By Nigel Eastwood, CEO of New Call Telecom
This time last year, Virgin Media launched the UK’s first quad-play bundle. It caused quite a stir. For the first time, customers could access broadband, TV, fixed-line and mobile services from a single supplier.
Virgin Media announced that customers could save up to £300 per year with quad-play, and the media ran with the story for weeks. Virgin Media demonstrated the wisdom of getting in first.
In a highly competitive market, they gained a good number of new customers and kept their existing customers happy with flexible bundles to suit individual needs.
Since then, lots more telcos have raced towards quad-play, some more successfully than others.
The latest entrants to this race are Telecom Italia and Sky, who yesterday unveiled Italy's first quad-play offering, and BT, who will shortly fully acquire EE to move the business from triple to quad-play.
Further, Vodafone are reportedly opening new UK offices to focus on building the resources to implement quad-play.
I believe we have now reached a critical point in the history of quad-play. Now the hype is settling down, a number of important flaws in this business model are starting to emerge.
Over the next year it will become clear that it is customers, and not telcos, who matter in the quad-play game – and, at the moment, many customers are getting a raw deal.
We’re already seeing the start of the end. A number of customers who were early adopters of bundled services report they no longer value the benefit of having just one bill to pay for all the combined services.
Explaining his decision to unbundle his telco subscription in The New York Times, tech reporter Nick Wingfield complained about how his cable company lumped “three services into one price on my monthly bill, making it difficult to tell what I'm paying each service […] and shop with other providers”.
Nor are customers quite so willing to accept a poor service just because it’s one single company they need to wrangle with. They are increasingly choosing to look around for an alternative.
The number of consumers who say they have considered switching their service provider remains high and, contrary to industry wisdom, you are also much more likely to consider switching your provider if you're tied to a bundle.
According to Ofcom's latest Consumer Experience report, 15 percent of bundled digital TV subscribers considered switching their provider in 2014, compared with just eight percent who bought digital TV as a standalone service.
Instead of attracting and retaining customers, bundling is simply putting people off. Customers now feel like they're being sold a battery of unnecessary additional services – in the pursuit of higher margins and ARPU figures.
When customers call to cancel their services, it is not unusual for them to get off the phone having been sold an even larger package of services and content.
This has also fed through directly into poor customer services scores among some of the largest operators in Britain. There is a new and growing dissatisfaction with some service providers’ inflexible approach.
A recent survey conducted by UK consumer watchdog Which? found that customers were least satisfied with the services provided by some of the quad-play trailblazers: Virgin Media, TalkTalk and BT all finished in the bottom half of the table.
Customers want to feel like they are being treated as individuals – with their own unique needs and requirements.
Fortunately, new technology has enabled telcos to offer exactly these types of personalised, 'pick-your-own' service offerings.
OTT and other cloud services give users the power to add and subtract additional services as and when they need them.
This explains the success of Netflix and other standalone video on demand providers over the last few years to the detriment of pay-TV broadcasters. The former let users quickly and easily opt-in and opt-out of its services.
Younger people are looking to “pick and mix” content. They want flexibility. That's one reason why we've seen a rise in both pay-TV cordcutters and unbundlers.
This is the start of a trend that will accelerate over the next decade, and wise telco CEOs should now position themselves for this shift.
Bundling content might help companies retain older consumers in the medium term, but it will not work in the long term as younger people mature and become a larger segment of the spending public.
Given these prevailing industry trends, I would recommend that telecoms companies consider ditching bundled services.
Instead, they should aim to provide customers with facilities and technical resources they need to add OTT services, like access to latest-release movies and premium TV programming, when they want.
This could work in a number of different ways. Perhaps, we might be able to provide our customers with an interface to add-on such services easily, or enable them to do so through streaming devices like Google Chromecast.
Telcos need to accept that customers have changed. They’re no longer naïve about technology.
They’re time-poor and they demand services that suit their lifestyles right now, today.
Telcos are fascinated by quad-play. They’re so captivated by it that they’ve forgotten to look at the bigger picture.
When you raise your head and look at quad-play in the cold light of day, in the age of OTT and the IoT, it’s already a decade out of date.