Abstract
Consumers are responding positively to bundled carriers because they find managing multiple media bills frustrating, and as a result of substantial price promotion. Double play, triple play and quadruple play offerings are becoming the rule rather than the exception for communication services. This is a growth market but one ruled by cost, with companies competing to win over consumers through price wars and promotions, with all segments (subscription television, cellular telephony, home telephony, and broadband Internet) largely mature.
This report provides a comparative examination of market leaders as well as competitive alternatives in home media service such as online video and VoIP. The report also examines how bundled offerings vary among competitors and which ones stand a better chance of capturing and retaining customers. Market innovation is reviewed, exploring why and how innovations are pushing this market forward in regard to content, technology, and service.
The report also provides the information necessary to identify and target receptive demographics, offer new products and services that take advantage of growth trends, and reach under-served groups quickly and effectively. This report addresses a number of issues and developments that will change the shape of the communications industry in the next few years, such as:
- The rise of promotion-based bundled offers, and the consumer response
- Remaining growth areas for cellular service
- Prevalent trends in communications advertising, and how to make marketing distinct
- In-depth analysis of consumer attitudes and behavior
- Product segment analysis
- Building brand loyalty among younger communications consumers
- Forecast of sales and subscriptions for cable/satellite TV, and copper-wire and cellular telephony.
Table of Contents
- Scope and Themes
- What you need to know
- Definition
- Data for this report
- Abbreviations and terms
- Abbreviations
- Terms
- Executive Summary
- BCS share of consumer communications dollars rising rapidly
- IM, online video and wireless broadband share market
- Cell phone and subscription television carry 43% of communications sales
- Consumers still selecting based on cost
- Vast majority prefer a single bill
- Quadruple plays poised for growth
- More bandwidth, please
- Transition from analog to digital to increase demand for HD
- Comcast aiming to rule through content
- Ads still focused on standalone service
- Spend higher among minority groups online
- Substantial interest in video chatting
- Market Size and Forecast
- Penetration for BCS rose from 25% to 32% in 2007
- Figure 1: Sales of consumer communication service, at current prices,
2003-11
- Figure 2: Sales of consumer communication service, at inflation adjusted
prices*, 2003-11
- Competitive Context: Internet Telephony
- Instant messaging provides multi-content, multi-user communication
- Figure 3: U.S. Top five online subcategories ranked by usage, May 2007
- Figure 4: Fastest-growing U.S. IM providers, August 2006-June 2007
- Instant messenger players
- Figure 5: Most popular instant messaging services among teens and
adults, November 2007
- AIM/AOL
- Yahoo! Messenger
- Voice over Internet Protocol (VoIP) allows real-time voice chats
- VoIP players
- Figure 6: Revenues and subscribers for Skype and Vonage, 2006 and 2007
- Vonage
- Skype
- Competitive Context: Online Video
- Over half of all Americans now watch online video
- Figure 7: U.S. Online video viewers, 2006-2012 (millions)
- Online video is portable, interactive
- Online video content is bite-sized, not full-length
- Figure 8: Types of online video content U.S. users watch monthly or more
frequently, February 2007
- Netflix bypasses PCs, connects directly to televisions
- 18-24s lead the way and provide a glimpse of the future
- Figure 9: Ownership of device for watching online video on the home
television, by age, January 2008
- Figure 10: Interest in complete "on-demand" programming, by age, January
2008
- Figure 11: Interest in viewing online video on the home TV, January 2008
- Competitive Context: Wireless Broadband
- Wireless broadband gaining traction
- Figure 12: Intent to purchase wireless broadband, by household income,
March 2008
- Figure 13: Intent to purchase wireless broadband, by age, March 2008
- Verizon Wireless BroadbandAccess
- T-Mobile Hotspot
- Sprint Nextel Broadband Network
- AT&T Broadband Connect
- Segment Performance Overview
- Verizon and AT&T have the advantage going forward
- Figure 14: U.S. sales and forecast of consumer communication services,
at current prices, by segment, 2003-11
- Figure 15: Sales of communication services, by segment, 2005 and 2007
- Segment Performance--Cell Phone
- Quadruple plays and cell phone bundles
- Figure 16: Factors that would influence U.S. Internet users to purchase
mobile phone service from their fixed-line communications provider, April
2008
- Add-ons
- Cell phone subscriptions and sales
- Shortage of family plans in bundles
- Figure 17: Cell phone penetration, plan type, and spend, 2003-07
- Figure 18: U.S. Cell phone subscriptions, 2002-07
- Figure 19: Sales of cellular services, at current prices, 2003-11
- Figure 20: Sales of cellular services, at inflation adjusted 2007
prices, 2003-11
- Segment Performance--Internet Service
- Overview
- Exclusive content
- Subscriptions and sales
- Figure 21: Households with Internet subscriptions, 2003-07
- Figure 22: Sales of home Internet services, at current prices, 2003-11
- Figure 23: Sales of home Internet service, at inflation adjusted 2007
prices, 2003-11
- Segment Performance--Pay TV
- Introduction
- DVR service headed toward becoming a standard feature
- Premium content features
- HD
- Sales
- Figure 24: Sales of subscription TV service, at current prices, 2003-11
