The Anonymous Analyst

Commenting on technology & communication issues around the world with focus on USA and India. Also ramblings on other subjects.

Sunday, December 12, 2004

This blog will comment on issues of technology & communications around the world. The author is partial to the US and India because of her association with these countries. From time to time, I will also address other issues like economics, current affairs and politics.
RBOC and Cable MSO Triple Play Strategies

The next big fight in the US is between the Cable MSOs and RBOCs. Key in the RBOC arsenal is their control of wireless providers namely Cingular and Verizon Wireless.

Triple Play aims to concentrate the communication & entertainment dollars in one provider and with wireless, the RBOC becomes a one-stop shop - Phone, Internet access, Cable TV & Wireless. Cable MSOs do not have this luxury and they could try to do this by aligning with a wireless provider/ buying a wireless provider. WSJ had reported that the MSOs were looking into this. The options for partnership are only Sprint, Nextel and maybe T-Mobile. Sprint Nextel is better due to the larger coverage. Qualcomm and others might already be working on ways to make this convergence true.

To start with, Qualcomm's GPS location chips and systems make it possible to identify a mobile subscriber as being at home or elsewhere - if at home, only the landline phone will ring - all wireless calls will be forwarded to that. Presence software from Microsoft can make communication among teams, colleagues and friends very effective - if these techniques are combined with location determination, one can have a great experience with individualized content, accurate driving instructions, e-911 etc. Comcast has good relations with Microsoft and they are using Microsoft's IPTV solution in some markets.

The RBOCs have the wireless carriers, but their IPTV rollout plans might make them very late to the market.

Comcast is announcing details of their Triple Play strategy in Jan 2005 - this could be an inflexion point for Cable stocks. RBOC stocks might get hammered too.


Triple Play in the US
Triple Play means Voice, Video and Data coming into your home/office on a single line from a single provider. This is significant since it is the path most of the service providers worldwide are moving towards. It means bundling multiple services, thereby locking in customers - studies have proved that such a customer is less likely to churn out. It is also a means of increasing ARPUs, adding new revenue streams in an era of increase competition and changing business models. The Cable MSOs (Comcast, Time Warner Cable, Cox, Cablevision etc) & RBOCs (SBC, Verizon, Bellsouth etc) are working towards this and competition is bound to intensify in this space in the next 2-3 years.

Cable MSOs
The Cable MSOs have great deal of experience in video & content - Comcast and Time Warner Telecom own substantial content. For the past several years, they have been spending billions in upgrading their infrastructure, which can provide voice, video and data on the cable line today. CableVision is a leader in bundling voice, video and data with packages starting at $90. Their focus is more on the household market, but some like Cox have started targeting the Small Business Market.

RBOCs
The RBOCs have recently committed huge investments to replace the existing copper network with FTTN and FTTP - SBC estimates spending $5 bn for Project Lightspeed by 2007-2008. They have been working with bundling multiple services and with quite good success. They have a great deal of experience with enterprise customers - large and small. One bright spot with the RBOCs is their control of major wireless carriers - they could potentially provide "Quadraple Play" services.

Who will win?
Analysts predict that Cable MSOs stand to win in this game - they can provide Triple Play today and this means that they can undercut the RBOCs and gain customers. So the next 2-3 years will have major competition. The RBOCs are also committing a lot of investment since they need to replace their existing network and this is the only way to remain in the reckoning. The new products and services will require new OSS. If Cable MSOs wants the upperhand, they would have to focus on enterprise customers also - small businesses mainly.

Around the world the Triple Play space is very interesting one with multiple access technologies under consideration. Tata Indicom in India is focussed on Ethernet, Reliance Infocomm is trying out with FTTN, Cable Networks and Ethernet. BT in the UK is doing a major overhaul of their network - replacing the existing copper with an IP network and also doing other interesting things - like Fixed Mobile Convergence Project BluePhone.


Sprint-Nextel Merger

Sprint and Nextel are merging as reported. In this mature market consolidation is the name of the game - the existing players can only grow by joining up. This leaves Verizon, Cingular, Sprint-Nextel and T-Mobile as US's leading wireless players.

What would have happened if they remained separate:
  • Sprint was trying to get in bed with the Cable Providers - so that they could provide "Quadraple Play" services. This might have happened and it would have improved their fortunes.
  • Nextel was facing the technology upgrade choice and they most probably would have picked up CDMA2000 EVDO - then there would have been 3 CDMA players - Nextel, Verizon and Sprint.

What now

Sprint-Nextel might still work with the Cable MSOs. Qualcomm and CDMA is the big winner since 3 of the top 5 are CDMA plays - the CDMA providers have a good corporate customer base, better technology and stabler companies. Amdocs might also be a winner since Nextel has a very good systems and the combined company will do good to adopt those systems.


PIC
One of the major products introduced in recent times with a focus on developing countries is the PIC (Personal Internet Communicator) from AMD. This product is a stripped down, low-cost internet machine, running Windows CE and featuring an editor, spreadsheet, acrobat reader and powerpoint viewer. This is part of AMD's initiative called 50x15 - to enable affordable Internet access and computing capabilities for 50 percent of the world population by the year 2015. For more details, go to www.amd.com. The focus countries are India, China, Brazil etc - guess this will not be available in US much. In India, Tata Indicom, a leading Telecom Service Provider is a launch customer.

In the case of India, AMD could do well to tie up with Reliance Infocomm - they have launched internet access services recently and can easily help in making this a great success. RelianceInfo had recently started a tie-up with Intel for bunding their wireless card along with Intel PCs.

This is one of the products which target the low-end consumers - a market which is large and can be made very profitable by the correct products and strategies. For more read this seminal work by Prof. C.K Prahlad - The Fortune at the bottom of the Pyramid. He has also written a book of the same name - see it here at Amazon.com