December 3, 2008

Quadruple Play Takeaways for US Cable Operators

Success stories from foreign providers of wireless, TV, broadband, and phone combos.

By Peter D. Shapiro

How quadruple play works in real life, in places as far-flung as Hong Kong and France and as near-flung as Canada, has implications for cable operators back here in the USA.

Speakers at a general session of CTAM Summit 08 in Boston came from each of these places, representing very different companies: Paul Berriman, from PCCW, the incumbent telco in Hong Kong; Jean-Marc Harion, from France Telecom, which owns Orange, Europe’s 2nd largest mobile wireless operator; and Mike Lee, from Rogers Communications, Canada’s largest cable operator and its largest mobile wireless operator. 

What they had in common were quadruple play success stories. Even taking into account the unique aspects of the US environment, these experiences provide relevant and useful perspectives for US cable operators. 

Selected highlights:

Mobile Wireless Future-Proofs the Package
Mike Lee reported that 65-70% of mobile wireless calls are made from locations where users can easily make lower-cost fixed line phone calls. Such a statistic, he said, demonstrates the value users place on convenience. This is a cautionary tale for US cable operators looking to fixed phone service as an ongoing source of growth. While US MSOs will continue to gain fixed phone subscribers at the telcos’ expense, they are harvesting this growth in a mature corner of the telecoms market; the real growth opportunity is in wireless.

Mobile Wireless and Wi-Fi Play Well Together 
Hot-spots.  PCCW operates 5000 Wi-Fi hotspots in Hong Kong, where data traffic can be off-loaded automatically from its wide area mobile wireless network. 

In-home Wi-Fi.  For Rogers’ mobile wireless users whose handsets include WiFi, their in-home calls may be linked with Rogers’ wide area network via the customer’s home WiFi network and broadband connection.  This feature, which improves the customer’s in-building coverage and provides wireline phone pricing for the in-home calls, is targeted mostly to young adults who have cut (or never had) fixed phone lines.  Orange provides a similar wireless-WiFi feature through its Livebox home gateway system.

In the US, in-home and hot-spot Wi-Fi calling are both available from T-Mobile; however, T-Mobile receives this traffic over cable or telco broadband connections, which it has no control. Once US cable operators introduce their own mobile wireless services, they will be well positioned to exploit their QoS-managed broadband footprint to support in-home calls carried via WiFi.

Wireless is Sold Differently
Mobile wireless is typically sold to individuals, whereas fixed TV, Internet access, and phone are sold to households. 

To help to bridge this marketing gap, Rogers promotes mobile wireless family plans that relate more easily to household-oriented fixed products. Rogers looks for natural fixed + wireless combinations rather than attempting to jam square-peg bundles into round-hole market segments.  For example, perceiving a natural broadband + Blackberry affinity, Rogers promotes a price-discounted pairing of its high speed Internet access and mobile smartphone services. 

Soon after PCCW wins a new mobile wireless customer in one of its stores, the PCCW phone center calls the new customer to cross-sell the other PCCW products.  The phone center representative takes note if the customer reports that there is time still remaining on a service contract with the cable operator, and then calls back when the contract has expired.

TV Channels Evolve into Interactive TV Portals 
In-game betting is available on a PCCW sports channel, as is stock trading on its business news channel.  A PCCW TV channel that shows movie trailers offers a ticketing feature that enables a user to purchase a movie theater ticket and select a seat.  Then, in a cross-platform flourish, the user can download the ticket information to his or her mobile phone to be read as a bar-code on entering the theater.

More Than One Way to Market Multiple Products
For new customers, Rogers offers the typical product bundles for a single price. For existing customers, however, Rogers employs a different offer structure, one that provides progressively larger discounts for each additional product purchased.

Offering TV channels à la carte has helped PCCW to siphon market share from Hong Kong’s incumbent cable operator.  PCCW’s subscribers like the idea of buying only what they want to watch.  But after a new subscriber has picked what may be a skimpy selection of favored TV channels, PCCW’s phone center follows up to sell additional price-discounted “mini-packs” of channels, as well as cross-selling the other PCCW products. 

Orange’s and PCCW’s commercials highlight availability of their exclusive sports programming across TV, PC and mobile devices.  Conflating exclusive content with convenience of being able to access that content anywhere has provided an effective marketing message. It’s also proving to be attractive to advertisers, which place their spots on the TV, Web and mobile wireless platforms.

It Takes a Back-Office
Managing quadruple play involves operational complexity that should not be underestimated, Rogers’ Mike Lee says.  Rogers copes by spending a lot on IT and back office systems. 

To obtain a single view of each customer, PCCW has had to link together separate systems that support each of its products, a “major task,” according to Paul Berriman.  In addition, managing PCCW’s à la carte TV requires dealing with variations in customers’ selections of channels, each involving different contract durations and price discounts, which in turn determine settlements with content providers.

Takeaways
Executives from major US MSOs have visited Hong Kong to see for themselves how PCCW, the incumbent telco, has been eating the local cable operator’s lunch.  Over time the takeaways from PCCW and other successful non-US operators may be reflected in actions that US MSOs can take to achieve more growth and defend against AT&T and Verizon, strategic competitors that already offer the four quadruple-play products.

Peter D. Shapiro is founder and principal at PDS Consulting, a cable & telecoms consultancy (www.pdsconsulting.net). He can be reached at: peter@pdsconsulting.net