OTT to drive quad-play TV bundles to extinction

Michelle Clancy | 28-02-2014

The North American communications market is changing significantly, driven by the rise of the cloud and over-the-top (OTT) content. In the not so distant future, TV operators are likely to trade quad-play residential bundles (ie, voice, video, Internet access and wireless), for a dual-play of landline and wireless broadband. All other services including video could simply be applications.

The survey, from Stratecast/Frost & Sullivan, shows that consumers find broadband connections sufficient for voice telephone and subscription television, in addition to a preference for bundled services. Services, therefore, may one day look more like applications, easily downloadable via an app store.

"The implications of these results portend a transformation in consumer perceptions," said Stratecast/Frost & Sullivan consumer communication services programme manager Mike Jude. "Our findings made it very clear that consumption of the services that ride access channels voice and video are in decline. It begs the question: does this mean the two access services, broadband and wireless, are increasing in importance to consumers? The simple answer is yes."

Residential consumers already rate Internet service the highest in importance, followed by wireless, subscription video and then voice. Statistics related to the services consumed concurred with these rankings, with 97.3% of respondents subscribing to an Internet service, and 78.9% subscribing to landline telephone service. Finally, among other results, the survey found that Internet usage now exceeds conventional television viewing for more consumers with a data connection.

Broadband Internet access is a growing market. With year-over-year growth at 3.7% from 2012 to 2013, the survey showed satellite-delivered broadband as well as fibre and cable continue to have considerable increases, while DSL is declining.

And wireless continues its inexorable penetration among consumers. Subscribership, especially in the prepaid space, is increasing, although at a slower pace than in the past.

However, subscription television service also shows a slow to negative growth dynamic. In fact, conventional cable subscriptions show a marked decline, down 12% in the third quarter 2013 from Q3 2007. Similarly, landline telephone service is continuing to erode, with year-over-year annual erosion approaching 3%. While the survey found that nearly 79% of respondents still maintain a landline telephone service, more than 25% indicated they had dropped a landline service in their lifetime. At its peak, landline telephone service was used by 95% of consumers; however, factors like cell phone ownership, price and mobility continue to erode this figure.

"The slowdown in wireless is due to subscriber saturation, and also because subscriptions can cover more than one device," said Jude. "The bigger picture is the fact that consumers are increasingly harnessing mobile devices as a medium for the delivery of data-based applications. Services are now applications, mostly written in software, and instantiated over IP-based connections. The old quad play is now the new dual play of landline and wireless broadband."