Quad-Play and Beyond: Multiplay bundling strategies for ... · Quad-Play and Beyond: Multiplay...

Quad-Play and Beyond: Multiplay bundling strategies

for telecoms and pay-TV operators

Extract

informatandm.com/multiplay

Your global research partner

www.informatm.com © 2011 Informa Telecoms & Media 1

Case study: BT’s broadband/Wi-Fi bundling strategy17 February 2011Informa Telecoms & Media

Key points

• Since June 2010, BT Retail has bundled unlimited Wi-Fi access with its midpricedhome-broadband packages at no extra charge.

• The UK incumbent hopes to reduce churn and increase its customer-acquisition rateand ARPU, partly by targeting bandwidth-intensive smartphone, iPod and iPad users.It also aims to defend its current- and next-generation broadband business against 3G+ and 4G mobile.

• The company has rapidly scaled up its Wi-Fi network by partnering with Wi-Fi operatorFON to enable BT customers to share bandwidth on their residential WLANs with otherusers.

• The sheer scale of the hot-spot networks – 2.6 million hot spots by February 2011– is the main strength of BT’s strategy, but questions remain about the quality andavailability of BT FON hot-spot access.

• The main opportunity is that of carving out a new market subsegment of residential-quality broadband on the go, especially in indoor and built-up public spaces. The mainthreat is BSkyB’s likely entry into the Wi-Fi market after its acquisition of Wi-Fi providerThe Cloud.

• Informa believes BT’s strategy is smart and will continue to generate growth for itsfixed-broadband business in the medium term. In the longer term, its success willdepend on the degree to which bandwidth and availability will match those of 4Gmobile.

Overview: ubiquitous, “free” Wi-Fi

In June 2010, UK incumbent BT made unmetered Wi-Fi-hot-spot access available to allcustomers subscribing to its residential Total Broadband packages. Previously, Wi-Fi accesshad been time-limited in all except the highest-priced Total Broadband option.

At the time, about 1.5 million hot spots were available to BT subscribers. The vast majority ofthese were BT FON hot spots: Residential WLANs made available to third-party BT users on asecure basis using software supplied by independent Wi-Fi operator FON. By November 2010,the number of hot spots had topped 2 million, including the following:

• About 2 million BT FON hot spots.

• About 195,000 BT Business WLANs broadcasting a BT Openzone public Wi-Fi signal.

• About 3,900 BT Openzone public WLANs.

The pace of hot-spot growth has accelerated since then: At the beginning of February 2011,BT reported that it already had about 2.6 million hot spots in operation, exceeding its originaltarget of 2.5 million by end-2011.

Strategic goals

BT’s move serves a number of strategic purposes:

• Adding value to the fixed-broadband offer – The provision of widely available,unlimited Wi-Fi adds a significant competitive advantage for BT in the broadbandmarket.

• Defending against fixed-to-mobile substitution – BT’s offer is targeted at high-volumemobile data users, especially users of devices such as smartphones, the iPod, tablets(such as the iPad) and laptops. The aim is to provide a nearly ubiquitous wireless-broadband experience that is an extension of users’ experience with residentialWLANs and at least as good as, if not better than, current 3G(+) broadband. In thisway, BT aims to prevent this high-value portion of its customer base from replacingtheir fixed-broadband subscriptions with mobile offerings, including some that arealso bundled with free Wi-Fi.

• Carving out an “indoor wireless broadband” market subsegment – The rationale forusing both public and private WLANs (via the partnership with FON) as an alternative


wireless-broadband technology is that it targets the locations where 3G coverage isknown to be patchiest – indoors, whether at home or on the move, such as in cafes,hotels, train stations and airports, and in built-up areas in general, where there is ahigh density of residential and business WLANs.

• A pre-emptive strike against LTE – By rapidly building out its Wi-Fi infrastructureand building up its Wi-Fi subscription base now, before the UK rollout of Long TermEvolution (LTE) 4G networks, BT is aiming to blunt LTE’s impact on its broadbandbusiness – since LTE is expected to contribute greatly to the trends of fixed-to-mobilesubstitution and improved indoor mobile coverage that BT’s strategy is designed tocounteract.

