The stage is set for 2015 to be a chaotic year of rapidly shifting landscapes for the telecommunication industry. While nobody can predict with absolute certainty what the future will bring, here is a rundown of some of the more likely scenarios:
What do Comcast, Xfinity, TWC, Charter, Greatlands, AT&T, U-Verse, DirecTV, Cricket, T-Mobile, MetroPCS, Verizon, Vodafone, Iusacell, Sprint and SoftBank have in common? All of these brands have recently been—or will be—involved in major merger/acquisitions this year. Currently, all signs are pointing toward the approval of two mega-mergers that are awaiting regulatory approval. Comcast will purchase Time Warner Cable and AT&T will purchase DirecTV. These mergers will likely lead to an increased focus on creative bundling of services.
Merger madness means that well-known brand names will struggle to maintain their equity, as customers struggle to figure out who owns whom and what each brand represents. This not good news for telecom, for as I have pointed out in previous posts, confusion and customer dissatisfaction are the likely result of mergers (read Merger Mania), compounding the problems in an industry already struggling with consumer trust (read To Trust or Not to Trust).
The price wars of 2014 look like they will only get fiercer in 2015. In the first week of 2015, AT&T launched its “Rollover Data” whereby unused data can rollover to the following month. This follows T-Mobile’s introduction of its “Data Stash” feature only three weeks earlier. It appears that every pricing move is quickly met with a competing response within a matter of days or weeks. These constant pricing changes lead customers to be more likely to churn due to competitive lure. I expect this ultra-aggressive pricing will not only continue in wireless but will also spread to TV and high-speed internet.
The good news is that customers are getting some of the best telecommunications deals in history. The bad news is that all of this is really starting to impact the telecom carriers’ bottom lines.
The end of 2014 introduced customers to new ways to get their favorite television channels without subscribing to traditional cable or satellite service. Many customers have cut the cord, in favor of Netflix, Hulu, Roku, Apple TV and YouTube. In 2015, these cord-cutters will have even more choices, with streaming no-contract options from HBO, Showtime, Sony, CBS and even Dish, which just announced a new $20 service for streaming ESPN, TNT, TBS, the Food Network, HGTV, the Travel Channel, CNN and ABC Family.
As these new over-the-top offerings become more mainstream, cable and satellite providers will need to convince their customers why old-fashioned pay TV still makes sense. Undoubtedly, competition will heat up as a result. Content providers and cable/satellite operators will need to rethink their business models, just as has been happening in the wireless arena for the past 18 months.
Internet of Things (IoT)
If CES 2015 is any indication, the IoT might finally hit its stride this year. The biggest news is that the connected car is finally here, and the connected home is right around the corner. While both of these have been trying to break through to the average consumer, 2015 is likely the year where it all comes together and the consumer starts to understand how this can be a reality. For an interesting point of view on the security realities of the IoT, read Paul Hartley’s recent post, Rise of the Machines.
Obviously, connected cars and connected homes are dependent on robust and reliable connections. These connections (both LTE and WiFi) are bound to be the life-blood for telecommunications carriers in 2015 and beyond. The big question will be whether these carriers can successfully make the shift to content providers, or if they will be relegated to dumb pipes that simply provide behind-the-scenes connectivity for other companies’ cool connected concoctions.
Market Research Implications
Telecommunications providers are facing the reality that their world is changing rapidly. These changes can lead to great opportunities or to a slow march to extinction. Providers would be well advised to accept these changes and rethink their competitive landscapes.
Now is the time to embrace and expand your market research plan. Understanding these new realities is critical to successfully navigating this new world and determining where the provocative opportunities lie. Brands that embrace the new world will be tomorrow’s heroes; and those that do not are destined to become irrelevant.
Let Market Strategies help ready your organization for the new world of telecom. Email me or comment on this post, and let’s get prepared for 2015 and beyond.