Telecom Carriers Resort to Bundling Due to Alarming Drops in Prices

Telecom Carriers Resort to Bundling Due to Alarming Drops in Prices

Telecom carriers have been involved in aggressive price wars due to intense competition in the communications market. The prices of most services have fallen by 10 percent every year even while their adoption increased by around 15 percent. This makes it difficult to create a defendable and profitable niche within the market because dozens of competitors can deliver the same service. Telecom carriers see a way out of the situation with service bundling. Apart from reducing customer churn, it enables carriers to provide commoditized services at prices higher than the market value. Bundling can also help save costs in areas of bill statement creation, paper, printing, and postage.

This Frost & Sullivan research service provides an overview of and outlook for the U.S. communication service markets. It provides the prospects for various segments including wireless, local wireline, long distance, international long distance, cable and satellite TV, and burgeoning satellite radio. The study illustrates the analyses with graphs comparing revenue, subscribers, cell sites, and employee growth. Trends in market size and share are also included.

Wireless Steals the March over Wireline Services

The biggest trend in the communications market is the replacement of wireline with wireless services. In 2002, with the enabling of number portability, customers could keep original phone numbers even after transferring them to different carriers. When this scheme was announced, 800,000 wireline consumers switched to wireless numbers. With only 100 million consumer home phone lines, the wireline market is receding rapidly.

Wireless services can capitalize on e911 location-based capabilities to win over customers that are averse to mobile services because of safety concerns. Service providers can also make handsome profits by pursuing wireless Internet applications such as the hugely successful data-only broadband wireless. Although the revenue was threatened by price-based competition, the wireless segment has been able to stay profitable mainly because of economy of scale. While the average price per minute dropped from 43.9 cents to 10.3 cents, the minutes per user grew from 140 to 483.

Internet Services Become a Major Money Spinner for the Market

Internet services follow at the heels of wireless services in terms of growth. While it is not growing quite as rapidly as wireless in terms of new subscribers, broadband replacement of dial-up is causing Internet access revenue to increase faster than wireless’. This is because its prices are too low for the value proposition and most consumers would pay much more for Internet access. "Carriers should charge by speed to increase current pricing and competitors would be wise to compete on speed instead of price," notes the analyst.

Even though Internet services’ increase in subscriber numbers is not as impressive as its revenue contributions, it is not anything to be dismissed either. "At the end of 2003, about 21.2 percent of U.S. households with cable TV had subscribed to cable modem broadband Internet access - that is roughly 16.1 million users," says the analyst. The Internet is expected to penetrate more than 85 percent of households in the United States in 2010 at million homes a year, and thereby, generate huge revenue for the communications market.

Telecom Carriers Resort to Bundling Due to Alarming Drops in Prices

Telecom carriers have been involved in aggressive price wars due to intense competition in the communications market. The prices of most services have fallen by 10 percent every year even while their adoption increased by around 15 percent. This makes it difficult to create a defendable and profitable niche within the market because dozens of competitors can deliver the same service. Telecom carriers see a way out of the situation with service bundling. Apart from reducing customer churn, it enables carriers to provide commoditized services at prices higher than the market value. Bundling can also help save costs in areas of bill statement creation, paper, printing, and postage.

