In our new blog series, we discuss the pros and cons of some of the key topics driving change in telecoms. Whether it is a new service package, or a completely new technology, there will always be an impact on both the communication service provider (CSP) and their subscribers. We start the series off by taking a look at quad-play. Our first blog, written by Mihai Constantinescu, has been featured in VanillaPlus, truly demonstrating the importance of quad-play in the telecoms sector right now.

 

The pros and cons of quad-play

 

For many major CSPs, quad-play represents a significant new revenue stream with great potential for growth. It is the latest offer to attract customers and conquer the market, by combining fixed line telephony, broadband, paid TV and mobile services. Operators that can successfully offer ‘the fantastic four’ could realise several times the revenue of a basic access service. It sounds like the perfect situation, but what are the pros and cons for the operator and their subscribers?

Operator Pros: A new source of revenue in a competitive market

Telco companies are continuously under pressure to find new sources of revenue. Operators are finding it difficult to monetize their current services and cope with remissive revenues, so are turning to radical solutions (e.g. merging with a wireless operator). These radical solutions have great potential, with the promise of significantly increasing the lifetime value of a customer who signs up to a quad-play package.

But operators must evaluate the risk; subscribers moving away after short contract periods due to poor billing clarity, subscribers opting for OTT providers and keeping mobile contracts as stand-alone, subscribers refusing to being tied into a long and possibly expensive subscriptions; these can all be tipping points that erode quad-play’s commercial proposition and could slow down quad-play adoption.

Subscriber Pros: Ease, simplicity and cost savings

For the subscriber, quad-play offers the simplicity of just one contract and one bill to worry about. This is attractive for the busy individual, saving time, and in most cases, money.

For operators, the ultimate aim of such plans is to lock in more customers by offering them more services. This can be great for subscribers, with many operators offering discounts to tempt customers to sign up. However subscribers do have to shop around, as some operators try to resist discounting – they do not want to be the first to cut mobile prices in what is an already difficult, competitive environment.

Subscriber Cons: It’s all in the small print…

While cutting price to craft an attractive quad-play bundle can clearly cost operators in the short-term, it is clear that operators are investing in a long-term customer retention plan. Bundled service packages with a low entry rate are designed for longer lock in, so subscribers may find themselves with limited flexibility if they wish to alter their package, or change supplier completely.

Operator cons: Investment in a technically challenging arena

Quad-play is a significant investment, and will have a major impact on the day to day activities of telco operators. They may need to pursue acquisitions and partnerships to provide all services, coordinate marketing and integrate technologies and systems (e.g. a lack of fibre optic cabling has frustrated operator’s plans to deliver quad play services to date). Adding multiple mobile devices to the existing ‘per household’ fixed line, broadband and TV contracts also gives rise to new challenges with regards to packaging, pricing and management of the total offering, with multiple options on the table.

Operators need to develop new models to understand customer behaviour – the ability to identify when and where opportunities will emerge is clearly key to success in this space. In order to deliver on quad-play promises, operators need an intelligent network management solution which can segment and monitor subscriber behaviours and issues, enabling them to offer the best suited packages. This in itself is a distinguishing feature that gives operators a competitive edge.

 

Quad-play comes with a number of other inherent risks, such as cannibalisation of existing revenue streams (e.g. still growing triple play market), difficulty of quantifying the long term returns on quad-play investment or  identifying the right time and market. Reported reductions in churn may be misleading and furthermore, competition within the market is growing and initial churn reduction may disappear as more operators enter. Nevertheless, the traditional fixed and mobile value chain is already under threat from a new wave of competitors (e.g. OTT) and there is no doubt that quad-play bundles have the capability to disrupt fixed and mobile markets and thus they cannot be ignored.