Consumer Communication Services Preferences: The New Quad Play is a Dual Play

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Information about Consumer Communication Services Preferences: The New Quad Play is a Dual...

Published on February 27, 2014

Author: FrostandSullivan



Stratecast | Frost & Sullivan's survey of 2,035 consumers from North America reveals a sea change in preferences for communication services. The results indicate the market is evolving toward a new dynamic in which services are simply applications delivered via an Internet Protocol (IP)-based connection, whether wired or wireless. The survey also shows consumers find broadband connections sufficient for voice telephone and subscription television, in addition to a preference for bundled services. However, the new bundle evolving is unlikely to be a quad play (voice, video, Internet access, and wireless), but is increasingly a dual play of landline and wireless broadband. Services, therefore, may one day look more like applications, easily downloadable via an app store.

Stratecast | Frost & Sullivan's new Consumer Communication Services Preferences: The New Quad Play is a Dual Play analysis highlights findings from Stratecast's most recent Consumer Preferences Survey, and provides strategic recommendations for providers. The results show that residential consumers 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 percent of respondents subscribing to an Internet service, and 78.9 percent 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.

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Frost & Sullivan’s Consumer Survey Reveals Voice and Video Must Surrender to Wireless and Broadband Research PREVIEW for the Consumer Communication Services Preferences: The New Quad Play is a Dual Play SPIE @FS_TVision

Consumer Preferences: Relative Importance of Services Mean Score (Scale of 1 to 5) What communication services do residential consumers want? Data from the recent survey indicate that when asked to rate the importance of the four quad play services (voice, video, Internet access, and wireless), as the below figure indicates, Internet comes in first, followed by wireless, subscription video, and voice. 5.0 3.8 4.0 4.1 4.0 4.7 3.0 2.0 1.0 0.0 Local landline Subscription TV Wireless Internet Service N=1,980 Source: Stratecast analysis.

Consumer Preferences: Reasons for Dropping Conventional Voice Services When the respondents who dropped their service were asked why they dropped it, the results are notable. As the below figure shows, the primary reason was that they had a cell phone. The second most likely reason was that the price was too high. Now, it can be argued that landline telephone service is far less expensive, generally, than cellular service, but it is important to remember that this is a consumer perspective based largely on an assessment of value. As will be discussed in an upcoming analysis on share of wallet, the pricing for the various services does not currently match the value assessment for those services. Percentof Sample 60% 50% 40% 30% 20% 10% 0% N=520 Source: Stratecast analysis.

Consumer Preferences: Smartphone Ownership However, the real story in wireless is that it is increasingly a medium for the delivery of data-based applications. Smartphones increasingly characterize consumer wireless communications, and consumers increasingly use smartphones to access the Web and to send and receive text messages (a data type). Standard feature phone 46.8% Don't know 1.6% Smartphone 51.6% N=1,873 Source: Stratecast analysis.

Consumer Preferences: Relative Use of Entertainment Services Percent of Sample On average, interview subjects watched approximately 16 hours a week of television programming. However, they also surfed the Web more than 12 hours a week, on average. Combined with time spent on social networking (more than four hours a week), Internet usage is now in excess of conventional television viewing for most consumers with a data connection. Moreover, the dynamic of consumer value assessment is now anchored by their data connections, rather than their video subscriptions. More to the point, this dynamic implies that the precise mix of programming in a video subscription is becoming less persuasive to a prospective subscriber than the extent a data connection enables other online activities. 18% 16% 14% 12% 10% 8% 6% 4% 2% 0% Watching television Surfing the web/Internet Social networking Playing video games N=2,029 Source: Stratecast analysis.

Integrated Services in the Dual Play As noted in the analysis, the new dynamic requires a service-centric perspective by the operator; but more importantly, it requires a seamless service experience. This means that the consumer will transfer a service session from a local landline broadband connection to a smartphone, and vice versa; and the service session must persist across that interface. Ideally, session persistence exists because the operator is providing the service application suite, with the experience working the same way across multiple broadband services. Source: Stratecast analysis.

Executive Summary—CEO’s Perspective 1 Consumers are beginning to focus on the utility of their broadband connections, and are beginning to look at service offering as over-thetop applications that utilize those connections. 2 Especially in the area of pricing, operators need to recognize the attributes of value that are important to consumers, and price accordingly. 3 As services evolve to be applications, similar to the applications that consumers routinely download to their smartphones, this dynamic requires a much different market approach by network operators. 4 Operators must invest in a universal service delivery infrastructure, and apply their expertise in management and billing systems to extract revenue from the value transfer equation. The Consumer Communications Market The evolving consumer communications market is focused on providing communications services to residential consumers. Increasingly, this is an exercise of creating services in the cloud, and then delivering them to the consumer over broadband connections that can be either wired or wireless. This analysis focuses on consumer perceptions revealed during the last Consumer Communication Services Preferences survey. Source: Stratecast analysis.

Details of the Full Analysis

Contents Section Page Number Executive Summary 5 Introduction 6 Consumer Preferences 7 • Basic Telephone Service: Not Quite Dead Yet 9 • Subscription Television: A Declining Notion 12 • Broadband: The Evolving Everything Service 14 • Wireless: A new Mobile Dynamic 15 Services are Just Applications 18 A Dual Play World: Broadband and Wireless 20 Implications for the Network Operators 21 Demographics 23 The Last Word 25

List of Figures Figure Page Number Figure 1: Relative Importance of Services 7 Figure 2: What Services Consumers are Consuming 7 Figure 3: The Importance of Bundling 8 Figure 4: Service Package Preference 8 Figure 5: Importance of Bundle Characteristics 9 Figure 6: Satisfaction with Landline 10 Figure 7: Cutting the Cord 10 Figure 8: Reasons for Dropping Conventional Voice Services 11 Figure 9: Reasons for Retaining Landline Service 12 Figure 10: North American Video Subscriptions (Third Quarter, 2007-2013) 13 Figure 11: Satisfaction with Subscription TV 13 Figure 12: North American Internet Subscriptions (Third Quarter, 2007-2013) 14 Figure 13: Satisfaction with Broadband 15 Figure 14: North American Wireless Subscriptions (Third Quarter, 2007-2013) 16

List of Figures Figure Slide Number Figure 15: Smartphone Ownership 16 Figure 16: Number of cellular phones 17 Figure 17: Satisfaction with Wireless 18 Figure 18: Streaming Video Use 19 Figure 19: Internet Speed 20 Figure 20: Relative Use of Entertainment Services 21 Figure 21: Integrated Services in the Dual Play 22 Figure 22: Demographics 24

Market Overview—Key Questions This Study Will Answer What communication services do residential consumers want? What services are consumers consuming? How important is bundling services? How satisfied are consumers with the different communication services, and how is this impacting purchase decisions? What are the trends related to cutting the cord, and how will they impact future service offerings? What are the implications for network operators? Source: Frost & Sullivan analysis.

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