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Retail Packaging of Video, Broadband Can Halt Voice Erosion

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August 20, 2012

Retail Packaging of Video, Broadband Can Halt Voice Erosion


The large mobile service providers are not without significant persuasive tools where it comes to inducing customers to buy important new service plans that protect legacy voice and messaging revenues while tying mobile bandwidth consumption to retail prices.


One of those tools is use of Apple's FaceTime (News - Alert) video calling feature. AT&T has announced it will limit how iPhone users can use FaceTime over AT&T's 3G and 4G networks when Apple's new iOS 6 software launches.

Users will not be able to use FaceTime over 3G or 4G unless they sign up for one of AT&T's new shared data plans. Users with an individual data plan will only be able to use FaceTime over Wi-Fi.

One suspects both Verizon and AT&T (News - Alert) will have to do much more before usage of the new plans really becomes the norm. Right now the actual savings for switching to the new shared data plans are fairly subtle, and therefore not so compelling.

More value will be needed, ultimately, and that probably will include a much clearer value-price relationship. Right now, a rational consumer would be hard pressed to identify significant savings or clear additional value.

But the point is that large service providers have formidable tools to change the ways they package their retail services to protect legacy revenue streams.

The latest report on U.S. fixed network voice connections by the Federal Communications Commission suggests that voice connections declined three percent between June 2010 and June 2011. That raises an obvious question: will number of fixed voice connections continue to drop, without end, to zero?

That seems highly improbable. There would seem to be some good reasons for predicting a perpetual demand for fixed voice connections, not the least of which is that voice quality likely always will be higher, and more consistent, on fixed connections, compared to mobile or forms of VoIP that do not use managed connections.

But that isn’t the only reason. Much might hinge on how voice services are packaged and priced.

In principle, service providers can package fixed network voice service in ways that impose little incremental cost over not buying the service, or in fact tie the purchase of another network service to the voice service.

That is not to discount the “add value” approaches, but simply to note that the easiest path forward is simply to make fixed voice service so affordable there is no reason to drop it.

Under the new Verizon (News - Alert) Wireless “Share Everything” pricing scheme, for example, though users can still use over the top messaging and voice, there is no financial incentive to do so, at least for domestic calling.

At some point, other fixed network providers will probably reach the same conclusion, and package “broadband access” with voice features in ways that make paying for fixed network voice a reasonable and preferable option. You might argue that Charter Communications and Verizon’s landline business have already moved in that direction.

Charter is going to stop selling voice subscriptions as a discrete product, and will in the future only sell voice in conjunction with at least one other service – either entertainment video or broadband access.

Verizon, for its part, also requires bundling of a voice line with DSL. Charter is adopting similar policies.

"Going forward, we will not offer Charter Phone as a standalone product," a Charter spokesman apparently has confirmed.

In principle, the bundling is akin to the ways consumers buy many other products. When you buy a PC, a tablet, a smartphone, an iPod or an automobile, you get a battery as part of the device. Both Charter and Verizon Wireless (News - Alert) are now making “voice” part of a product bundle – a feature, essentially.

If, as some of us suspect, voice and messaging eventually become features of a network access service, the number of voice “lines” in service will stop falling, in line with either the number of broadband access or video entertainment accounts in service.

Some will object to bundling of messaging or voice calling as part of a video, broadband or other service, including in AT&T’s case unlimited use of Apple’s (News - Alert) Face Time app. But the point is that larger service providers have significant resources when it comes to packaging policies that halt the erosion of voice landline accounts.


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Edited by Braden Becker


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