Business model

The unique selling points of BT’s Wi-Fi offering are its ubiquitous and unrestricted characterand the fact that it has been bundled with BT’s residential broadband packages.

Marketing: ubiquity in pursuit of the iPad generationThe key to achieving ubiquity has been the partnership with FON, which enabled the launchof the first BT FON hot spots in October 2007. The partnership has led to unprecedented growthin the number of hot spots available to BT subscribers, with about 2 million being added injust over three years.

BT is using its success in expanding its Wi-Fi coverage to attract and retain users ofsmartphones, iPods and iPads, who increasingly expect to be able to effortlessly access theirapps and content without regard to location or access technology. These users are beingexplicitly targeted by apps for the iPhone and Android phones (launched in September 2010)and for the iPad (launched in January 2011) that enable BT Broadband subscribers to easilylocate and automatically connect to any available BT hot spot.

Advertising: ‘Take your home broadband with you wherever you go’The marketing message of “portable home broadband” was communicated in a TV andan online ad for the new iPhone app (see fig. 1), in which a number of environmentsoutside of the home (a park, a soccer field, outside a rural pub, inside a bus station) areimaginatively transformed into the home environment as people effortlessly access typicalhome-broadband applications and content on their iPhones or iPads.

Fig. 1: BT Retail, Wi-Fi TV ad, Nov-10

Bundling strategy: adding value as well as ARPUAs well as seeking to attract and retain the iPad generation, and slow its drift to all-mobilebroadband, BT is seeking to add value to its broadband proposition. Wi-Fi enables BT to achievethis at little incremental cost, in that it piggy-backs on services such as customers’ homeWLANs (in the case of BT FON) and the Openzone public WLAN network, access to which isstill being charged on a retail basis to non-BT Broadband customers and on a wholesale basisto other operators, including mobile operators Everything Everywhere (Orange and T-Mobilebrands) and Vodafone.

The low cost – compared with cellular-network deployments – with which BT has rapidlyexpanded its Wi-Fi coverage enables it to offer a service that is potentially valuable to manycustomers at a competitive price (see fig. 2). BT attributed its high share of net broadband-customer additions in 4Q10 (53%, according to the operator) in part to the Wi-Fi offer. The


growth of the broadband-customer base is in turn generating greater ARPU, in that customersare adding broadband to their telephony packages. In its results for 4Q10, BT reported thatconsumer ARPU rose by £5 (US$8) quarter-on-quarter, to £322.

Fig. 2: UK, selected midrange broadband prices and services, Feb-11

Wi-Fi clearly sets BT’s services apart. By contrast, BSkyB uses its market-leading satellite-TVservice to attract new broadband customers via its entry-level offer of “free” broadband (the£19.50 bundle), limited to 2GB of downloads a month. BT also imposes monthly downloadlimits on its midrange bundles, in part offset by the unlimited Wi-Fi.

Results

Wi-Fi offering contributing to BT’s customer-acquisition rateBT reported that it added 114,000 retail and LLU DSL subscribers in 3Q10 and 188,000 in 4Q10,representing 45% and 53% of all UK net additions, though the 3Q10 figure varies slightlyfrom Informa’s estimate (see fig. 3). BT attributed this success in part to its Wi-Fi strategy. Itpointed to the rapid growth in the number of hot spots it has deployed and the fact that Wi-Fi usage increased from 335 million minutes of use in 4Q09 to 881 million in 4Q10, drivenby smartphone and tablet-PC usage. In addition, in the two months to mid-November, BTreported that there had been more than 170,000 downloads of the free iPhone and Androidapp for locating and connecting to BT’s hot spots.

Fig. 3: UK, fixed-broadband net additions by selected operators, 4Q09-3Q10

BT needs to include a distinct added value in its broadband packages to compete with BSkyB.The satellite operator has experienced huge success in gaining new broadband users via itsentry-level triple-play offer of broadband as a “free” add-on for Sky TV customers paying£19.50 a month for their TV subscription. The Wi-Fi offer is targeted at winning and retaininga different user segment: more-intensive broadband users who want to access the sameservices, applications and devices on the move – as opposed to BSkyB’s TV-focused customersusing broadband mainly in the home.


