Residential Voice, Data and Video: Change Is the Only Constant
Carl Weinschenk spoke with Diane Myers, the directing analyst for Infonetics Research. Myers and Infonetics released a report earlier this month, "Residential Voice, Data, and Video Services in North America: Market Outlook."
Weinschenk: What did you look at, and what surprised you?
Myers: We looked at the North American residential communications services market. When I say that, I mean that we looked at voice, video and Internet access services. Mobile is part of that, both broadband and voice. Nothing was shocking, but some key points stood out. One is that residential services have traditionally been voice-centric business. Voice has always been king. That's really in decline. That market is in decline from the revenue perspective and usage perspective. [For example,] on the mobile side, when you look at minutes of use, it has really shifted. People are using voice a lot less, respective to data, which includes text messaging. They are also using their mobile phones for broadband, Facebook, Twittering, looking up their stock portfolio, what have you. The important point is that people are communicating in different ways, and voice is being deemphasized. There are other modes, particularly text messaging.
Weinschenk: What in particular is hot?
Myers: The biggest growth area is in broadband access. That's not surprising. There is a lot of room for growth there. There still is quite a bit of room to grow in North America. The other area is video services, video entertainment. By 2011, the video services market on a revenue basis will be larger than voice services. There is a little of a Catch-22, the ARPU – average revenue per user -- is pretty steady, in some cases increasing because people are taking enhanced packages.
Weinschenk: What's the Catch-22?
Myers: If you are a video provider, the cost of programming is going up, so they have to pass that [extra] cost on to consumers. That's why RPU stays steady for the base packages. Because of that, the video services will be the largest segment of the residential services market. It is the most challenging market in terms of margins. We are looking at everything: IPTV, traditional and digital cable services and satellite. [Incumbents] are evaluating the need to move to IP-based services. What's in the market today primarily from cable operators is traditional services. We took it all into account, including Verizon's FiOS, AT&T's U-verse and what other smaller operators are also doing it.
Myers: When you talk about cable operators and larger incumbent local exchange carriers, change moves slowly. When you have a large customer base and a lot of legacy technology, you tend not to be nimble. The question is a bit loaded in that most understand where they need to be and need to go. But it's taken a while to go there. Verizon and AT&T absolutely on the fixed line are getting there. On the mobile side, they are there with services. They tend to be challenged and have to move quickly now just to manage capacity [demands]. For AT&T, the biggest challenge is the success of the iPhone and broadband intensive applications. Now they have to cope with how they re-architect their network just to maintain assets to support all the innovation that is coming. The cable operators historically are pretty quick to move on some technology. They ... moved up quickly and are pretty much on par with DSL options. They've been pretty successful with VoIP options.