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Consumer Communication Services Share of Wallet Analysis 2015

  • February 2015
  • -
  • Frost & Sullivan
  • -
  • 17 pages

Executive Summary

Stratecast conducts annual surveys to gauge consumer preferences for communication services. One consequence of doing so is that Stratecast can assess the way in which consumers prefer to spend their communications dollars. This year’s survey, conducted in the fourth quarter of 2014, provides some profound insights into the future of consumer communication service offerings. In particular, while spending is up over 2013 in unadjusted terms, the overall trend is flat for the last five years tracked. In fact, when spending is corrected for inflation, residential communication services spending is down over % from 2009.

Why is this?

In part, consumer spending reflects the commoditization of communication services. As competitive pressure increases in the market from non-traditional sources, such as over-the-top (OTT) service offerings, traditional spending has been constrained. After all, consumers will shop for the best deal; when an OTT service is essentially priced at zero incremental cost, there is a strong temptation to utilize it, rather than a service offering from a network operator.
Additionally, consumption habits are changing. While a previous generation might spend most of its recreation time surfing broadcast television channels, current generations will surf the Internet. And the younger generations tend to look for more abbreviated entertainment, where simply viewing the most exciting parts of a film or a TV show on YouTube is preferred over watching the entire performance over a cable connection, or even an OTT streaming video feed.

The move to data, and the increasing commoditization of the consumer wallet, demand that operators deliver OTT integrated service packages that are complete and include wireless access. Certainly, players like Google are already moving to do so.

Introduction

A Stratecast client, whose focus is on enterprise technology, asked recently if the only virtue of 4G LTE is a higher data rate. The question is a natural one, given the marketing of major carriers, whose messaging typically emphasizes speed when talking about 4G wireless. Yet, the primary virtue of LTE is not its speed, but the kind of communication path it represents. LTE is an end-to-end Internet Protocol (IP) connection. Consequently, services delivered over LTE are software-based, and are easily delivered over landline broadband connections as well. What LTE means, then, is that the Internet is now mobile.

Why is this important from a consumer spending perspective? The ability to deliver a set of communication services over a connection that looks virtually the same regardless of delivery media (wired or wireless) means that consumers can acquire very capable service packages that are accessible both at home and on the move. And since many of these services are advertising-based and very low cost to the consumer, they are putting pressure on more traditional operator service offerings.
This report provides telemetry on consumer spending for communication services (the consumer wallet), and explores the dynamics that are moving to change both the nature as well as the size of that wallet.

The message is clear; consumer spending is not keeping up with inflation, and, in fact, is declining on an inflation-adjusted basis. As this report discloses, this is both a function of the migration of services to a data-centric environment and the change of consumer utilization of communication services. While the message may seem dire, market opportunities for network operators are present.
This report will be of interest to both the traditional network operator community as well as the emerging OTT community.

Table Of Contents

Consumer Communication Services Share of Wallet Analysis 2015
Executive Summary 4
Introduction 5
Consumer Spending Dynamics 6
Spending Trends 9
Commoditization of the Wallet 11
The Switch to Data 12
Operator Strategy 14
The Last Word 16

List of Exhibits

Exhibit 1: Monthly Voice Service Spending (North America 2014) 6
Exhibit 2: Monthly Video Subscription Spending (North America 2014) 7
Exhibit 3: Monthly Broadband Internet Access Spending (North America 2014) 7
Exhibit 4: Monthly Wireless Spending (North American 2014) 8
Exhibit 5: Importance of Communication Services (North America 2014) 9
Exhibit 6: North American Consumer Services Total Wallet (2009-2014) 10
Exhibit 7: North American Consumer Services Wallet Adjusted for Inflation (2009 Base) 10
Exhibit 8: Bundled Service Uptake (North America 2014) 11
Exhibit 9: North America Streaming TV Usage (2014) 12
Exhibit 10: North American Online Video Usage (2014) 13
Exhibit 11: Trends in Video and Internet Subscriptions (North America 2007-2018) 14

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