds are only marginally more expensive.
Another clear trend that the report is that the only way cheap pricing can be maintained is by combining all four services into a bundle that only has the same cost of sale as most individual services.
It is the aggressive Quad play approach that has meant that PCCW in Hong Kong has such massive broadband penetration of all operators globally. In a country of roughly 7 million people Hong Kong has 3.8 million landlines and PCCW controls just over 2.6 million of them, with just under half, 1.1 million, using Netvigator branded DSL broadband lines. It also has 818,000 IPTV homes and 957,000 cellular customers based on figures from the end of the third quarter
Quadruple Play ‘Method or Madness’ is available from Rethink Research associates www.rethinkresearch.biz for $3,000.