Triple play and the DSL imperative

The “triple play” of voice, video, and data services has long been an object of desire for telcos, but it has always remained just out of reach. A number of small, independent telcos operate as video providers today, primarily in rural and small-town markets, but the major operators, despite various attempts to enter the video business and complete the triple play, have so far found success frustratingly elusive.

That is about to change, for two basic reasons. First, the technology to enable triple play over carrier infrastructure is now ready for deployment. Second, local telcos have no choice but to become triple-play providers. Voice revenues are diminishing as competition from wireless operators, local telco competitors, and even cable operators intensifies. Best-effort data services have quickly become commoditized and today generate only cash, not profits. Partnerships with satellite video operators do give telcos a path of entry into video services, but they don’t offer any way to leverage existing infrastructure, nor enter the more lucrative interactive video services markets.

I had a meeting last month with the Chief Strategy Officer of one of the biggest European Triple players, who asked us: Is there a choice for a mobile operator of competing in the triple play broadband market without own infrastructure? Not easy to answer. Here’s the rationale that will tell you what we think:

1. Triple play is no longer just a revenue enhancer, but a must for long-term survival; telcos must devise a video strategy in the coming year. The ability of cable operators to quickly add voice to their service mix is a major threat to local telcos. With competition for core voice services coming from multiple fronts, telcos already face real prospects of accelerated revenue erosion.
2. Telcos must become involved in the creation of content and services. Those that do not take an active role will be reduced to operators of “dumb-pipe” broadband networks, while facilities-free service providers reap the rewards of triple play by accessing the customer directly over their broadband lines.
3. The telco business case for triple play is improving, but many telcos feel the “grand slam” of voice, data, video, and mobility will be their long-term differentiator from competitors. In many cases, this will favor vendors that are able to support fixed-mobile convergence from their access platforms.
4. The emphasis on and interest in triple play are clear indications that telcos are rediscovering the importance of the consumer market. Although telcos still see business markets as potentially more lucrative, they also realize that continued erosion of their bread-and-butter consumer business could be fatal. Service bundles are their solution to stem that erosion.
5. Second to competition, the ability to increase ARPU by 100 percent is driving renewed interest in video. No other service can offer this effect on top-line growth for a local service provider. Broadband data service for the consumer market has already fallen to commodity status.
6. Smaller, independent telcos are taking the lead in deploying IP-based video services. Smaller telcos are moving quickly to embrace switched digital video based on IP to take advantage of the technology’s ability to better support unicast and interactive video services. This strategy will put smaller telcos in a favorable position to compete against satellite and cable providers.
7. IP is emerging as the telco’s most critical weapon in a showdown with cable competitors. All service providers can become triple-play providers, leveraging multiservice IP access solutions to provide voice, video, and data over a common platform. Although telcos have failed in the past to compete effectively with cable operators as video providers, the ongoing trend toward switched digital video services could favor the telco that understands switched services well and has well-established operations to support massively scaleable switched services.
8. Although much has been made of FTTP (Fiber to the premises) in the past year, telcos worldwide remain committed to delivering bundled services over their copper networks.  Operators currently show a preference for central-office-based multiservice access platforms (MSAPs) over DSLAMs alone, allowing them to flexibly provision voice and other data services from a common platform with high-speed backhaul. Independent and rural telcos showed a preference for IP DSLAMs with Gigabit Ethernet transport.
9. Twenty is the magic number. Operators worldwide are finding that a minimum of 20 Mbit/s is required to enable a compelling triple-play offer over DSL. This will guide network reengineering projects and vendor DSL solutions in the coming three years.

Got the answer? You might be right.
Best regards
CVA