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Monday, November 23, 2009

The quadplay myth

One of the perpetual themes I encounter at the moment is the notion that the world is moving towards a "converged" situation in which individuals or families purchase all their communications services from a single operator.

In particular, there is a fervent belief that people will choose the same cellular providers and fixed broadband providers, tempted by bundling deals and wondrous "three screen" content and entertainment services.

Not only that, but these ultra-loyal users will happily spend more in aggregate, persuade their entire families to follow their lead, churn less and will be happy to have femtocells or WiFi to offload "mobile broadband" onto their own paid-for fixed connections.

For the larger hybrid operators, that is a Utopian ideal. And to be fair, in some circumstances it will actually happen.

But realistically, it strikes me as a 10-20% thing whichever way you slice it.

- Maybe 10-20% of households will have a single family plan for all mobile devices coupled to the same provider's DSL or cable or fibre
- Maybe 10-20% of fixed broadband subscriptions will incorporate a bundled "for free" mobile extension (perhaps with a detachable dongle in the gateway)
- Maybe 10-20% of triple-play (voice/Internet/TV) subscriptions will expand to quad-play with mobile as well

There are too many factors driving *divergence* here, not convergence. A partial list:

- Operator-exclusive devices like the iPhone and Motorola Droid will often drive operator choice, not the other way around.
- Some mobile operators have no fixed arms (eg 3, or some T-Mobile properties)
- Some mobile operators only have fixed coverage in certain places (eg AT&T)
- Some mobile operators have lousy coverage in certain places (or certain buildings) where their fixed arms are strong
- Devices like the Amazon Kindle and laptop/dongle combinations will proliferate with an unknown "Brand X" mobile operator behind the scenes, thus non-connectable into an existing household plan
- Prepay-centric markets tend to have many people with multiple devices, specifically chosen to be on different operators to enable tariff arbitrage
- Many users have company-issued devices on a different network to their personal devices and broadband
- Few users are ever willing to churn fixed broadband provider for a variety of reasons (unique content / IPTV, difficulties in switching phone numbers or email address, perception of disruption etc)
- Unusual households (flat-sharers, students in accommodation blocks etc)
- Preference of children to buy own devices / services with pocket money rather than as part of a family plan

You get the picture.

Now, the 10-20% of quadplay-receptive households are definitely a target worth pursuing. But let's not kid ourselves that they represent the *typical* future household rather than the ideal telco-dream segment. Yes, the picture will vary substantially by country and specific operator, but overall it's worth betting on divergence and not convergence (as per usual in the telecoms industry).

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