U.S. households are increasingly subscribing to bundled services from telcos and cable providers; IDC sees the market doubling by 2010.
Posted Jun 8, 2006
The number of U.S. households that subscribe to bundled communications services is expected to reach 85.4 million by 2010, double the current tally, according to new research from IDC. "U.S. Multiplay Bundled Services 2006-2010" predicts convenience and competitive pricing will create more demand for package deals of voice, video, broadband, and mobile wireless.
"Our survey information is pretty overwhelming in terms of why customers are taking bundles," says Matt Davis, research director at IDC and report author. Convenience and low cost make double- and triple-play packages very attractive to consumers, which in turn makes offering the packages that much more important to providers.
This trend will have considerable influence on the high tech and telecom verticals beyond simple growth. "The impact of bundled services on network convergence, device integration, and cutting-edge variations of bundles will be more disruptive than reduced churn and [average revenue per unit]," Davis says. "The speed of transition to bundled service will require an enormous amount of collaboration across the separate service divisions within companies and [this] extends to their hardware, software, and professional services partners."
The majority of bundles in homes today (82 percent in 2005) are double plays, bundles with two communication services. Broadband Internet is the cornerstone, both for cable companies and telcos; cable attributes 92 percent of its package deals to video/broadband bundles, while the phone companies cite broadband in 66 percent of bundles. Wireless mobile makes up 27 percent of two-service bundles.
However, IDC is forecasting a significant drop off of double-play service over the next five years, falling to 42 percent of total subscriptions by 2010. Standalone services from the cable companies and telcos will likewise lose more than half of their current standing, giving way to triple plays and even four-service bundles.
Another interesting shift is in who provides the services. "In past surveys consumer preference for bundled services was very strongly with the telcos," Davis says. "Today, everybody wants cable packages." Telco broadband penetration lags, because they haven't been as successful penetrating their phone base as cable has been with its video subscribers. "For example, a company like AT&T has 22 percent penetration, but Cablevision is over 50 percent--they're really leveraging their subscribers."
Cable operators have increased the market for their voice products, and will continue to cut into telco local voice market share, according to the study. Telcos, however, will increase ARPU by upselling existing customers. This will speed up once they have broad implementation of facilities-based services like video over fiber, and have strengthened their relationships with satellite companies.
Davis believes this trend toward service consolidation will be with us for the long haul. "We're getting to the point where all communications offerings will be bundled, and consumers will evaluate which package best fits their needs and price range," Davis says. "It's already happening in Europe."
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