Disconnecting The Holy Grail
By Mike Masnick, Wed Jun 30 22:00:00 GMT 2004
Telcos and cable companies have been fighting to offer the sought after "triple play" of services to the home: voice, video and data. There's just one problem: people don't only connect from home any more.
Thanks to both technology and regulations, there have been two major players fighting to get data pipes into American homes for the last few decades: the telco and the cable company. The local telco provided voice communications while the local cable company provided video services (for most people who decided that over-the-air TV wasn't cutting it any more). With the introduction of the Internet, however, the world changed. Both the telcos and the cable companies moved to offer high-speed Internet access whether by DSL or cable modem -- and the battle over data services began.
It wasn't long before people on both sides realized the inevitable competition, as that single wide data pipe could be used to offer the "triple- play" offering: voice, video and data in a single bundle. Moved along by the simple fact that offering more services means more revenue per customer, providers were even more encouraged by studies that showed customers who buy bundles of services have a much lower likelihood of moving to another provider. That reduction in subscriber churn alone, more than paid for the cost of the services.
The cable companies have had the easier job. They already had the most difficult part (video) taken care of, though many moved to upgrade their services to more feature-rich digital cable to take advantage of additional services they could provide. They upgraded their networks to offer cable modem service, which has been quite successful in the US (though less so around the world where the local telcos often are much more dominant). The final piece, voice, is starting to fall into place now that VoIP systems have improved to the point that they're nearly as good as traditional telephone service from a quality standpoint, while also being easy to install.
The telcos, however, have been a bit slower to move. The voice business has been a cash cow for some time, and many telcos have operated as government regulated monopolies for most of their lives -- and, thus, are not used to moving as fast. When it came to DSL, many telcos relied on their monopoly position and were slow to encourage adoption until competition from CLECs started to get them more interested. As they've woken up and realized the need to compete with cable, they're also discovering that the video component is quite a lot of work. Some telcos have come up with a temporary solution: partnering with satellite TV providers. However, that's a short-term solution, as it leaves control of the service outside the telcos' hands and presents additional logistical difficulties as well.
To really offer TV-over-broadband, the telcos are coming to the realization that they need to upgrade their networks, often with a fiber-to-the-premise solution. This is something many telcos have been promising for years, but have then balked when it came time for delivery. Without the competitive pressure, they haven't been able to convince themselves that they really needed to upgrade. Still, even if the expensive upgrades do go forward, it may take quite a while for the telcos to understand the television business, which should put them at a severe disadvantage in the triple-play world for some time.
However, one major variable has changed over the last few years: people don't just want that pipe to come into the home, but to follow them around. High-speed access to everything in the home is turning into anywhere, anytime access over any device.
Already, the idea of the landline for voice is losing its appeal to many people. Around the world, users are ditching their landlines in favor of mobile phones in record numbers. While the argument for a VoIP solution over a landline is one of cost, many users who have gone 100% mobile for voice, don't see the need for a landline at all, whether using POTS or VoIP.
Disconnected data may be next. As 3G and other wireless broadband systems launch around the world, they're not just about getting faster data to your mobile phone, but to your computer as well. When Vodafone launched their 3G service in Europe, they started out only offering a PC card for Internet access from a laptop, before starting to offer phones a few months later. If the pricing is good enough, and the speeds are fast enough, will users even need a DSL or cable line at home?
As for video, that's still a big challenge, but efforts are underway in Korea and other places to offer video to the mobile phone. While some question whether or not anyone really wants to watch TV on their mobile phones, what if that connection was also fed directly into a full-sized TV?
If the entire triple play goes wireless, then, suddenly, the telcos may be back in control. Most telcos either have a mobile offering or are closely aligned with a mobile company. The cable companies, however, are mostly stuck to their cable roots and have not moved to offer much in the way of wireless access. Recently, in the US, Time Warner announced plans to create an MVNO for mobile phone service, where someone else would provide the network and they provide the marketing. Just like the telcos providing satellite TV, however, this is a short-term solution. It takes the control out of their hands and makes them reliant on other players (many of which are owned by the telcos they compete with).
None of this is to say that either side won't change and adapt, but it is important to watch what happens over the next few years, as both the telcos and the cable companies realize the battle isn't for the triple play of services over a single pipe into the home – but to offer the triple play to anyone, anywhere on the go. What was once the holy grail of a single fat pipe into the home is now going to be disconnected pipe that follows the user around.