Converged services cause less churn for telcos

Converged services have become one of the marketing strategies employed by service providers today to grow revenues and subscriber bases, and reduce customer churn.

“Bundling two or more services such as fixed voice, broadband, mobile and pay TV into attractive price plans has proven to result in less customer churn than single-service offerings,” says Frost & Sullivan senior industry analyst Kamlesh Kalwar. He cites Hong Kong’s PCCW which has managed to keep churn rate below 1% since introducing its converged services.

Kalwar further reckons that single-service telco offerings may soon be a thing of the past as tomorrow’s consumers are likely to demand fully converged services from a single provider as a result of changing lifestyles and technology convergence.

New analysis from Frost & Sullivan Asia-Pacific Converged Services Market Potential reveals that approximately 20.8% of households across 14 Asia–Pacific countries subscribed to dual-, triple- and quadruple-play (quad-play) services in 2008 for total bundled billings of US$58.7 billion. By 2014, residential bundled-service revenues are expected to hit US$88.3 billion.

Dual-play services, typically fixed-line and broadband, are the most commonly contracted bundles at present, with 10.8% of residential users.

Kalwar argues that three forms of convergence are driving the delivery of bundled or multiple services to a single user —convergence of networks, content and devices.

Network convergence: Thanks to IP (iternet protocol), existing networks are capable of delivering a multitude of services — such as a broadband network enabling applications like iternet, TV and VoIP (voice over iternet protocol) — with just an incremental upgrade to the core network.  Operators are banking on this opportunity to up-sell their services and increase average revenue per user (ARPU) and customer stickiness.

Content and device convergence: The increased mobility of present-day consumers dictates the need for multiple access points to the same content.  Similarly, the sophistication of devices available today supports consumers’ expectations for ubiquitous access to such content.

Given this, Kalwar believes that converged services present obvious benefits to both service providers and users, “Converged services is expected to be a critical strategy for communication service providers in the mid to long term."

In just 30 months since mid-2006, Telstra has very swiftly transformed from a single-service operator to offering bundled quad-play services to its subscribers. In June 2008, Telstra held a commanding 58.5% share of the pay TV market in Australia through its 50% owned FOXTEL, after the cable TV network's viewers tied to Telstra bundles grew to 30.6% the same year.