communication is essential to business making and it involves more than the ability to name your product, write a tag line or a press release. It's an intricate, rational and scalable effort and, let's face it, not anyone can do it.

2/04/2008

Quad at any price

I think I may have mentioned total communications in this blog before - it is also known as quad play in Romania and it refers to an operator providing mobile and fixed voice services (you cannot say landline because it may not be landline), Internet communication and TV.
In Romania two companies are doing it, Romtelecom (Cosmote - mobile, Dolce - TV and ClickNet - Internet) and RCS/RDS (DigiMobil as mobile operator).
Now Orange has locked hands and offers with UPC to provide a combo deal where you get fixed phone and cable TV + Internet from UPC and a mobile subscription from Orange. Richard Moatt (CEO Orange) says in an interview for ZF that they are thus 'prospecting quad play' but they do not intend to get into TV too soon (Orange already has mobile, Internet and fixed in Ro).
What I find interesting is that quad or triple was initially considered because it was a cheap way to get more money by aggregating distribution and promotion costs - because you had one medium - say cable - and you used it to provide landline phone, Internet and TV. In addition, you also maximized admin costs - one network, one team of engineers. Now, if you invest in cable for your Internet but provide 3G mobile it seems to me that the optimization objective is somehow defeated.
Can someone explain why quad play is so important that you'd sacrifice your overheads and invest in additional technology (which ostensibly will increase your costs and thus your price and thus reduce revenue) and, in this particular case, also make a partnership with a highly criticized operator like UPC?

2 comments:

Anonymous said...

:) The main idea with this double, triple, quad or n-play is not exactly related to the aggregation of distribution or to promotion costs. The admin costs of the network may be reduced, but the complexity grows so high as the engineers will really have big issues in their work (mobile telephony engineers don't usually know shit about Internet services or cable TV and the other way as well). The trick with this n-play is more about keeping the customer prisoner and about retention. If somebody subscribes to n-play service, his once signed contract will cover all the services and the probability to move to competition for the sake of a better deal for one service is low. Also his contacts with the competition will be lower (one bill, one self service web site, one customer service, one sales rep or store etc.). As this kind of services (mobile and fixed telephony, Internet access, cable and satellite TV) are getting more and more commoditized, the only chance for the operators is to try to increase ARPU (average revenue per user) by offering more services and to keep customers in their garden with integrated offers. The innovation in this area is low, new services are far away from raising the level of interest, either the margins that, for example mobile telephony was providing some 5 years ago. Other source of pressure: if you don’t do it, your competition will and you can not stay out of this game! G

Bogdana said...

:-) some valid points in your argument although I think that if the offer is bad no one will take it for the sake of comfort. I mean one invoice is okay but not if it's bigger than more invoices put together. To my mind it's the same thinking as behind bank product bundles: more products from the same bank at a better price than if you got them all from different banks. And currently in Romania people are still after the best deal rather than paying an extra buck but being more comfy with one provider. Interesting discussion though :-)