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Take Notice of AT&T’s Naked DSL Growth
20 May, 2008
Nearly 30% of AT&T’s DSL growth in the last quarter was of the naked kind – meaning sans a traditional wireline. Half of those new naked DSL lines were sold as a part of a wireless bundle. Presumably, those 75K or so AT&T customers who opted for a mobile-DSL bundle also opted out of a traditional wireline. The details appear in this Telephony Online article. Goodbye wireline – hello mobile and broadband. While the trend is widely known, it does help to validate it when you see real data like this. We've seen other recent data on wireless substitution that isn't pretty, at least from a wireline provider point of view.
So here’s the skinny. If I’m a traditional wireline company, I’m certainly trying to stem the flow of wireline substitution. One potential strategy is to continually try to add value to a wireline through applications like fixed mobile convergence. But even with that, a quantifiable number of customers will leave wireline behind – and a large number at that. So, if customers are going to leave anyway, why not try to sell them broadband at least, and a broadband-mobile bundle at best (if you’re lucky enough to be in a position to offer mobile). I sat through a recent presentation at the MetaSwitch Users Forum, where an AT&T exec spelled it out like this. From AT&T’s perspective, "we’re positioning our product portfolio to meet the needs of customers, whatever their preferences are." Want wireless and broadband, we’ve got you covered. Want wireline voice triple play, no problem. Want wireless voice triple play, be our guest. Truth be told, I think AT&T would prefer wireless bundled customers over wireline bundled customers. I’ve never heard that from anyone at AT&T, but as the Telephony article pointed out, wireless customers tend to have a higher ARPU than wireline, or at least a better opportunity to increase ARPU. In today's competitive environment, the name of the game is meet your customer's needs and expectations with whatever flexible product portfolio you can, even if that means they cut the “bread and butter” wireline. If you don’t have something to sell them at the point they’ve decided to cut the chord, more than likely, you’ve lost that customer for life. Agree?
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Should Telephone Service be Free?
12 Oct, 2008
Comcast announced a new promotion last week that offers 12 months of free basic cable service for new customers who also sign up for an additional service. Customers who don’t want an additional service can get Comcast’s basic service of about 20 -30 channels for $10/month. The promotion is tied to the digital TV transition of February 2009 and entices potential customers to avoid the transition “hassle” by getting “free” cable service. “The simple fact is that basic cable is the easiest path through the digital transition and now consumers can get it for free,” said Derek Harrar, General Manager and Senior Vice President, Video Services for Comcast in a company statement. This move is similar to strategies pursued by other video service providers, who are hoping to leverage the digital TV transition for new subscriber additions.
But is this strategy a leading indicator for the future? Should basic core services like basic cable and basic telephone service be offered for free, used as a “carrot” to entice customers to buy “more important” services like broadband? Maybe a very basic phone service, with no LD, access to landline 911, and maybe outgoing service only (to avoid telemarketers) should be a free component of a bundled offering. Such a wireline service may appeal to a customer who previously cut the cord for wireless only, but also needs broadband. There is a growing portion of the population who find the value of traditional wireline phone service elsewhere – either through wireless or broadband/IP services. But, if they could get the security of landline 911, and an extra dial tone in their home as a free value add for subscribing to broadband (or video from a telco’s perspective), maybe a telco’s bundled offering may look more attractive than a comparable cable offering. I realize this idea is not appealing to the hundreds of ILECs who are a part of the current access/settlement system (in fact, it couldn’t work in the context of today’s regulatory structure), but I wonder whether it’s inevitable. In this possible future scenario, the current settlement system adapts to broadband as the underlying service, as opposed to voice.
This scenario cuts both ways. From a cable company’s perspective, a growing portion of the population is turning to the Internet as a source for their video content, and no longer see value in paying for a broad package of video as a part of a traditional subscription pay-TV service. But, if they could receive basic TV (which includes local broadcast affiliates) as a free value add for buying broadband, maybe the cable bundle is more attractive. In a true IP/broadband world, very basic phone and video service is relatively easy to deliver, and has little impact on bandwidth and network performance. Maybe the digital transition is opening the door to a future where free basic services are a regular component of a bundled offering. Thoughts?