Strategic outlook

Fig. 4: BT’s broadband/Wi-Fi bundling strategy SWOT analysis

Informa viewpoint

BT sweats its assetsBT’s use of Wi-Fi to boost its customer-acquisition rate and add value is a classic example ofmaximizing the revenue potential of a massive but rapidly depreciating asset: BT’s ownershipof the legacy copper local loop, which it is incrementally replacing with fiber and hybrid fiberand copper (VDSL).

Developing long-term value for fixed broadbandBT needs to ensure that it has a large and stable base of broadband customers to which itcan market its Infinity-branded VDSL services. To achieve this, it needs to establish the ideathat only fixed broadband can offer the bandwidth and reliability that intensive Web-based-service users demand, including when on the move.

Wi-Fi offer will help BT sustain rapid subscription growth in the medium termCoupled with the competitive prices of BT’s bundles, the Wi-Fi offer does represent asignificant differentiator for BT Broadband. In view of that, Informa expects BT to be ableto sustain its high rate of customer acquisition over the next year or two. This will dependon the extent to which the BT FON network develops a reputation for ubiquity and quality,since these will be crucial in resisting churn toward increasingly higher-bandwidth mobilebroadband offering better indoor coverage. The great majority of the increase in BT customers’use of Wi-Fi is attributable to the FON network, according to BT. Since there have been nowidespread reports of customer dissatisfaction, customers’ quality and availability concernsare most likely being addressed adequately.

BT’s strategy is not easily transferable into comparable European marketsBT is unique among incumbents in major Western European countries in that it does not owna mobile network. This enables it to battle on both fronts: defending and building its fixed-broadband business as it mounts a pre-emptive assault on the mobile-broadband market. Bycontrast, incumbents such as Orange France, Deutsche Telekom and Telefonica are much morecautious about how they position their Wi-Fi services so that they do not cannibalize eithertheir fixed- or mobile-broadband businesses.

www.informatm.com © 2011 Informa Telecoms & Media

ContentsContributing Analysts....................................................................................................... 1

Quad-Play and Beyond: Executive Summary – PowerPoint file (66 Slides)................... 2

Global Multiplay Market Status Report – PowerPoint file (199 Slides)......................... 3

Multiplay M&A strategies: Multiple options for operators to offer bundles................ 4

Fig. 1: Market-entry strategies for operators seeking multiplay bundling.........................................................................5

Fig. 2: Global, mergers and acquisitions for multiplay bundling, selected operators.................................................... 5

Fig. 3: M&A opportunities for fixed-line operators moving into TV.....................................................................................6

Fig. 4: M&A opportunities for TV operators moving into fixed broadband...................................................................... 7

Fig. 5: M&A opportunities for mobile operators moving into fixed-line triple play...................................................... 8

Fig. 6: Global, mobile operators that have built FTTH/B or cable networks.......................................................................9

Fig. 7: M&A opportunities for fixed-line/TV operators moving into mobile.....................................................................9

Fig. 8: Rationale and results of selected telecoms and media M&A deals....................................................................... 10

Quad-play bundling in France: Is more than three a crowd?....................................... 12

Fig. 1: France, overview of existing and potential quad-play providers, Mar-11...........................................................12

Fig. 2: France, quad-play bundling strategies of selected operators, Mar-11..................................................................13

Fig. 3: France, quad-play bundling business models of selected operators, Mar-11.................................................... 14

Fig. 4: France, selected bundled offers, Mar-11.............................................................................................................................16

Fig. 5: France, selected bundled offers, Mar-11 (cont.).............................................................................................................. 16

Fig. 6: France, selected fixed-broadband providers' share of net additions, 1Q09-4Q10........................................... 17

Fig. 7: France, mobile ARPU, 4Q08-4Q10........................................................................................................................................ 17

Fig. 8: France, quad-play bundling scorecard, Mar-11.............................................................................................................. 18

Fig. 9: France, selected operators' fixed-broadband net additions, 4Q08-4Q10............................................................ 19

Case study: SK Broadband reaps rewards of targeting SKT mobile subs with bundledplans................................................................................................................................. 21

Fig. 1: South Korea, fixed-broadband market share by operator, 1Q09-3Q10............................................................... 21

Fig. 2: South Korea, No. of smartphone models and proportion of smartphone subs, by operator, 4Q10......... 22

