Defending Against Fixed Mobile Substitution: detailed operator case studies. Mark Heath and Alastair Brydon with Rupert Wood Edited by Gordon Davies

Transcription

1 Defending Against Fixed Mobile Substitution: detailed operator case studies Mark Heath and Alastair Brydon with Rupert Wood Edited by Gordon Davies

2 Analysys Research Fixed Networks and Services Analysys Research Fixed Networks and Services online market intelligence service World Telecoms Marketplace online market intelligence service Business Data Services: growth opportunities and forecasts IPTV: a breakthrough for US telcos? Retail VoIP in Western Europe: forecasts Fixed Mobile Convergence: opportunities and strategies for the mass market Fixed Mobile Substitution and VoIP: forecasts for the battle for mass-market voice The Telco Product Portfolio beyond 2010 The Telco Organisational Structure beyond 2010 The Business Case for Carrier Migration to VoIP The Business Case for Broadband Entertainment Western European Fixed Telecoms Markets: forecasts Mobile Networks and Services Analysys Research Mobile Networks and Services online market intelligence service Accelerating Fixed Mobile Substitution: detailed operator case studies The US Mobile Market: trends and forecasts Making a Success of Mobile TV and Video Delivering Strategic Benefits with IP Multimedia Subsystem (IMS) VoIP versus Mobile: forecasts for the future of enterprise voice Fixed Mobile Substitution and VoIP: forecasts for the battle for mass-market voice The Future of MVNOs in the 3G Era The Western European Mobile Market: trends and forecasts Product and Service Opportunities from Shortrange Wireless Technologies: WLAN, Bluetooth, UWB and NFC Wireless Voice over IP: technical and commercial prospects Billing for Mobility: strategies for convergent charging The World s Top Ten Wireless Services Retaining Customers and Minimising Churn: strategies for mobile markets Pushing Beyond the Limits of 3G with HSDPA and Other Enhancements Billing and OSS Analysys Research Billing and OSS Markets online market intelligence service Billing for Mobility: strategies for convergent charging Emerging Charging Architectures for New Mobile Services: understanding and evaluating the available technical solutions Published by Analysys Research Limited St Giles Court 24 Castle Street Cambridge CB3 0AJ UK Tel: +44 (0) Fax: +44 (0) research@analysys.com Analysys Research Limited 2005 Printed in the UK by Victoire Press. All rights reserved. No part of this publication may be reproduced, stored in a retrieval system or transmitted in any form or by any means electronic, mechanical, photocopying, recording or otherwise without the prior written permission of the publisher. ISBN

3 Contents 0 Summary ix 1 Fixed mobile substitution is a major threat for fixed network operators The biggest threat to fixed operators is line substitution, but there are opportunities to reverse this trend There are strong drivers for traffic migration from fixed to mobile networks as mobile prices fall in many markets Fixed operators in markets that have not yet experienced significant fixed mobile substitution must not be complacent Tariffs and pricing are critical levers for fixed operators, but other tactics are also important Six operator case studies illustrate a variety of strategies to defend against fixed mobile substitution 10 2 BT defends fixed revenues with UMA services as well as tariffs and broadband services While the UK has not seen significant line substitution, BT is vulnerable as a fixed-only operator New usage-enhancing tariffs have been introduced on a widespread basis Fixed SMS tries to close the gap with mobile services, but the need for special handsets is a weakness BT has substantially improved the affordability and availability of DSL broadband services BT intends to improve broadband performance, enabling services such as TV and VoD Following the demerger of O2, BT re-entered the mobile market with an MVNO service coupled with fixed voice services BT is an early mover with the UMA standard through the launch of the BT Fusion consumer service 19 3 Elion is defending against fixed mobile substitution by increasing the value of its fixed-line services As the incumbent fixed-operator in Estonia, Elion has a tough battle against fixed and mobile competitors 24 Analysys Research Limited 2005 Contents

