Memo 5: International Business Investment: Triple Play

This week I'd like to look at Triple Play as the major Telecommunications Investment of interest, from both a financial background as well as a technical perspective.

Triple Play Defined

At the highest level, Triple Play, which is offered by both Cable companies and Telecom operators, simply means delivering Television, Phone and Broadband access through a “single” pipe, typically to a home user.[1]

How has it influenced the market till date?

Triple play has all the hallmarks of the great financial success stories of the near past, it has elements of "bundling", "lock-in" and centralised support externalities for each of the three services provided.

So how exactly does it all gel together? Well, to start with, it does, with an estimated 35 million new subscribers each year, Triple Play investments appreciate about 250% growth annually. Typically, as we have seen with some of the great products, there is a synergy created through the bundling of services, very comparable to that of software, like Microsoft Office. It just becomes so much easier to communicate when there is wide scale deployment and peer compatibility within the software user community. The need to select different software developers for a word processor, a spreadsheet and a slide show mechanism, is not necessary because you get them all in one, with widespread reach. All of which stem from the fact that they are bundled at a single, very attractive price, creating what is commonly knownto the business world as "lock-in".

This is exactly the concept behind Triple Play, coupling services such as voice, data and TV (more specifically IPTV) all in one package, for an extremely competetive price. At present, there are several different flavours of Triple play, whether it is provision through fiber, coax, xDSL or even satellite delivery, essentially it is viewed as being over a "single" pipe over a common network infrastructure for operational efficiency.

Triple Play Network Architecture

So with all the benefits of bundling, is it free game? Not exactly, while the market is still expanding, already existing distinct factions, that have not been provided a reason to change remain as the were. So Telecom companies are yet to take over on the TV(IPTV) market, because DSL over the local loop cannot quite provide enough bandwidth to stage a serious threat, and so Cable's greatest threat for TV(IPTV) comes from satellite companies. In the case of voice and broadband services, its really a Cable vs. Telecom operator stand off, because satellite technology is inherently held back by latency and physical laws of geosynchronous satellite. So in fact, for the moment Cable is the only technology that is technically capable of providing Triple play over the single medium. This may however change as the Telecom operators, join with satellite technologies or ones that own wireless networks themselves, move to the next battlefront in a wave called "Quadruple Play".

In essence, in order for fixed line providers (Cable/Satellite or Telecom Operators) to move to this next battle front, the key business strategies elicited by most of the companies are listed below.

1. Increase customer retention through service bundling

- Standardized services become individual through additional modules.

2. Increase average revenue per user (ARPU)

- Triple Play Services are key to increase ARPU through small additional offerings.

3. Reduce Operational Expenses (OPEX)

- Integrated Support and wide-view QoS delivery across converged technology of choice.

4. Speed up service creation

- Standardized open interfaces and flexible IMS platform support systems.

The bottom line is at present the major challenges facing the concept of triple play, regardless or the nature of delivery is in "determining the right business model, backend processes, customer care support and economic environment rather than technologyFor example, using the right billing platform to address a variety of subscriber demographics or having the appropriate subscriber density to financially justify introduction of the service are a few factors that affect decisions to offer Triple Play service". [2] But thats not to say that thats the only concern, of course QoS management for each service is part of the challenge, and the race to converge to a working solution is still on... Place your bets...


References

1. BluePrint

2. Wikipedia

3. Extranet