Broadbandindia Magazine

The mobile sector in India is now well established and is also beginning to form the core of a “Quad-Play” marketplace in Indian communications. Quad-Play means four methods of communication service provision to the consumer – fixed-line (plain old telephony), mobile, broadband and TV. If you are a Bharti Airtel, Reliance or Tata Teleservices (TTSL) mobile subscriber today in Delhi then the chances are that you pay a sister company owned by one of these entities more than just your mobile phone calls. All now are able to provide fixed-line voice and broadband services in some areas. Significantly, all now provide TV services through their Direct to Home (DTH) satellite TV, which started in India in 2005.

The CATV industry – at least in analogue form – has been around since the early 1990s. Today there are around 72 million subscribers but this number looks to be stabilizing. Now if you pause to think for a minute the Indian CATV players have a crucial network asset – the last mile between the switch and the home. The last mile is a very powerful tool. Not only can it be used for CATV as is the case today, but also fixed-line voice services and crucially broadband internet access services.

As operators focus on upgrading switches, faster transmission speeds are possible down co-axial copper cables between the switches and the home. In Europe nowadays, transmission speeds of 8 and 16Mbps are common. In India, speeds above 1Mbps are rare. Today there are only 8 million broadband subscribers in India. By March 2013 Standard Chartered estimates there could be 26 million subscribers. The CATV operators could secure a large percentage of this profitable industry. The issue facing cable operators in India today is that they see themselves as entertainment companies. This, in professional opinion, is misguided strategically and in terms of value creation potential.

What is Quad-Play?

Quad-Play means four methods of communication service provision to the consumer – fixed-line (plain old telephony), mobile, broadband Internet and Cable TV. This service set is also sometimes humorously referred to as “The Fantastic Four”. “Mobile service provisions” refers in part to the ability of subscribes to purchase mobile phone like services, as is often seen in comarketing efforts between providers of land-line services. It also reflects an ambition of wireless – access to all of the above including voice, internet, and content/video while on the go and without tethering to the network via cables.

Multi-play is a marketing term describing the provision of different telecommunication services, such as Broadband Internet access, television, telephone, and mobile phone service, by organizations that traditionally only offered one or two of these services. Multi-play is a catch-all phrase; usually, the terms triple play  voice, video and data) or quadruple play (voice, video, data and wireless) are used to describe a more specific meaning. A dual play service is a marketing term for the provisioning of the two services: it can be high-speed Internet (ADSL) and telephone service over a single broadband connection in the case of phone companies, or high-speed Internet (cable modem) and TV service over a single broadband connection in the case of cable TV companies. The convergence can also concern the underlying communication infrastructure. An example of this is a triple play service, where communication services are packaged allowing consumers to purchase TV, internet and telephony in one subscription.

The broadband cable market is transforming as pay-TV providers move aggressively into what was once considered the telco space. Meanwhile, customer expectations have risen as consumer and business customers alike seek rich content, multi-use devices, networked products and converged services including on-demand video, digital TV, high speed Internet, VoIP and wireless applications. It’s uncharted territory for most broadband companies.

Quad-Play proposition

Indian Cable operators should look hard at the Quad-Play proposition. Overlaying a broadband and fixed-line service over a CATV network is relatively straight-forward. Providing a mobile service to their CATV subscribers will be more challenging. However the CATV operator should think about becoming a service provider in partnership with an existing mobile operator, just as Virgin Mobile has done with Tata Teleservices.

To make Quad-Play a reality, the Indian Cable operator must first of all apply for a Universal Access Service Licence (“UASL”). However this may be easier said than done. In India there is a lengthy application period for a UASL as the regulator debates whether there is a need for more integrated telecoms operators in the country. But given the strategic importance of the last mile, not just for CATV but also for broadband, my hope is that the regulators support Cable operator applications for UASLs. Once an appropriate licence is secured then management expertise and funding will need to be sourced.

None of this will be easy but surely strategically this is a more positive option for the Cable operator than fighting a defensive battle against DTH? Diversifying future revenue streams is essential for India’s Cable operator. DTH won’t destroy CATV but it will seriously constrain value growth upside. Pro-active diversification would allow the operators to prosper once more.