4 iv Defending Against Fixed Mobile Substitution: detailed operator case studies 3.2 Elion s Home Solution and Business Solution services provide bundled DSL, PSTN and voice minutes for a flat fee Discounted voice calls have been used to position fixed telephones as the preferred device for long conversations Elion has attracted new customers to its fixed services by offering free connection Elion adds value to its fixed-line services with additional services and will add TV to the bundle Elion offers some limited services with its sister mobile company, but its primary focus is currently its fixed business Elion has faced challenges from its regulator as it has restructured its pricing and services 31 4 Belgacom is defending against line substitution with usage-enhancing tariffs and broadband services Belgacom has both fixed and mobile operations, in a market that has already experienced significant line substitution Belgacom has reversed market-share losses with tariff promotions, but attempts to deploy fixed SMS have proved less conclusive Belgacom was an early mover in broadband Internet services and is now driving TV and VoD 36 5 BellSouth hedges its exposure to fixed mobile substitution through mobile services BellSouth has experienced a decline in fixed lines due to fixed mobile substitution BellSouth views its part ownership of Cingular Wireless as one of the best defences against fixed mobile substitution Free local fixed calls with low line rental may help slow fixed mobile substitution Long-distance tariffs have been successful in increasing service take-up and usage Broadband is a focus area for BellSouth s fixed operations BellSouth offers a satellite TV service and is expected to offer IPTV services, which may also help prevent line substitution Bundling of wireline (and wireless) services has reduced churn and could also discourage fixed mobile substitution 47 6 France Telecom s integrated approach enables flexibility when addressing fixed mobile substitution France Telecom is setting out to exploit its dominant position in fixed, mobile and broadband services in France Bundled tariffs have slowed the decline of the fixed voice business Sophisticated broadband services over DSL strengthen the need for a fixed line in the home Converged tariffs and services across fixed and mobile networks aim to maximise the overall value for France Telecom 57 Contents Analysys Research Limited 2005

5 Defending Against Fixed Mobile Substitution: detailed operator case studies v 7 Telecom Italia has re-invigorated its fixed services with lessons learned from mobile As the incumbent fixed operator in Italy, Telecom Italia has needed to take strong action to slow traffic migration to mobile Telecom Italia offers a number of tariffs that move the balance of cost from individual calls to monthly subscriptions Sophisticated terminals featuring Telecom Italia services encourage loyalty to the fixed network Telecom Italia has replicated mobile services and developed new services to strengthen its fixed proposition 68 8 Operators must carefully select their tactics from a range of options Fixed operators must first decide on a clear strategy towards fixed mobile substitution Fixed operators should be prudent in adopting unproven converged fixed mobile services Fixed operators must address the different needs of different customer segments 74 Actions 76 Market intelligence services from Analysys Research 80 Reports from Analysys Research 81 Custom Research: meeting your information needs 82 Analysys Consulting 83 List of Figures and Tables Figure 0.1: Relationship between mobile pricing and the proportion of total traffic originated on mobile phones, quarter ending December 2004 ix Table 0.1: Case studies demonstrating a variety of approaches to encourage fixed mobile substitution xi Figure 1.1: Proportion of mobile-only households in selected Western European countries, Figure 1.2: Proportions of mobile- and fixed-originated voice calls in selected Western Europe markets, quarter ending December Figure 1.3: Relationship between mobile pricing and the proportion of total traffic originated on mobile phones, quarter ending December Figure 1.4: Relationship between the price premium of mobile over fixed and the proportion of total voice traffic originated on mobile phones, quarter ending December Figure 1.5: Relationship between fixed pricing and the proportion of mobile-only households, quarter ending December Table 1.1: Case studies by operator type, market size and market development 10 Table 1.2: Case studies demonstrating a variety of approaches to defend against fixed mobile substitution 11 Table 2.1: Market information for the UK and BT 13 Figure 2.1: UK fixed and mobile traffic volumes, Table 2.2: BT Together pricing options 15 Figure 2.2: Customer take-up of BT s BT Together pricing tariffs 15 Table 2.3: BT Fusion pricing 21 Analysys Research Limited 2005 Contents