Fig. 3: SK Broadband and SK Telecom monthly bundled offerings..................................................................................... 23

Fig. 4: SK Broadband bundled fixed/mobile subscriptions, 2H08-2H10...........................................................................24

Fig. 5: SKB subscriptions and net adds, by service, 1Q09-4Q10 (000s).............................................................................. 24

Fig. 6: SK Broadband marketing expenditure, 1Q09-4Q10.....................................................................................................24

Fig. 7: SK Broadband operating revenue, 1Q09-4Q10...............................................................................................................25

Case study: YTL steps up to the plate as first wireless triple-player............................27

Fig. 1: Malaysia, mobile broadband subscriptions by operator, 2Q08-2Q10.................................................................. 28

Fig. 2: Astro, DTH subscriptions and household penetration, 3Q08-3Q10...................................................................... 29

Fig. 3: Yes, WiMAX-service pricing......................................................................................................................................................30

Fig. 4: Malaysia, mobile broadband postpaid plans by operator, Mar-11....................................................................... 31

Fig. 5: Malaysia, WiMAX and FTTH subscriptions, 1H09 to Feb-11................................................................................... 31

Superfast-broadband bundling strategies: How to avoid turning fast food into a junkmeal ................................................................................................................................ 33

Fig. 1: Superfast-broadband markets classified by phase of development...................................................................... 34

Fig. 2: Japan, operating performance of superfast-broadband services assessed in relation to bundlingstrategies..........................................................................................................................................................................................................42


Fig. 3: Netherlands, operating performance of superfast-broadband services assessed in relation to bundlingstrategies..........................................................................................................................................................................................................42

Fig. 4: South Korea, operating performance of superfast-broadband services assessed in relation to bundlingstrategies..........................................................................................................................................................................................................42

Fig. 5: Sweden, operating performance of superfast-broadband services assessed in relation to bundlingstrategies..........................................................................................................................................................................................................43

Fig. 6: France, operating performance of superfast-broadband services assessed in relation to bundlingstrategies..........................................................................................................................................................................................................43

Fig. 7: Germany, operating performance of superfast-broadband services assessed in relation to bundlingstrategies..........................................................................................................................................................................................................43

Fig. 8: UK, operating performance of superfast-broadband services assessed in relation to bundlingstrategies..........................................................................................................................................................................................................43

Fig. 9: US, operating performance of superfast-broadband services assessed in relation to bundlingstrategies..........................................................................................................................................................................................................44

Value-added-service strategies: To bundle or not to bundle....................................... 46

Fig. 1: Selected operators, value-added service bundling strategies....................................................................................47

Fig. 2: SFR Evolution, bundled content............................................................................................................................................. 48

Fig. 3: Free, services bundled with the triple-play package..................................................................................................... 48

Fig. 4: TDC, HomeDuo packages..........................................................................................................................................................49

Fig. 5: Virgin Media, online storage and back-up offers.......................................................................................................... 49

Fig. 6: Key operator and content provider partnership examples........................................................................................50

Fig. 7: Key business rationale behind value-added service bundling strategies............................................................ 51

Fig. 8: Types of operator/content provider partnerships..........................................................................................................52

Fig. 9: Value-added service bundling strategies........................................................................................................................... 53

Fig. 10: Broadband operator value-added service segmentation.........................................................................................53

Broadband/Wi-Fi bundling strategies: the latest battleground between fixed andmobile.............................................................................................................................. 55

Fig. 1: Global, fixed-broadband / Wi-Fi bundling strategies of selected operators, Feb-11.......................................56

Fig. 2: Global, fixed-broadband subscribers and Wi-Fi assets of selected operators, Feb-11.................................... 56

Fig. 3: Global, fixed-broadband/Wi-Fi bundle pricing of selected operators, Feb-11...................................................59

Fig. 4: Global, fixed-broadband/Wi-Fi bundling strategies of selected operators, Feb-11.........................................59

Case study: BT’s broadband/Wi-Fi bundling strategy.................................................. 62

Fig. 1: BT Retail, Wi-Fi TV ad, Nov-10............................................................................................................................................... 63

Fig. 2: UK, selected midrange broadband prices and services, Feb-11................................................................................64

Fig. 3: UK, fixed-broadband net additions by selected operators, 4Q09-3Q10.............................................................. 64