Some example for Quad Play providers

For example, AT&T and Verizon remain the true Quad-Play providers in world. While triple-play bundles have woven their magic for service providers in the US and parts of Europe, the market seems to be ready for Quad-Play packages at this time. AT&T Inc is the largest provider of local, long distance telephone services in the United States, and also sells digital subscriber line Internet access and Digital Cable television. AT&T is the second largest provider of wireless service in the United States, with over 81.6 million wireless customers, and more than 150 million total customers. AT&T, Inc. was formed in 2005, when “Baby Bell” SBC

Communications Inc. purchased former “Ma Bell” AT&T Corporation.

The newly merged company took on the iconic AT&T moniker and T stock-trading symbol (for “telephone”). The current AT&T includes eleven of the original Bell Operating Companies, and the original long distance division. While it reconstitutes much of the former Bell System, AT&T Inc. lacks the vertical integration of the historic AT&T Corp., which prompted United States v. AT&T, the antitrust suit that led to the breakup in 1984 (which was ultimately settled by the Modification of Final Judgment in 1982.) The company is headquartered in downtown Dallas, Texas. The company was honored at the 2008 Technology & Engineering Emmy Awards for development of coaxial cable technology.

Another Quad-Play operator Verizon Communications is an American broadband and Telecommunications Company and a component of the Dow Jones Industrial Average. It was formed in 1983 as Bell Atlantic as part of the 1984 breakup into seven Baby Bells. Prior to its transformation into Verizon, Bell Atlantic had merged with another Regional Bell Operating Company, NYNEX, in 1997. The name is a portmanteau of veritas and horizon. The company’s headquarters are located at 140 West Street in Lower Manhattan, New York City.

Opposition says, Quad-Play overrated for cable TV

US Cable operators & MSO’s are making moves in the wireless space, but at least one industry analyst is not convinced they should even bother with a wireless service at all. According to USA’s Bernstein analyst Craig Moffett, academic research shows that bundles have a negative utility in economic terms, meaning customers have to be compensated for agreeing to accept restricted choice. The argument in favor of wireless is that competing telcos have it and, as more cable customers cut the cord on their landlines, they must turn to wireless to stay competitive. Moffett calls this theory thin. “The power of bundles, after all, has little if anything to do with what customers want,” Moffett wrote in a research report. “And it has nothing whatsoever to do with what competitors are offering. Bundles are about the network. Bundles are about supply, not demand. The power of the bundle arises from the marginal costs of delivery. In other words, it’s the network, stupid.”

Bundling requires the carrier to offer a discount, which often outweighs the revenue, Moffett added. He outlined three questions that Cable operators & MSO’s must answer in the affirmative to have a compelling reason to enter wireless. First, does cable’s current fiber/coaxial cable network confer any cost advantage in building or operating a wireless network? Second, would owning a wireless network lower the costs of operating their cable network? And third, are there products or services that can be uniquely delivered by an operator controlling both a wireless and wireline cable network? There is little evidence to suggest that any answer would be yes, he said.

“Sure, there are opportunities for MSOs to provide cellular backhaul,” Moffett said. “That might be a big future revenue generator for cable operators, but it doesn’t take a joint venture or a bundle to do that.” Previous wireless ventures haven’t proven effective for the cable industry and even some telcos. The demise of Pivot, Sprint’s partnership to provide wireless service with Comcast, Cox Communications and Time Warner Cable, left the cable companies to fend for themselves – if they so choose. Surewest Communications sold its wireless business to Verizon in January, and Embarq abandoned its reseller deal with Sprint back in May. Qwest, too, gave up its virtual operator relationship with Sprint to sell standard Verizon Wireless service from cellular kiosks, similar to its reseller relationship with DirecTV.

Most cable companies left the wireless business due to a lack of subscriber interest resulting in a lack of revenue and a desire to put their focus elsewhere, but they also weren’t ruling out future wireless possibilities. Cox announced in October that it would launch a wireless service over its own 3G network in 2009. It was the first to unveil its wireless plans in detail, but it was soon followed by Bright House, Comcast and TWC, which all placed their bets on Clearwire. The nationwide WiMax network gives the cablecos access to highcapacity wireless broadband service, as well as to SpectrumCo AWS license in their territories, meaning they can compliment any data-centric WiMax offering with 3G services if they also choose to launch their own voice service.