This Frost & Sullivan

1. U.S. Communications Services Market Overview and Future Outlook
        1. Introduction to the U.S. Communication Services Market
                1. Title Slide
                2. Legal Disclaimer
                3. Table of Contents
                4. U.S. Communication Services Market Introduction
                5. Communication: Three Major Market Participant Types and Market Overlap
                6. Market Segmentation
                7. Telecom: Utilities in transformation to High Tech
                8. Communication Timeline
                9. Poor Investment Decisions in the 1990’s and Early 2000’s Reaps Dividends for
                    Consumers
        2. Overview of the U.S. Communcation Services Market
                1.  Overview of the U.S. Communication Services Market
                2.  Publicly Held Telecom and Cable Providers Focused on in this Study
                3.  U.S. Communications Market Size by type of Company 2003
                4.  Telecom Earnings for 2003:
                5.  Telecom Industry Retained Earnings for Select Companies 2003
                6.  Revenue Per Employee for Telecom Firms
                7.  Revenue per Employee for Cable and Satellite Firms
                8.  U.S. Communications Market Overview 2003 Revenue by Market Segment
                9.  Overall Cable and Satellite Market Share by Revenue
                10. Telecom Market share by Overall Revenue for 2003
                11. Communications Industry Percent of Revenue Spent on Cap Ex by Segment and Year
                12. Telecom Industry Cap Ex Spending 1998-2002
                13. Leading Network Equipment Vendors Wireless Networking Revenue 2003
                14. Cingular Wireless Cap Ex Case Study
                15. Cingular Cap Ex Projections for Cap Ex Case Study
                16. Pension Funds and Stock Options a Huge Potential Problem for Telecom Firms
                17. Is Technology the Remedy for Low Communications Industry Profits?
                18. Bundling: From Panacea to Placebo
                19. Bundling 2: Commercial Airlines and Telecom; Bundling and Frequent Flier
                     Programs
                20. Bundling 3: Conclusions on Bundling
        3. Wireless Telecommuncations
                1.  Wireless Communications Market
                2.  Wireless Communications Market Overview
                3.  Wireless Communications Market Growth Drivers & Restraints
                4.  Wireless Communications Market Size & Share for Mid Year 2003 by Subscriber
                5.  Annual Subscriber Growth Rates for Top Carriers 2001-2003.5
                6.  Market Share Gain or Loss for Top Wireless Carriers from 2001-2003.5
                7.  Wireless Industry Growth is Slowing; Moderate Growth Period Approaches
                8.  Wireless Market Exponential Growth is Slowing; Moderate Growth Period
                     Approaches
                9.  Cell Sites Have Kept Pace with Subscriber Growth Improving Call Quality
                10. Not all Growth is Good; Wireless ARPU; Minutes; and Effect on Price 1993-2003
                11. Not all Growth is Good: Subscriber growth plus Average Price declines; plus
                     Average minutes per Subscriber; equals hyper growth in network usage
                12. How has the Wireless Industry Stayed ahead of Rapid Price Erosion? Economies
                     of Scale
                13. Wireless Communications Market Forecasts 2004-2010 for Revenue; Subscribers;and ARPU
                14. Wireless Communication Market Forecast 2004-2010 for Subscribers; Population;
                     and Market Penetration
                15. Wireless Market Strategies
        4. Cable and Satellite Television Market
                1.  Cable & Satellite Television and Burgeoning Premium Radio Market
                2.  Cable & Satellite Television Market Size and Overview
                3.  Cable & Satellite Television Market Size & Share Overview 2
                4.  Growth Drivers & Restraints
                5.  Market Share for Cable & Satellite Providers; 2003
                6.  Cable & Satellite Market Size by activity; 2003
                7.  Satellite Radio
                8.  Premium Radio Key Drivers
                9.  Key Statistics shed light on Potential of Satellite Radio Market
                10. Key trend Cable providers attempt to increase content access: Case Study
                     Comcast and Disney
                11. Cable & Satellite Market Forecast for Revenue Subscribers and ARPUs;
                     2004-2010
                12. Overall Cable and Satellite Market Strategies
        5. Wireline Internet Service Market
                1.  Wireline Internet Service Market Consumer and Small Business only
                2.  Wireline Internet Service Market Overview
                3.  Wireline Internet Service Market Growth Drivers & Restraints
                4.  Wireline Internet Service Market Share by Subs
                5.  Wireline Internet Market Share by Revenue
                6.  U.S. Internet Subscribers by type; 1999-2003
                7.  Average Monthly Price for type of Internet Service
                8.  Wireline Internet Service Market Forecasts
                9.  Internet Service Provider Revenue Forecast
                10. Wireline Internet Service Market Strategies
        6. Wireline Telecommuncations
                1.  Wireline Telecommunications
                2.  Wireline Telecommunications Market Overview
                3.  Wireline Voice Communications; Local; Long; and International
                4.  Wireline Telecommunications Market Growth Drivers & Restraints
                5.  Local Wireline Market Share by type
                6.  Local Wireline Revenue and Lines along with average price consumer and
                     combined for 1999-2003
                7.  Local Wireline Market Size by type
                8.  Local Wireline Service Market Share by Subs 2002
                9.  Local Revenues by type of Carrier 1999-2002
                10. Long Distance International and Domestic Price Erosion 1991-2003
                11. U.S. Wireline Long Distance Revenue Domestic and International; 1987-2002 and
                     Percent International
                12. Long Distance Market Share 2000-2002
                13. U.S. International Long Distance; Minutes; Average Price; and Revenue;
                     1980-2002
                14. International Calls by Country and World Region
                15. U.S. International Long Distance; Minutes; Average Price; and Revenue Growth
                     rates for time period; 1980-2002
                16. U.S. International Calls; Average Duration; Price; and Price per Minute
                     1980-2002
                17. U.S. International Long Distance Revenue by Carrier for 2002
                18. Wireline Telecommunications Market Forecast
                19. Wireline Telecommunications Market Strategies
        7. End User Analysis
                1. End User Analysis
                2. U.S. Average Monthly Household Spending on Communications Services
                3. Communication Penetration Rates; 2004-2010
                4. Wireless Replacement of Wireline
                5. Phone Number Portability
                6. ARPUs
                7. U.S. Household Telephone Access Penetration Peaked in 2002
                8. Subscribers for Internet access; Wireline local; Wireless; and Cable &
                    Satellite TV
        8. Conclusions; Strategies; and Awards
                1.  Overall Conclusions; Strategies; and Market Forecasts
                2.  Total U.S. Communications Market Forecast by Vertical
                3.  Vertical Market Forecast and Annual Growth Rates Throughout Time Series
                4.  Total U.S. Communications Market Forecast by Vertical Including Wireline
                     Segmentation
                5.  Vertical Market Revenue Forecast along with Annual Percent Change in Revenue
                6.  2010 Projected Market Share by Segment
                7.  U.S. Communications Market Segment Share Change in Vertical 2004-2010
                8.  Key Advantages: Internet Service Providers
                9.  Key Disadvantages: Internet Service Providers
                10. Key Advantages: Wireless
                11. Key Disadvantages: Wireless
                12. Key Advantages: Cable & Satellite
                13. Key Disadvantages: Cable & Satellite
                14. Key Advantages: Wireline
                15. Key Disadvantages: Wireline
                16. Overall Industry Trends and Outlook
                17. Awards

