Triple play services are dead: What’s next?
This race to the bottom results from the fact that many service providers are still constrained by a traditional triple play model.
The pressure on service providers to grow revenue, margins, and shareholder value is at an all-time high. In countries such as Australia, where the federal government assumes the role of a national Layer 2 wholesale network, there are over 140 registered service providers (RSPs) in the market, all of which are battling it out for a share of broadband revenue.
Even though these RSPs have access to the same wholesale input supply costs for the Layer 2 access network, many of these companies are still grappling with the challenges of acquiring more customers and maintaining sustainable margins across their customer base. With innovations in the broadband technology space now able to deliver capacities above what most customers can consume, a business model rethink may be required.
So how are service providers dealing with the challenges of growing revenues and improving margins across their broadband consumer base, given that broadband commoditization is occurring across the globe?
Before addressing this question, let’s take a moment to reflect on where we are today — here in my backyard of Australia!
Since the first deployments by the national broadband network (NBN) in 2011 right up until today, we continue to see the robust debate around the NBN, and its wholesale input cost models, with many of the service providers in the region attributing their margin squeeze squarely to the NBN wholesale input costs alone. However, if we start peeling back the layers and analyze the root cause of this margin squeeze, we quickly realize that our industry has actively been engaged in a race to the bottom on price in an effort to try and attract consumers to the respective RSP's services.
This race to the bottom results from the fact that many service providers are still constrained by a traditional triple play bundle model. With the diminishing returns of traditional voice and video revenue, many service providers are left with nothing more than a single play broadband offering predicated on purely broadband speed and pricing when trying to differentiate themselves from their competitors.
For much of the market, one must argue that it does not matter what the NBN wholesale input cost is to your broadband today. The result, over time, will always be that service providers will undoubtedly lead with broadband price as their value proposition. As a result, this will drive broadband service pricing to the bottom.
While this may be great from a consumer perspective, this is not so great nor sustainable long-term to competition and the viability of many service provider business models. Margin squeeze is further compounded by the erosion of traditional revenue streams such as voice and video to tech companies founded on cloud-managed solutions with global scale like Meta, Amazon, Netflix, Microsoft, and Zoom.
These traditional revenue streams have been the bedrock that has helped these internet service providers grow and thrive over the last decade.
How does our industry evolve so service providers don’t become the next Blockbuster or Sanity music store? What’s next, and how are service providers across the globe dealing with the broadband commoditization problem?
Well, what we are seeing emerge in mature markets like North America and the United Kingdom, is the emergence of a new bundle. That bundle is in-home managed Wi-Fi services for consumers. This is a lifeline for service providers who are now taking on the big tech companies as they have never been able to do before.
The driver around this new bundle has spawned from the perfect storm that has culminated from four main drivers:
- Unprecedented demand for increasing broadband service rates
- An explosion in Wi-Fi-connected devices in the home, a household average of 21 devices, which are all fighting for congested airtime
- The continued rise of data-hungry streaming applications thanks to the over-the-top companies
- And finally, a large population working from home, resulting in a steep jump up in consumer service level expectations for their residential-grade home internet services and Wi-Fi
Managed Wi-Fi companies such as Plume, who have taken the market by storm, are capitalizing on this new evolution. Plume developed one of the world’s first residential cloud-managed Wi-Fi platforms specifically designed and targeted toward the service provider community.
These cloud-managed service platforms are transforming telco markets around the globe by enabling service providers to move the conversation away from just being a broadband pricing discussion to one that involves feature-rich, value-added services for consumers in their homes and businesses. Not only that but these services can now be fully managed and supported by the service provider. We have evolved from a world where the in-home environment was once seen as the Bermuda triangle. Now there is a new and exciting world where the service provider can monetize services by using open, standardized technology that delivers the tools and automation to enable them to guarantee Wi-Fi network and consumer application performance.
Over the last 18 months, we have seen over 150 service providers around the globe adopt these “in-home” cloud-managed services. We now have market offers that enable ARPU growth, OPEX savings, a reduction in customer churn, and game-changing customer experience NPS (net promoter score) levels.
So, what are some of the new cool and exciting features offered through these cloud-managed platforms?
Given the advancement in artificial intelligence (AI) and machine learning algorithms, solutions are now in place that automate the management of the in-home Wi-Fi environment, delivering flawless Wi-Fi performance that optimizes the user’s experience in homes and businesses. Using a databank across nearly 1 billion consumer devices, where device fingerprinting is used to classify Wi-Fi utilization needs, these solutions can now control Wi-Fi channel bandwidth and perform network slicing to ensure Wi-Fi resources are efficiently utilized across all connected devices.
We are also seeing the emergence of access control and intelligent security services that give household and business users the ability to quarantine the internet at an individual level or a device level, all at the click of a button. Intelligent security capabilities are being offered to give consumers peace of mind against cyber security threats without the need to manage expensive and complex firewall applications loaded on individual IT devices.
Another exciting application relates to the home security, assisted living, and healthcare needs of families everywhere. These solutions offer motion detection capabilities that utilize the existing in-home Wi-Fi devices to monitor and analyze the interference profiles of the 2.4GHz, 5GHz, and 6GHz bands to trigger alarms. These alarms notify users of either unexpected motion on-premises or, in the case of the health and wellbeing of loved ones, send alarms when there is a lack of motion detected at a premises such as a nursing home or grandma's house.
One of the most significant shifts cloud-managed solutions bring to the table is the least visual.
The predictive capabilities of cloud-managed solutions are automating the fault scenarios. This enables fault resolution and isolation techniques to take place without the need for human intervention and often without the consumer even knowing that a problem has been present. This is possible through cloud-based AI and machine learning innovations that these self-healing solutions bring to the table.
If you put yourself in the consumer’s shoes, how wonderful would it be if your broadband just worked, and when it did not, you no longer need to spend hours on the phone with your service provider? This new play enables the service provider to notify you before you call them, which is truly transformational in terms of customer experience.
And finally, one of the most powerful advantages of these cloud-managed services is the ease of turning up a new application or service. Gone are the days when service providers need to spend months or years working with different customer premises equipment vendors to develop and add additional firmware or software agents onto home gateways. How can this be possible?
Stay tuned for my next blog, where I will provide an overview of the technology, take you through the inner workings of OpenSync, and spill the secret sauce to enabling communication service providers to take on tech giants with their AI-driven, cloud-managed Wi-Fi platforms.