Latest moves in the quad-play market
Quad-play is the name of the new market area where land line phones, cell phones, cable TV, and high-speed Internet converge. (Triple-play is now so 2005.) While only a minority of companies now offer three or all four of these services, that's changing fast.
The growing feeling is that, if you don't go beyond one or two services, you're dead. This has opened up a whole new level of competition as newly comfy oligopolies get dissolved and the competition matrix shifts under the corporate feet. Most triple- and quadruple-play moves look like money losers for years, but if you can just outlast most of the others…
Here is some of the latest news about this rapidly-expanding market segment:
Dutch cable companies to merge
Two Dutch TV cable companies are about to merge in a $3.7 billion deal. Casena, recently acquired equity groups Cinven and Walter Pincus, will be combined with Multikabel, owned by Walter Pincus. These are the third and fourth largest cable TV operators in the Netherlands, with a combined 1.6 million customers.
Cinven and Warburg Pincus bought Casena from other equity investors, namely the Carlyle Group, Providence Equity Partners and GMT Communications, who acquired the company in 2003. The sellers realized a 300% gain on the sale.
Already other equity investors are circling around the new entity, according an article in the Financial Times ("Private equity groups plan to merge Dutch cable operators", 6/18/06)
The sale attracted interested from numerous buy-out groups, including BC Partners, Macquarie Bank and Liberty, the US investment group that owns UPC, the market leader in the Dutch cable sector. It is likely to prove a prelude to the sale of Kabelcom, owned by Dutch energy utility Essent and the second-largest operator with 1.8m subscribers.
As cable companies offer Internet connectivity and fixed phone services, they are competing against the national telephone company, KPN. With the decline of the land-line phone services KPN offers, it has been competing more in the high-speed Internet area and running up against increasing competition from the cable companies.
BSkyB launches its triple play service
British-based satellite TV service provider BSkyB (a division of News Corp.) is launching its own triple-play effort. It will offer all its satellite TV customers free wireless broadband Internet access, albeit at only 2 megabits per second (Mb). BSkyB will also offer several classes of faster broadband, at from five pounds (8 Mb) to ten pounds (16 Mb) per month.
(For comparison, my reasonably fast Comcast cable speed is 6MB. Dialup service runs at somewhere between 0.5Mb to 1Mb under the best conditions. Some competing British broadband companies with wired connectivity offer 8MB. Some countries, like South Korea, have 20Mb broadband available, and speeds of 100Mb and over are technically possible.)
BSkyB will also, using VOIP technology, offer unlimited telephone calls within the UK for five to pounds a month, depending on speed. There is talk that BSkyB is considering a bid for AOL UK, which already has a significant broadband business at 1Mb, though plans for 8Mb are announced).
According to an article in the Financial Times (BSkyB/Triple play", 6/18/06)
Strategic necessity, however, not standalone economics, is the main reason for the push into broadband. Other telephony providers, including BT, are lining up to make inroads into the television market. Sky has unveiled a strong, cheaply priced product. It has 8m existing pay-TV subscribers and the expertise needed to service them. Its target for 30 per cent of customers to take broadband by 2010 does not appear too ambitious. Adding broadband may not reduce customer churn, but it should certainly help cap it.
Among the new competitors are cell phone providers Carphone and Orange, both now offering wireless broadband, In addition, cable TV companies in the UK are offering broadband and phone services. The race to the bottom has started; the survivors are likely the ones who can afford to lose money for several years in search of market share and a narrowed field of competitors.
AT&T
combines satellite and DSL
AT&T recently started selling its Homezone services, a product that combines cable TV, Internet access and movies-on-demand, along a DVR. The program will be expanded gradually, but is starting in Ohio and Texas. The service requires the installation of AT&T's DSL broadband service, and also EchoStar's satellite TV service (the DISH network).
According to a Wall Street Journal report ("AT&T Rolls Out Homezone, Blending Web Services and TV", 6/19/06), the Homezone set-top box that ties it all together costs $10 a month, while the whole package with basic satellite service and Internet will cost about $60 a month, though others estimate higher prices, from $80 and higher.
The motivation for the move is explained by technology-savvy site Ars Technica
As cable companies such as Comcast begin to aggressively market their own triple-play bundles (I hear at least one Comcast ad on the radio every time I turn it on), AT&T wants to be able to offer a full-featured alternative. In Chicago, Comcast is advertising TriplePlay-cable TV, Internet, and VoIP phone service at an introductory price of US$99 for the first 12 months. That's a better deal than AT&T offers, and Comcast gets all of the revenues from the offering rather than splitting them with a partner like Echostar.
Hmm... Three countries, numerous firms, but all using the same play-book.
