The Telcos’ Better Mousetrap?
The Telcos’ Better Mousetrap?
By The Carmel Group’s Jimmy Schaeffler
Twelve years ago, the satellite guys needed a better mouse trap in order to lure cable subscribers to their nascent, all-digital video services.
The same holds true for today’s telephone companies, namely, AT&T and Verizon, as they venture into a television jungle heretofore controlled solely by those satellite guys (with their 29 million video subscribers), and by the cable guys (with their 63 million video and “bundle” subs, when you count voice, audio-video and telephony services).
Yet to succeed and deliver healthy returns on investment, a critical component will be how easy they will make it for consumers to do business with them.
This ‘’seamlessness’’ will involve every one of the “triple play” services and products offered by cable, as well as wireless offerings in a “quadruple play” package. And it must apply from order to installation to usefulness of the program guide to friendliness of the hardware, all the way to quality of digital signal and beyond.
Adding ATT and Verizon together, they apparently “get it.” Yet whether that applies to their individual deployments, remains a very open question. Somewhere along the way, they need a better mousetrap, to win away customers.
AT&T’s Attributes
This market-by-market telco video and triple-play monopolist sees its key message as one of a new service, based on the success of two key technological decisions. One is the use of Internet Protocol TV (IPTV). The other is fiber to the local center (or node), for all “brown” (or existing) households, and fiber to the premises for all “green” or new households.
AT&T believes its service superiority lies in the fact that rival cable is, like satellite, limited by its physical and broadcast environments.
AT&T recognizes that Verizon has also invested in a fat pipe, yet notes that Verizon’s remains a broadcast environment. Because AT&T’s is a non-broadcast system, the San Antonio-based company claims it can carry more video, channel applications and services in an “on-demand,” single user mode. All of AT&T’s new set-top boxes are MPEG-4 compatible.
Specifically, AT&T believes its software-based system allows more control over more streams of content into the home. As an example, AT&T boasts its digital recorder can record four different programs concurrently, in part because it does not rely on four separate tuners to sort through the digital ones and zeros. VOD and HD are additional areas of AT&T system superiority, according to a company spokesman.
Verizon’s Vision
Two clear messages resonate from Verizon’s deployment of its triple play bundle. One is its more-expensive decision to install fiber optic cable all the way into every home, without a differentiation as to “green” or “brown.” Nicknamed FiOS, Verizon melds this video side closely with the burgeoning broadband side of its triple play.
The other is Verizon’s focus on life beyond voice. Notes Verizon’s spokesperson, “This isn’t a phone company anymore; it’s a broadband and entertainment company.”
Statistically, Verizon appears to be planting the seed. Verizon claims 79% of its new subscribers are triple play users, 99% use at least two services (of the triple play), and more than 90% take the Fios TV Premier package at $39.95. Verizon also states it has a penetration rate of 10% average across the limited number of markets it has entered, mostly in TX and the east coast. Like AT&T, Verizon believes its packages and prices, of both individual video packages and triple play specials, are ultimately superior to cable’s.
And because satellite cannot offer bundled services, the telcos know they have the DBS guys trumped from the start.
The Messages
The messages are clear.
Note to Comcast’s Brian, Time Warner’s Glenn and Cox’s Pat: Look back, guys, they’re gaining on you. Note to satellite’s Charlie and Rupert/Dr. John: Run faster, gents, they’re passing you by.
Yet the consumer is the one who ultimately decides whether mice get caught. That reality brings us back to the seamlessness of the overall experience, time upon time, transaction after transaction. If the telco consumers’ overall triple play experience is significantly better than that of the cable guys, and if the telcos’ video play is so much better than the satellite guys’, then the real best marketer of multichannel products and services will be each consumer’s word of mouth.
Nonetheless, in searching for those key components that cause entrenched U.S cable customers to relinquish their video and triple plays, the next-gen telco services look, at best, quite a bit like cable, give or take a couple steroids. That, in turn, raises the question of whether the telcos’ new trap is enough to make millions of consumers go through the hassle of changing. Ultimately, at year-end 2006, the telcos’ trap appears just a bit too indistinguishable from the best cable systems.
Note to the telcos’ Ivan and Ed: Can you find some real cheese for that trap?
Jimmy Schaeffler is chief service officer and senior analyst at The Carmel Group, a publisher and consultancy based in Carmel-by-the-Sea, CA. The company covers telco, satellite, cable and wireless services, as well as computers and the media. Schaeffler can be reached at jimmy@carmelgroup.com; or, (831) 643 2222.