Editor's note: Integrated services—the ability to deliver a variety of offerings across different service delivery networks to a variety of customer devices—is perceived as more valuable to consumers than traditional triple-play and quadruple-play bundled services, with wireless services as the key value-add. In this column, Frost & Sullivan analyst Mike Jude looks at the high-value services and service integration findings in a new Stratecast report.
When services are integrated across service delivery networks, they become more useful and more available.
Frost & Sullivan
Almost everyone is familiar with the term "triple play," that is, voice, video and data services offered by a single service provider. The notion originated with cable operators that found they had the capability to deliver multiple discrete services over the same cable network. This capability was quickly matched by telephone carriers that were able to provide voice and data over the same copper plant and video through partnerships with satellite service providers. Recently, some telecom carriers also started offering IPTV over the same DSL-based connections.
Now the stakes have been raised. The new bar is defined by the "quadruple play," or voice, video, data and wireless services. Adding wireless to the service bundle increases the value of the total bundled offering and provides the consumer with a single bill for all of their communications services.
What many operators have forgotten, however, is that the point of service bundling is not the convenience of getting a single bill. If that were the case, consumers would be willing to pay more for bundled services. The fact that they aren't, and that service bundles are following the same price-to-cost curve as discrete services, is an indication that simple bundling is not really a high-value pursuit.
Perceived value is based on the perceived utility of the service being offered. Simple bundling and single billing do not necessarily add to utility; they simply make consumption more convenient. High-value service bundling is what's needed, and this is where service integration comes in.
Integrated services increases service value to the consumer
Service integration, or services that are independent of the delivery network, is becoming the high-value offering for network operators. This trend is described in the new Stratecast report, Triple Play or Triple Loss: Service Packaging Forecast and Strategic Analysis. Where simple bundling provides discrete services, most of which are confined to individual networks, integrated services live across the delivery networks.
One example serves to illustrate: Mediafriends (www.mediafriendsinc.com), a network service software provider, has technology that allows text messaging to appear on a wireless device, a PC and a video display. In this environment, text messaging is a highly integrated service accessible to consumers regardless of which device they may be using or which network is actually delivering the service.
The interesting thing here is that while the dynamic of service bundling is to reduce the margin for any of the services in the bundle, integrated services do the opposite. Why? The difference is in the value perception of the consumer. When services are integrated across service delivery networks, they become more useful and more available. People are willing to pay extra for such services, especially if the perception is that such services are complex and hard to deliver.
Wireless is the key to service integration because it provides the mobility element for any service offering. And because many of the communications services that consumers most value live in the wireless world, they are probably the ones consumers want to see delivered in an integrated way.
Wireless operators gain leverage with quadruple-play integrated services
What's ironic is that fixed infrastructure carriers are likely to be highly dependent on either their mobile assets or mobile partners for the high-value features that are necessary to elevate the value of the overall package. As a result, wireless operators will find that they have increasing leverage over service definition and opportunities as the bundled triple-play offerings evolve to integrated quad-play services.
What this means, in practice, is that wireless network operators need to format new services to blend easily with other delivery modalities. This doesn't mean services that can go either way; it means services that can easily transfer across modalities. Imagine Web surfing that can begin on a PC, transfer over to the video display and then transfer over to a wireless device, seamlessly and with no loss of information. In other words, they are services that follow consumers regardless of where they are.
Is that easy? Probably not, but it is the only way to arrest the decline in margin associated with delivering communications services. Wireless provides the edge. Quad play is simply integrated services delivered by leveraging wireless technology.
About the author: Mike Jude is a program manager at Stratecast/Frost & Sullivan in charge of the consumer communication services practice. He brings 30 years of experience in technology management in manufacturing, wide -area network design, intellectual-property management and public policy. Jude holds degrees in electrical engineering and engineering management and a Ph.D. in decision analysis. He is co-author of The Case for Virtual Business Processes: Reduce Costs, Improve Efficiencies and Focus on Your Core Business, Cisco Press, 2003.
This was first published in October 2009