This is the first in a series of blog posts regarding the evolution of broadband over the past 20 years. I’ve been involved with broadband networks since the beginning – when ISDN was considered broadband and when Bell Atlantic trialed the first DSL networks in 1992.
If I were to ask anyone on the street what broadband means to them – they will most likely talk about streaming services. And while this service is currently a driver for broadband adoption – it certainly was not the first.
The Past: Video on Demand
In the early 1990s, the driver for the deployment of broadband access technologies was Video on Demand (VOD) and interactive services – not Internet access. Telcos wanted to expand their service menu by adding video to their service menu, while Cable MSOs wanted to expand their video services with more Pay-Per-Use applications.
Using intelligent set-top boxes, the vision was for subscribers to participate in interactive services such as home shopping, games and videos. Time Warner was the best-known operator to attempt interactive television – with its high-profile Full-Service Network in Orlando, FL – touting 500 channels. While Telco’s such as Bell Atlantic trialed VOD over DSL.
Neither was successful. DSL did not offer sufficient bandwidth to support VOD services, while cable operators learned that consumers were not that excited about interacting with their TV and 500 channels was too much to muddle through with much of the content not attractive enough to command sufficient advertising revenue.
And so, the focus shifted to offering a higher speed access path to the Internet - considering at this time the main option to access online services was dial-up (hello AOL!).
Enter the Bundle
Bundling services was not a new concept. Telcos already offered different voice bundles, while cable offered different video bundles. By 1997, the both added data to the mix.
And the battle for the Triple-Play began.
For cable operators, the attraction to add voice services was too much to pass up, while Telcos continued down a video path.
Why Bundle? Bundling offered many advantages:
Competitive tactic
Ability to differentiate product offerings
More services at lower combined prices
Increase Average Revenue per User (APRU)
Incremental Penetration of Services (Telcos offering video service are seeing 20-30% penetration within 2 years)
Reduce customer churn (Cox experienced a 50% reduction in churn from triple play customers)
Operational Efficiencies
Full service, value-added service provider
I referred to this as CPR for service providers (Customers, Profit, Retention). Sadly, my acronym did not catch on.
From a customer perspective, the bundle of services offered the following:
One Stop Shop (Single bill, single provider, single point of contact for Customer service)
Savings (Discounts – the more you buy, the more you save)
Choice (Customer builds package that best fits their needs)
In short, the bundle offered customers Convenience and Value
After bundling, operators shifted their focus towards "blending" service packages. This allowed them to add value to strengthen their customer relationship by adding more value to their existing services, while giving the customer the feeling of personalization.
Enter the Disruptors
Broadband technology opened the door to new entrants. Not necessarily new network operators, but definitely new service providers. These include Vonage and Skype – who forever changed the voice model; Netflix, Hulu and other OTT video streaming services – which completely changed the dynamics of video consumption; and every social media site has impacted how consumers share information and the type of information they share as well as customer care.
While traditional service providers (both Telco & Cable) continued to charge (and make) high fees for their bundles - new competitive entrants to the market - such as Free in France, Fastweb in Italy, Google Fiber in the US, Talk Talk in the UK, and Softbank in Japan forced change in pricing models, service offerings and even the infrastructure plans of incumbent operators.
The U.S. would not be where it is with Fiber to the Home if Google Fiber had not jumped into the waters. Yes, Verizon was an early adopter, but it wasn't until Google Fiber threatened the markets of other operators (AT&T) that the real volume began to take shape.
And let's not overlook mobile broadband and the one device that completely changed everything: The iPhone. This was the beginning of smart devices and smart services that only
needed a broadband connection to work.
As such, broadband began to evolve.
Basic to Full Service
Impersonal to Personal
“Nice to Have” to “Must-Have”
Broadband Becomes Integral to Lifestyle
Any Service, Any Screen, Anywhere!
High Speed Internet Access Becomes the Most Valuable Service
With mobile phones, customers dropped their voice services. With streaming video, customers dropped their video services, leaving high-speed Internet access (almost universally referred to as broadband) as the service customers were willing to continue to pay for.
In the U.S. - Telco TV (IPTV) reached its peak in 2014 and has steadily declined since, while voice services continue to evaporate. For Cable Operators, there are 35 million more cable broadband subscribers than cable TV subscribers while voice also declines.
And while the bundle of voice, video and data still exists - broadband is the foundation for any and all services - with operator attention focused on making the broadband experience more positive by offering faster and faster speeds, better Quality of Services and value-added options such as whole home and Managed WiFi.
Going forward operators will likely focus on offering a "package" such as remote worker, gaming, remote school, etc to match products and services to optimize the experience for the end user.
I can look back at presentations I gave from 2005-2010, discussing all the ways that operators could leverage their broadband networks to provide added value to the customer and one thing stood out - not one incumbent operator was a leader or a visionary with respect to broadband. They were all followers, reacting to the market around them rather than setting the direction of the market.
I am not sure I would consider myself a visionary, but I did outline the following message to operators in 2006:
Broadband infrastructure must become core to network
Utilize broadband infrastructure for network transformation
Unleash the power of broadband through new services that are simple to use, compelling and good value
Enable device and service cross functionality
It has taken some time, but many of these goals are being achieved. Broadband is not a service, but a key foundational technology from which all services now emerge.