When it comes to monetizing telco TV assets in the toughest economic times, operators are trying to decide whether they are hunters, farmers or both.
With the rising cost of customer acquisition, many telcos, and their infrastructure suppliers, are leaning toward “farming” their current customer base as opposed to focusing primarily on hunting for new subscribers.
Set against a backdrop of financial market chaos and a looming economic recession, farming by developing value-added features and services has come to the fore, with capex spending increasingly uncertain. This raises core questions with no easy answers.
“Service pricing based on the cost of offering it plus, as opposed to, value, is a mistake the industry has made,” admitted Patrick Murphy, director of engineering for FairPoint Communications Inc., an ILEC with operations in 13 states. “Where we’re all struggling is in identifying where the real value of a service is for the customer.”
Murphy, who is in charge of next-generation offerings at Fairpoint, unplugged his cable a few years ago and watched 100 percent of his content on demand as opposed to live. 90 percent of that content came from Internet streaming media from sites such as movie rental and purchase destination VUDU Inc., which required a $12 cable to tie his PC to his big screen.
Challenges Breed Opportunity
Noting that user interfaces, electronic TV programming guides and search functionality all need big improvement, Murphy and others are convinced the real value of video is in ease of use.
“There’s a huge amount of complexity in video services today and especially in home networking,” added Colin Dixon, director of broadband media strategies at The Diffusion Group. “The true key is simplicity.”
That’s especially the case, he contends, with home networks, which provide both big challenges and big opportunities for operators.
“By 2015, there will be 72 million home networks in the U.S. with an average of three to five attached devices,” Dixon predicted. “And the devices won’t be just PCs, they’ll be TVs, cameras and media players.”
This represents a nightmare for consumers to manage, even if they want to, he added. “I think people would love to see telcos jump into home networking and offer managed services,” perhaps akin to how operators offer managed services for enterprise networks Dixon remarked.
Now, consumers largely are left to their own devices, their tech-savvy kids, Best Buy’s pay-extra Geek Squad services, at least for setup, or a growing cottage industry of independent tech experts.
Dixon sees managed home network services as a strong means of adding value atop consumer services, leveraging telcos’ current knowledge base and workers’ resources. He also believes this would strengthen the current relationship between telco TV provider and customer.
Suppliers Refocus
Infrastructure providers also are hard at work focusing their research and development efforts on products that people want, will use and can be monetized.
“The majority of products created, much like the number of [TV] channels available, are not consumed,” explained Jon Romm, COO at Avail Media Inc.