Telecom service providers see the media and entertainment play as a major opportunity for offsetting declining voice revenues in a market where fixed-mobile substitution, VoIP and aggressive triple-play offerings from cable operators are all facts of life. Telecom service providers are positioning themselves for the post-voice world by ensuring that they can provide customers with exciting new connected-entertainment services.
Around the world, most players have been investing in media-related technologies. Telecom Italia launched its 'Alice' offerings (broadband, IPTV, DTT) as early as 2002; SingTel launched Mio TV this year; Reliance launched an IPTV trial in 2006 in India and is planning a full roll-out by end-2008.
For these operators, there are two main objectives in moving from a pure-play strategy to a triple-play strategy: maintaining or growing ARPU (mobile, broadband) by establishing new revenue streams (content); and reducing churn by increasing customer's 'stickiness' to their products and services.
So how could telecom service providers succeed in the media space and offset the heavy investments required‾ The best way is to target households through a segmented, differentiated value proposition.
Consumer patterns have changed with increased demand for a multi-channel user experience (mobile handset, wireless PDA, PC and laptops, TV, game console). Disruptive technologies (IP, Wi-Fi, Wimax) and players (Skype, Joost, Microsoft, Google) have emerged and are contributing to the erosion of voice revenue for telcos. Telecom service providers are being forced to re-think their business models and adopt convergence.
Service providers can leverage several assets to succeed in this business model shift:
- Technology acumen, in particular with the growing digitization of the media space
- Customer insight, through their long and close ties with their subscribers
- Brand awareness, developed over the years through marketing and campaigns
- Financial strength, allowing long-term investments to prepare for the future
Despite their deep pockets, carriers face a conundrum of needing to heavily invest in media-enabling infrastructure, content and marketing with an unclear ROI as consumers are reluctant to pay for such services.
A study by Forrester Research found that operators will only capture a 10% share of the TV market over the next five years and will not reach 10 million subscribers before 2011.
Investments are also required in faster broadband access to build a compelling TV service offering. Also, they usually do not have in-house media expertise and need to hire and develop new skills. Lastly, they need to differentiate their value proposition to overcome competition from other traditional and non-traditional media players.
Success lies at home
At the heart of selling advanced communications and content packages is the household. Accenture's studies show clearly that the decision-making process is much more household-centric than individualistic.
Fixed-mobile substitution initially moved the focus away from homes to target the individuals and their on-the-move behaviors. With the increasing convergence of communications and media, mobile operators now need to shift their selling paradigm to re-target the homes.
Their value proposition is across three dimensions: pricing, services and personalization.