Can quad-play take off in the UK?
Nowadays many homes take three services – Internet, landline and TV – from a single provider. But the trend for a single provider to offer all four services – including mobile – is catching on in Europe and analysts believe the UK could be the next big growth territory for 'quad-play'. Iain Regan, Executive Vice-President, Sales and Marketing, with customer management outsourcer Firstsource Solutions, considers what the impacts on the Telco industry might be.
Right now the UK telecoms landscape sees BT and Sky dominating in internet, landline and TV provision, while other significant players such as Vodafone, O2 and Orange provide separate mobile offerings.
Cost has kept internet, landline and TV segregated from mobile in the UK. A standard line rental is £14.50, which might bring the cost of a package with TV to £30 - £40. But as a standard mobile service can be £40-£50, suddenly, when combined, they can reach triple figures.
In tough financial times when people are looking at their monthly discretionary spend very closely, the reality of being tied into a £100 a month or more contract is the tipping point that erodes quad-play's commercial proposition and has kept quad-play out of contention in the UK until now.
However, if companies are able to drive down costs with attractive packages, consumers will benefit from lower prices, simpler choices (a one-stop-shop for all their media needs), added content such as extra channels or call minutes they would not otherwise have paid for.
There has been scant quad-play from UK providers apart from Virgin until now, but all the signs are that this could be about to change. BT, a pay-TV market success with its own sports channels, is getting back into mobile. In a deal with Orange-owner EE, it is resurrecting its consumer mobile business.
Talk Talk implemented its quad play strategy in 2012, but has yet to become a significant player in this. Vodafone has signalled it is about to move into broadband and pay-tv but CEO Vittorio Colao sounds cautious about the imminence of UK quad-play: "In the UK there is not a huge or super strong converged market but it could be different in six or 12 months."
In the US, AT&T, Verizon, Comcast, Cox, and Time Warner all offer quad-play and have scored highly with American consumers due to significant discounts being available to consumers, with providers that are open to negotiation and offering deals.
The situation is healthier in the United States due to the multiplicity of providers and the keenly competitive landscape. However, Strategy Analytics predicts just 13% of US households will take a quad-play package by 2016. This is the other lesson from America – the process takes time and the numbers are small at first.
In Europe telecoms companies are equally under pressure to find new sources of growth. We could see, for instance, a wireless operator merge with a telecoms juggernaut. Whatever the shape of the industry, radical solutions are required. Analysts McKinsey say operators are finding it difficult to monetize their data as data traffic in the US and Europe has grown by a factor of more than 50 over five years, but revenue has only doubled. Meanwhile, voice/text revenues have wilted – with a 40 percent decline in income from texting in Europe. Total UK telecoms revenue fell for the fourth successive year by 1.8% in 2012 to £38.8bn, according to Ofcom.
Quad-play will have a major impact on the operations of telcos. Of course, offering all four services creates more scope for technical problems to be encountered, requiring additional assistance from customer support. Customers can always go elsewhere, so maintaining customer happiness through high-quality customer support will be critical.
Permanently connected customers, purchasing and watching content 24/7, whether on their mobile devices or in their living room, expect greater speed, variety and depth in support across all channels - whether they send an email, a message on social media, use online chat support, or speak to a customer service operator at the end of a phone.
In the quest to live up to these high expectations, companies are increasingly turning to outsourcers to provide cost-effective customer management systems. In particular, outsourcers can use Customer Intelligence (CI) platforms to help companies understand customers' behaviour and what influences them in order to design the right messaging for the right channels at the right times, giving messages the greatest possible impact and influence.
Quad-play will certainly grow in the UK in the months ahead, but it is only one of many changes we are likely to see. And, as the industry transforms, customer service will either be Telco's' Achilles' heel or the distinguishing feature that gives them a truly competitive edge.
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