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Tuesday, January 31, 2006

Managing heterogeneity and multiple service providers

A lot of the new business models around fixed-mobile convergence, or triple/quad-play, seem to assume that a whole household will willingly switch to a single service provider.

I can certainly see why operators would dearly love this to occur - ARPU and margin uplift from bundling, customer lock-in, and easier support calls (no finger-pointing or 3rd party equipment).

But is this unreasonable? It strikes me that "in the real world" there's a whole host of reasons why operators may have to deal with heterogeneous, multi-provider households:

- One family member has a company-supplied mobile phone with a different operator
- Family members unwilling to switch ISP, owing to use of email addresses
- "Content lock-in" - eg if someone is silly enough to have their music collection tied to a specific operator's services
- A given market has two "dual-mode" operators, each providing their own home gateway, and two family members independently buy one of each
- Shared households of students / young professionals
- Increasing use of long-term contracts over 24 months inhibiting migration
- Regulatory reasons prohibiting "single phone number" or "fixed+mobile" services
- People moving home to areas with different DSL / cable availability

... and so on. All of these strike me as possible problems in reaching the "single operator utopia". Together, it wouldn't surprise me if this reduces the addressable market for such services to under 30% of what more optimistic planners may expect at first.

1 comment:

Simon Cast said...

Optus and Telstra are a good example of not getting over excited by bundled services. Both companies saw an increase in service take up and lift in ARPU but neither saw it to the extent that the senior management had been promoting.

From memory the biggest uptake was combining telephony and broadband bills into one with mobile phones tacked on. The inclusion of digital TV didn't make a great difference.

One thing that did depress the ARPU gained was the need to offer discounts to encourage people to purchase the bundles. Consumers where just unwilling to purchase the bundle unless they saw their total bill decrease signifiantly.