Price Spurs Demand for Triple-Play’s Parts: Survey
Bear Stearns Finds Consumers View Services As Commodities
By Linda Moss -- Multichannel News, 3/6/2008 9:53:00 AM
Price is the key factor driving demand for video, broadband and voice services, according to consumer research conducted by Bear Stearns.
“Our survey finds that users continue to view these services as ‘commodity-like’ with price the primary driver of demand,” the Wall Street firm said in a report by analyst Spencer Wang.
For its 2008 Communications Survey, Bear Stearns surveyed nearly 1,000 consumers.
“Consistent with our prior work, our survey finds that across all three products categories, price is the top factor affecting demand,” Wang wrote. “This implies that consumers view communication services as fairly ‘commodity-like,’ and that as competition rises, pricing power may wane. However, we still expect rational pricing given the oligopoly structure of the industry, although average revenue per user growth will likely slow going forward with more competition.”
Based on the survey’s finding, Bear Stearns said it believes retains the competitive upper-hand over direct-broadcast satellite.
“Net-net, our work continues to support our view that cable has an intermediate-term advantage due to its ability to bundle and its faster and more reliable broadband service,” Wang wrote. “Conversely, this implies that DBS, as a one-product video service, may be challenged. DBS’s main advantage is a lower-priced video service and higher customer satisfaction.”
Bear Stearns found that consumers have little enthusiasm for the triple-play offering that DirecTV and Dish Network have cobbled together with telcos.
“Consumer preference for bundling remains strong, with 70% of respondents already bundling or wanting to bundle, with the triple play (i.e.,video, voice, and data) continuing to be the most popular — good news for cable MSOs,” Wang wrote. “On the other hand, our work finds limited demand for DBS’s ‘synthetic bundle’ — satellite TV service with DSL and voice from an RBOC.”
Bear Stearns also claimed that consumers are not motivated by new technological offerings.
“Like in past years, our work finds that new technologies — VOD, DVRs, and HD — are the least important factors driving demand for pay TV,” Wang wrote. “This implies that these services are unlikely to convey a competitive advantagevis-à-vis one video platform over another, and that DirecTV’s current HD-fueled performance may not be sustainable over the long term.”
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