Fig. 4: BT’s broadband/Wi-Fi bundling strategy SWOT analysis.......................................................................................... 65

Anti-cord-cutting strategies: Pay-TV operators look to bundling to counter the risk.......................................................................................................................................... 66

Fig. 1: Global, pay TV subscribers, 2010-2015...............................................................................................................................67

Fig. 2: Global, key pay-TV operator strategies in relation to cord cutting, Mar-11......................................................67

Fig. 3: Global, selected pay TV operators subscriber performance, 3Q09-4Q10.............................................................71

Fig. 4: Global, selected countries’ cord cutters as a percentage of pay TV, 2010-2015............................................... 72

Fig. 5: Global, selected pay-TV operators’ annualized churn rates, 3Q09-4Q10............................................................72

Fig. 6: Europe, HDTV performance of selected pay TV operators, 4Q10........................................................................... 73

Fig. 7: UK, BSkyB, additional product take-up, 4Q10.................................................................................................................73

Next-generation set-top box strategies: Gateways, gatekeepers and OTT.................76

Fig. 1: Western Europe, selected operators’ next-generation set-top-box deployments, Mar-10........................... 77

Fig. 2: Western Europe, selected operators’ next-generation set-top-box specifications, Mar-10..........................77


Fig. 3: Europe, UPC Horizon set-top box.......................................................................................................................................... 78

Fig. 4: France, Free Freebox Revolution set-top box....................................................................................................................78

Fig. 5: UK, Virgin Media Tivo set-top box....................................................................................................................................... 79

Fig. 6: UK, BSkyB Sky Plus HD set-top box......................................................................................................................................80

Fig. 7: Italy, Telecom Italia Cubovision set-top box.....................................................................................................................81

Fig. 8: Western Europe, selected operators’ next-generation set-top-box pricing and packaging, Mar-10........82

Connected device bundling strategies: OTT players up the competitive ante foroperators .........................................................................................................................85

Fig. 1: Selected operators, bundled device provision, Mar-11.................................................................................................85

Fig. 2: France, additional Livebox-related products and services, Jun-10......................................................................... 87

Fig. 3: STB monthly fees, selected operators...................................................................................................................................87

Fig. 4: Selected bundled devices score card..................................................................................................................................... 88

Fig. 5: Bundled-device scorecard totals.............................................................................................................................................89

Fig. 6: Negative impact of Wi-Fi on home networks ................................................................................................................ 89

Assessing the future viability of mobile-only operators.............................................. 91

Fig 1: Mobile operator acquisitions....................................................................................................................................................91

Fig 2: France, broadband and mobile connection market shares, end-2010.................................................................. 91

Fig 3: European mobile operators – stated and actual integration strategies...............................................................92

Fig 4: Yoigo: a role model for the lean mobile operator...........................................................................................................92

Fig 5: US, T-Mobile, mobile vs. Mobile broadband market shares, 3Q08 – 3Q10..........................................................92

Fig 6: Japan, operator market shares for mobile and mobile broadband, 3Q08 – 3Q10...........................................93

Fig 7: Australia, operator market shares for mobile and mobile broadband, 3Q08 – 3Q10.................................... 93

Fig 8: France, operator market shares for mobile and mobile broadband, 3Q08 – 3Q10......................................... 93

Fig 9: Germany, operator market shares for mobile and mobile broadband, 3Q08 – 3Q10....................................94

Fig 10: Saudi Arabia, operator market shares for mobile and mobile broadband, 3Q08 – 3Q10..........................94

Fig 11: Sweden, operator market shares for mobile and mobile broadband, 3Q08 – 3Q10.....................................94

Fig 12: Early results from Orange’s Open quad-play service.................................................................................................. 95

Fig 13: Telefonica’s integrated fixed and mobile network strategy.................................................................................... 95

Fig 14: Saudi Arabia, Mobily’s mobile broadband network.................................................................................................... 95

Multiplay interactive forecasting tool – Excel file........................................................ 96

Global multiplay-bundle tariffs 4Q08-2Q11 – Excel file.............................................. 97