6 vi Defending Against Fixed Mobile Substitution: detailed operator case studies Table 3.1: Market information for Estonia and Elion, Figure 3.1: Number of Elion customers for fixed telephony, Internet access (including broadband) and broadband Internet access, Table 3.2: Elion s Home Solution tariffs, October Table 4.1: Market information for Belgium and Belgacom 33 Table 4.2: Residential lines, traffic and voice revenues for Belgacom fixed business, first six months to June Figure 4.1: Growth in Belgacom Internet lines (narrowband and ADSL) 37 Figure 4.2: Broadband penetration, in terms of proportion of population, for a number of countries, split by technology, December Table 4.3: Pricing of Belgacom TV service 39 Table 5.1: BellSouth wireline and wireless operations, quarter ending September Figure 5.1: Residential fixed-access lines for BellSouth, Table 5.2: BellSouth long-distance tariffs 42 Figure 5.2: Growth in BellSouth long distance customers, Figure 5.3: Total fixed-access minutes of use for BellSouth, Figure 5.4: Growth in BellSouth DSL customers, for the period Table 5.3: Monthly savings from bundling of BellSouth services with BellSouth Answers 47 Table 6.1: Market information for France and France Telecom 50 Table 6.2: France Telecom Atout Illimité tariffs, November Table 6.3: France Telecom Atout + tariffs, November Table 6.4: Pricing of France Telecom fixed-to-mobile call bundles 58 Table 6.5: Monthly cost of MaLigne videotelephony service, November Table 7.1: Market characteristics of Italy and Telecom Italia 62 Figure 7.1: Telecom Italia fixed voice lines, June 2001 June Figure 7.2: Proportion of fixed-line voice customers with flat rate plans, June 2001 June Table 7.2: Details of Aladino cordless handsets offered by Telecom Italia 66 Table 7.3: Basic prices of Telecom Italia s Alice Mia service 70 Figure 8.1: Different approaches are required to defend against fixed mobile substitution 75 Contents Analysys Research Limited 2005

7 Defending Against Fixed Mobile Substitution: detailed operator case studies vii Authors Dr Mark Heath and Dr Alastair Brydon are founders of Sound Partners Ltd and authors of 16 reports from Analysys Research, including Accelerating Fixed Mobile Substitution: detailed operator case studies, Making a Success of Mobile TV and Video, Delivering Strategic Benefits with IP Multimedia Subsystem (IMS), The Future of MVNOs in the 3G Era, Wireless Voice over IP: technical and commercial prospects, The World s Top Ten Wireless Services, The Role and Impact of WiMAX and Proprietary BWA Technologies and The Road to Fixed Mobile Substitution Starts with 3G. Mark is Director of Research at Sound Partners Ltd. Mark has held a number of marketing and business development roles in Nokia, ultimately becoming responsible for strategy and business development across Europe. Previously, Mark was responsible for business planning at BT Cellnet in the UK, after spending six years at BT in wireless systems research and development. Mark holds BSc and PhD degrees from the University of Leeds, winning the University prize for his research in telecommunications. Mark also holds an MBA, graduating as top student from Henley Management College. Alastair is CEO of Sound Partners Ltd. Prior to joining Sound Partners, Alastair reported to Nokia s European management team and worked with many of Nokia s customers to implement market firsts ranging from the introduction of prepaid mobile tariffs to new mass-market content services. Previously, Alastair worked in a number of roles for the BT Group, focusing on the evolution of wireless services, networks and technologies. He also contributed to international research and standardisation of GSM, DECT and 3G. Alastair holds BSc and PhD degrees from UMIST, where he was awarded the IEE Prize for top student. Dr Rupert Wood (Principal Analyst, Analysys Research) specialises in competition analysis of the European fixed telecoms market and in particular the development of broadband services. He has extensive experience of forecasting and sizing European fixed telecoms markets and was author of recent publications including: Retail VoIP in Western Europe: forecasts , The Telco Product Portfolio beyond 2010, Western European Fixed Telecoms Markets: forecasts , The Impact of Voice over Broadband: forecasts for Western Europe and Maximising Revenues from Broadband: new pricing strategies for European operators. He also directs the Analysys Research Fixed Networks and Services database service. Before joining Analysys, Rupert was a lecturer at the University of Cambridge. Analysys Research Limited 2005 Contents