“Value” arguably is the greatest strategic threat faced by all access providers in the internet era, where applications are logically separated from network access. The fear of becoming a “dumb pipe” is precisely the problem all access providers face in an era where consumers buy value in the form of apps available from the internet, with access becoming a commodity function.
In fact, “free” Wi-Fi hotspot access illustrates the value problem, as it reinforces the notion that “access” should be free or available at low cost.
But “value” also remains a key competitive issue within the access business.
Consumer perception of the value of internet access largely explains the divergence between telco and cable products since about 2006, when cable operators deployed DOCSIS 3.0 platforms. Simply put, cable companies have for several years gotten more than 100 percent of all the net account additions, presumably because buyers see more value in cable access than in telco access.
So even if it is a defensive, tactical move, telcos cannot afford to indefinitely postpone access speed investments that boost perceived value. Only “higher perceived value” will convince more customers to stay with, or switch to, telco-supplied internet access.
Comcast, for example, has addressed the value issue in several ways, first by boosting speeds to gigabit per second ranges, across the whole network. Also, Comcast has created a huge network of public homespots (more than 20 million) that allow Comcast internet access customers to roam quite widely.
AT&T is doing something similar by bundling HBO subscriptions with some of its mobile plans. You may or may not consider “unlimited usage buckets” a form of value, but that also is a technique all of the leading U.S. mobile operators now offer, in some way.
In addition to those bundling issues, telco upgrades of the access plant are necessary to create additional value. The issue, up to this point, has been the payback. That is why 5G fixed wireless is seen a potential game-changer.
In addition to raw speed, moves “up the stack” into the application realm also are a necessary part of the effort to create more value. Supplying internet of things data connections is nice, but owning the platforms or apps supporting connected car, autonomous vehicle, industrial and commercial drone services arguably are better.
Such value is a direct driver of revenues. Consider the key matter of market share. “When overall industry revenue growth is stagnant, as it is with most telco markets, market share movements become the determining factor of an operator’s top-line performance,” says James Sullivan, J.P. Morgan head of Asia equity research (except for Japan).
In other words, customer perception of value is what drives both new customer acquisition and retention, which drive revenue. On the other hand, the drive to add value means faster pipes are required, which drives capital investment and hence costs.
So, in that sense, the drive to create and maintain value drives the whole business model. And “value” creation will underlie most of the discussions at Spectrum Futures, and many of the discussions at PTC Academy, both of which are part of the Industry Transformation Boot Camp organized by PTC for the first time.