What Have I Been Saying?

Peter : On Rad's Radar?
Peter
| Peter Radizeski of RAD-INFO, Inc. talking telecom, Cloud, VoIP, CLEC, and The Channel.

What Have I Been Saying?

Gary Kim writes, "A study of data submitted by 221 small U.S. telcos by Telergee Alliance confirmed trends you would expect: Broadband and wireless are growing, cable TV is flat, and voice is declining. As has been the case for several years, operating costs also are growing while profit margins are shrinking."

So if TelcoTV costs big money, but the market is flat, why spend the money?

There are ways to make the landline relevant again, but it would take some ingenuity. There are bundles that can be packaged that would reduce churn without becoming a price war.

I can't understand how telco TV bundles can get into a price war with cable TV bundles. The only variable is the channel lineup. Maybe I'm old but the TV Everywhere pitch doesn't work for me. I don't like watching movies or sports on my laptop and my cellphone has trouble delivering Facebook and LinkedIn data, how would I watch TV on that network? Plus the small screen. Again old. Remember Slingbox that DISH bought? Wouldn't that have taken off if folks wanted to watch TV Everywhere? Is there TV that is that compelling that can't be DVR'ed?

"As some had expected all along, video entertainment is winding up as a way of gaining customer "stickiness" and preventing churn, but is not contributing to profit, though it does contribute revenue," Kim writes. It's sticky if consumers buy the triple-play or if the service provider offers exclusive channels (or exclusive features like a DVR). But in a triple play world, if the service provider doesn't have at least 2 services with the consumer, that consumer is subject to churn. Also, in 2Q10, overall US TV subscriptions dropped 216K, according to SNL Kagan. Kagan cited the economy, unemployment and poor housing starts as reasons for the decline. I'd put foreclosures and bankruptcies in there too, because when a home is foreclosed there's no tenant for TV. I saw many foreclosures in 2009 that had VZ FiOS equipment sitting idle -- that's an expensive situation.

In a flat market which erupts into a price war, customer acquisition costs increase. Interestingly, Netflix customer acquisition cost is $22! That's a steal.

The telcos will need to learn how to make money from the Cloud. Luckily, IBM is trying to make it easy for them by operating the platform for Cloud services and managed services. The key is finding out what services the consumer base is willing and able to pay for.

There are a lot of moving parts right now - Cloud, SAAS, managed services, Over-the-Top-Video, VoIP, Hosted PBX - and all of them rely on Internet Access. Therein lies the revenue.



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