Make better business decisions, starting today:

www.informatandm.com/ic

Broadband & Internet

xDSL

FTTxpr

icin

g

VoiceCont

ent wirelessap

ps

Dev

ice

Who

lesa

le

convergence

IPTV

Regulation

Band

wid

th

Dem

and

Digitalmedia

mes

sagi

ng

acqu

isitio

ns

Com

plet

eD

eman

dCo

mpl

ete

Dem

and

Fixed

/mob

ile

broadband

Ded

icat

ed

AccessibleInde

pen

Digital

Inde

pen

Digital

dent

Valuable

Cabl

e

Retail

Finance

Vide

o

Next-generation

Mer

gers m

anagement

Conn

ecte

dMobile

Inte

rope

rabi

lity

Whether you are looking to grow, diversify, acquire or defend your market, a subscription to the Intelligence Centre will provide you with the analysis, insight, market data and forecasts to underpin major decisions and reduce risk.

Featuring 10 sector focused channels across TV, broadband and mobile, the Intelligence Centre provides comprehensive and unmatched topic, country and company coverage, as well as a library of presentations from Informa Telecoms & Media’s extensive conference programme.

Join us on LinkedIn:www.informatm.com/linkedin

Follow us on Twitter:www.twitter.com/informatm

Subscribe to our Connect emailwww.informatm.com/connect

Email us: [email protected]

MX6104 - Informa A4 Adverts v2.indd 2 19/4/10 14:05:14

Priority order form

Your details [Mr/Mrs/Ms/Miss] Family / Surname Forename

Business Email

Telephone Fax

Position Company

Address

Postcode / Zipcode Country

Please tick this box if you do not wish to receive further information on Informa UK Limited products. Please tick this box if you do not wish to receive further information from selected external companies.

The personal details shown on this brochure or provided by you will be held on a database and shared with companies in the Informa Group. They may be used to keep you up to date with developments in your industry. Sometimes your details may be obtained from, or made available to external companies for marketing purposes. We believe that you are the correct person to receive details of publications connected with this subject. If this is not the case, or if you do not wish to receive further correspondence from us, please write to: Informa UK Ltd, 9 Bressenden Place, London, SW1E 5DR. Telephone: +44 (0)20 7017 4555, fax: +44 (0)20 7017 4743 or email: [email protected]

Informa UK Ltd. Registered Office: Mortimer House, 37-41 Mortimer Street, London W1T 3JH. Registered No: 1072954 (England and Wales) VAT Reference No. GB365462636

Payment options

Please debit my credit card (credit card payments are charged in £ sterling): £ / US$ / €

VISA Mastercard Amex Diners Card no.

Expiry date: Security code: (Last three digits on the back of credit card or four if using an AMEX)

I enclose a cheque made payable to Informa UK Ltd for the sum of: £ / US$ / €

Signature: Date:

ORDER TODAY AND START EXPLORING THE OPPORTUNITIES

* UK VAT at 20% is chargeable on orders for the PDF report from all UK customers and from non VAT registered customers in other EU Member States. Please supply your EU VAT registration number or add 20% UK VAT to your remittance. The VAT rate is subject to change and may differ from the advertised rate, the amount you are charged will be determined when your invoice is raised.

5 Easy ways to order Tel: +44 (0)20 7017 4994 Fax: +44 (0)20 7017 4783 Email: [email protected] Web: www.informatandm.com/multiplay Post: Customer Services, Informa Telecoms

& Media, Sheepen Place, Colchester, Essex, C03 3LP, UK

I would like to order Title Research completed Format Users (tick) Price (+VAT)

Quad-Play and Beyond: May 2011 (Paper copy) n/a GBP 1,995 / USD 3,192 / EUR 2,494 Multiplay bundling strategies (Single user pdf) 1 GBP 1,995 / USD 3,192 / EUR 2,494 for telecoms and pay-TV operators (PDF) 2-5 GBP 3,990 / USD 6,384 / EUR 4,988 (Corporate) Corporate GBP 5,985 / USD 9,576 / EUR 7,481

Sub total EU VAT NO. VAT * Total

Quad-Play and Beyond: Multiplay bundling strategies for ... · Quad-Play and Beyond: Multiplay...

Documents

Transcript of Quad-Play and Beyond: Multiplay bundling strategies for ... · Quad-Play and Beyond: Multiplay...