• Communication: Three Major Market Participant Types and Market Overlap
• Communication Timeline
• U.S. Communications Market Size by Type of Company 2003
• Telecom Earnings for 2003
• Telecom Industry Retained Earnings for Select Companies 2003
• Revenue Per Employee for Telecom Firms
• Revenue Per Employee for Cable and Satellite Firms
• U.S. Communications Market Overview 2003 Revenue by Market Segment
• Overall Cable and Satellite Market Share by Revenue
• Telecom Market Share by Overall Revenue for 2003
• Communications Industry Percent of Revenue Spent on Cap Ex by Segment and Year
• Telecom Industry Cap Ex Spending 1998-2002
• Leading Network Equipment Vendors Wireless Networking Revenue 2003
• Cingular Cap Ex Projections for Cap Ex Case Study
• Wireless Communications Market Growth Drivers & Restraints
• Wireless Communications Market Size & Share for Mid Year 2004 by Subscriber
• Annual Subscriber Growth Rates for Top Carriers 2001-Q2 2004
• Market Share Gain or Loss for Top Wireless Carriers from 2001-Q2 2004
• Wireless Industry Growth is Slowing, Moderate Growth Period Approaches
• Wireless Market Exponential Growth is Slowing, Moderate Growth Period Approaches
• Cell Sites Have Kept Pace with Subscriber Growth Improving Call Quality
• Not all Growth is Good, Wireless ARPU, Minutes, and Effect on Price 1993-2003
• Not all Growth is Good: Subscriber Growth Plus Average Price Declines, Plus Average Minutes per Subscriber, Equals Hyper Growth in Network Usage
• How Has the Wireless Industry Stayed Ahead of Rapid Price Erosion? Economies of Scale
• Wireless Communications Market Forecasts 2004-2010 for Revenue Subscribers, and ARPU
• Wireless Communication Market Forecast 2004-2010 for Subscribers, Population and Market Penetration
• Market Share for Cable & Satellite Providers, 2003
• Cable & Satellite Market Size by activity, 2003
• Cable & Satellite Market Forecast for Revenue Subscribers and ARPUs, 2004-2010
• Wireline Internet Service Market Share by Subs
• Wireline Internet Market Share by Revenue
• U.S. Internet Subscribers by Type, 1999-2003
• Average Monthly Price for Type of Internet Service
• Wireline Internet Service Market Forecasts
• Internet Service Provider Revenue Forecast
• Local Wireline Market Share by Type
• Local Wireline Revenue and Lines along with Average Price Consumer and Combined for 1999-2003
• Local Wireline Market Size by Type
• Local Wireline Service Market Share by Subs 2002
• Local Revenues by Type of Carrier 1999-2002
• Long Distance International and Domestic Price Erosion 1991-2003
• U.S. Wireline Long Distance Revenue Domestic and International, 1987-2002 and Percent International
• Long Distance Market Share 2000-2002
• International Calls by Country and World Region
• U.S. International Long Distance, Minutes, Average Price, and Revenue, 1980-2002
• U.S. International Long Distance, Minutes, Average Price, and Revenue Growth Rates, 1980-2002
• U.S. International Calls, Average Duration, Price, and Price Per Minute 1980-2002
• U.S. International Long Distance Revenue by Carrier for 2002
• Wireline Telecommunications Market Forecast
• U.S. Average Monthly Household Spending on Communications Services
• Communication Penetration Rates, 2004-2010
• Wireless Replacement of Wireline
• ARPUs
• Phone Number Portability
• U.S. Household Telephone Access Penetration Peaked in 2002
• Subscribers for Internet Access, Wireline Local, Wireless, and Cable & Satellite TV
• Total U.S. Communications Market Forecast by Vertical
• Vertical Market Forecast and Compound Annual Growth Rates Throughout Time Series
• Total U.S. Communications Market Forecast by Vertical Including Wireline Segmentation
• Vertical Market Revenue Forecast along with Annual Percent Change in Revenue
• 2010 Projected Market Share by Segment
• U.S. Communications Market Segment Share Change in Vertical 2004-2010