BT Hopes Quad Play Will Slow Voice Line Erosion

April 01, 2014
By: Gary Kim

BT (News - Alert) hopes the creation of a new quadruple play offer including Long Term Evolution mobile services, fixed network voice, video entertainment, and high speed access will boost revenue per account and slow fixed network voice line churn rates.

About 60 percent of U.K. consumers buy a bundle of some sort, often the two-product bundle of fixed network voice and high speed access, according to Ofcom, the U.K. communications regulator. Some 27 percent of U.K. households buying a bundle purchase the voice-plus-broadband package.

About 21 percent buy a triple play package including video entertainment as well as voice and high speed access.

Just three percent buy a quad play package, and those customers largely are Virgin Media (Liberty Global (News - Alert)) customers, it appears. And that is the attraction for BT. Very low adoption of quad play packages suggests most of the market still is available.

Between 2008 and 2012, fixed network call volumes have fallen 27 percent, according to Ofcom, with no real expectation the decline can be arrested. In fact, even mobile call volumes dipped in 2011 and 2012 as well.

In fact, it might be that 2010 was the peak year for mobile minutes of use, as 2000 was the peak year for U.S. access lines in service.

By some estimates, usage of fixed network voice has fallen as much as 50 percent in just the last six years, and might dip as much as 66 percent by 2020, representing a revenue loss of perhaps £600 million, according to the Financial Times.

If the quad play slows erosion of fixed lines, BT preserves some revenue it otherwise would have lost and gains additional time to grow the value of substitute businesses.

According to Chris Adams, Ofcom Head of Market Intelligence for Telecoms and Networks, the story for U.K. telecom includes declining revenues, lower call volume and fewer fixed lines in service.

Total telecom revenue fell 1.8 percent in 2012, for example. But that has been the trend since at least 2007.

Also, the cost of a mobile-originated call now is lower than the cost of a fixed network originated call, which will drive more traffic to mobile, and off the fixed network.

Overall, the move to quad play offers is simple enough: if BT is going to have fewer customers, it has to sell more products to a smaller base of users.

Edited by Cassandra Tucker