- Figure 25: Sales of subscription TV service, at inflation adjusted 2007
prices*, 2003-11
- Subscriptions
- Figure 26: Subscriptions and arpu to satellite and cable pay television
services, 2002-07
- Segment Performance--Landline
- Sales and subscriptions in decline
- Consumers like having a back-up communication system for emergency usage
- Leaders' subscriptions falling with segment as a whole
- Figure 27: Sales of home landline service, at current prices, 2003-11
- Figure 28: Sales of home landline service, at inflation adjusted 2007
prices*, 2003-11
- Market Drivers
- Introductory promotions
- Figure 29: Introductory promotional rates for triple play bundles, May
2008
- The convenience of a single bill
- Figure 30: Annoyance with multiple bills, by age and household income,
March 2008
- The need for speed
- Figure 31: Interest in high-speed Internet, by age, March 2008
- Figure 32: Interest in high-speed Internet, by household income, March
2008
- Limited awareness of speed differences
- Figure 33: Awareness of differences in speed betweend DSL and cable
Internet, by age, March 2008
- On Demand media
- HD content and the end of analog transmissions
- Content partnerships may prevent commoditization
- Portable Internet platforms can jeopardize sales
- Growth of laptops may alter how consumers use media in the home
- Figure 34: Laptop vs. desktop households, 2003-07
- Security remains a central concern
- Figure 35: Concern over e-mail spam and Internet security, by age, March
2008
- Brand Differentiation
- Satellite operators offer more HD channels-- for now
- AT&T stands out with ethnic programming
- Comcast dominates content in niche offerings, volume
- Cell phone providers have the edge, partnerships needed to counter
- DISH the lowest-cost provider
- Difficulty with brand differentiation continues
- Figure 36: Perceived differences between subscription television
providers, by age, March 2008
- Leading Phone Companies
- Company subscriptions and sales
- Figure 37: Cell phone subscriptions, AT&T and Verizon, 2005 and 2007
- Figure 38: Total U.S. sales (cellular and other) for AT&T and Verizon,
2005 and 2007
- AT&T
- Verizon
- Qwest
- Figure 39: Qwest U.S. revenue, 2004-07
- Leading Companies--Pay TV
- Company subscriptions and sales
- Figure 40: U.S. Pay TV subscriptions for leading satellite and cable
operators, 2005 and 2007
- Figure 41: U.S. Pay TV revenue for leading satellite and cable
operators, 2005 and 2007
- Comcast Corporation
- DirecTV
- Time Warner Cable
- Figure 42: TWC U.S. revenue for subscription TV, Internet, and landline
services, 2005-07
- DISH Network
- Innovation and Innovators
- Partnering with next-generation student dorms
- Providing content the same day as the DVD release
- Comcast-Facebook alliance targets young adult market
- Advertising
- Ad spend on bundled products rose 466% from 2005 to 2006
- Figure 43: Ad spend on leading communication brands, 2005-06
- Figure 44: Ad spend on BCS products, 2005-06
- Battling for HD dominance
- Figure 45: AT&T television ad, 2007
- Figure 46: Comcast television ad, 2007
- Cell phone carriers face off against cable
- Figure 47: AT&T television ad, 2007
- Figure 48: Verizon television ad, 2007
- Consumers courted with freebies, rebates
- Figure 49: television ad, 2007
- Figure 50: Comcast "free Internet" television ad, 2007
- Young consumers targeted with irreverent humor
- Figure 51: Comcast "jabberwatchy" television ad, 2007
- Figure 52: Comcast television ad, 2007
- Spend on Communication Services
- Average spend up 9% from February 2007 -- March 2008
- Figure 53: Average monthly spend on consumer communications (pay TV,
home Internet, home and cell phone), by age, household income, and presence
of children, March 2008
- Quadruple plays report similar spend as triple plays
- Figure 54: Mean monthly price for telecom services and bundles, by type
of service, March 2008
- Penetration for Bundled Services
- Penetration for BCS rose from 25% to 32% in 2007
- Subscriptions in online sample tend to trend upwards with age, income
- Figure 55: Populations without cell phone, home Internet, landline, or
subscription television services, by age, household income, and presence of
children, March 2008
- Penetration for bundled services in online sample
- Figure 56: Use of bundled services, segmented by type of service, by
age, household income, and presence of children, March 2008
- Who Selects the Service Provider?
- Under-25s less likely to select service
- Figure 57: Main person in selecting service, by type of service, and
age, March 2008
- Reasons for Not Subscribing to a Bundled Plan
- Figure 58: Reasons for not having a bundled service, March 2008
- Figure 59: Reasons for not having a bundled service, by age, March 2008
- Figure 60: Reasons for not having a bundled service, by household
income, March 2008
- Motivation for Switching Service
- Cost is king
- Young and old alike feel need for speed
- Older users more resistant to change
- Figure 61: Factors that may motivate a change in service, by age, March
2008
- Interest in Video Conferencing
- Those who try it like it
- Figure 62: Interest in and experience of video conferencing, by gender,
age, household income, and presence of children, March 2008
- Minority Groups Online Keen on Tech
- Figure 63: Average monthly spend on telecom, by race/ethncity, March 2008
- Figure 64: Interest in and experience of video conferencing, by
race/ethnicity, March 2008
- Figure 65: Factors that may motivate a change in service, by
race/ethnicity, March 2008
- Figure 66: Interest in security and speed, among early adopter consumer
group, March 2008
- Appendix: More on VoIP
- Open VoIP the likely eventual solution for home telephony
- PC to PC calling
- PC to Phone calling
- Phone to Phone calling
- Appendix: Trade Associations
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