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Wal-Mart to Begin Selling Broadband Service
09 Oct, 2007
Wal-Mart will soon begin marketing broadband service, through a reseller arrangement with Hughes Network Systems. The broadband product will be HughesNet, which offers packages of satellite delivered broadband at download bandwidth speeds of 700kbps to 1.5mbps (not guaranteed). BusinessWeek is reporting that Wal-Mart will initially offer the service in 800 stores. It’s not clear if Wal-Mart will offer the broadband satellite product at the same price points as Hughes.
This move by Wal-Mart may have both positive and negative competitive implications. It really depends on how aggressive they intend to get with it. If this new arrangement ends up being a low visibility display in the back corner of the store somewhere, it probably won’t have much of an impact. But if Wal-Mart markets it aggressively and ties it to the sale of computers from their stores, perhaps a different story will emerge. Wal-Mart is notorious for their potential market changing behavior. They use their tremendous market power to squeeze their suppliers for lower prices. Many would argue that Wal-Mart is most responsible for pushing HDTV into the mainstream by aggressively selling sub-$1,000 HDTVs. Will they have a similar impact on broadband? Positively speaking, this Wal-Mart move could benefit the broadband landscape, by raising the visibility of broadband and educating the "broadbandless" demographic. Realistically speaking, Wal-Mart’s broadband hands will be somewhat tied, due to their reseller relationship with Hughes. Satellite broadband has some distinct limitations and tends to be higher priced. It doesn’t match up well against cable modem and DSL, either in performance or price. I don’t think this announcement will have all competitors “shaking in their boots.” But any time Wal-Mart makes a move, its worth observing. Businessweek even speculates that their next move may be into the home, offering “Geek Squad” type services. Perhaps marketing broadband is step one in a much more measured and complex strategy. Stay tuned.
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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?