Competitive Positioning Shifting to Brands Operating at National Scale
Amid the distractions of an Olympics- and politics-saturated summer it’s easy to miss the big picture emerging from the steady stream of strategic signals generated by the major cable MSOs and telcos. But it’s now clear that 2016 will go down as the year when, taken together, all these acquisitions and initiatives represented a historic redefinition of what it means to be a network service provider.
Actions on several fronts are contributing to the sea change. One of the most significant trends, of course, is consolidation, marked on the cable side by the transformation of Charter Communications into the New Charter with the acquisitions of Time Warner Cable and Bright House and by the entry of France-based Altice as a major player in U.S. cable with the acquisitions of Cablevision and Suddenlink Communications. On the telco side, the big news this year has been AT&T’s acquisition of DirecTV and Verizon’s agreement to acquire Yahoo! following last year’s acquisition of AOL
But bigness and the entry of new players alone aren’t what elevate the significance of these developments, which also include pre-2016 activities such as consolidation in the Tier 2 cable ranks, the emergence of CenturyLink as a major force in telecom and, in Canada, alliances of convenience among various players in cable, wireline telephony and mobile. The historic significance lies with the role wireless communications and OTT distribution of content will have in freeing territory-confined entities to operate and compete at national scales.
It remains to be seen how the liberating force of wireless as the access point for virtually all network services will impact the long-standing franchise-defined redline against competition in cable. But it’s hard to imagine MSOs investing in big mobile plays without competing with the mobile incumbents at national scales.
Of course, when it comes to MVNO deals like Comcast is trying to work out with Verizon, the cable mobile brand will be leveraging the incumbent’s mobile infrastructure to market services out of territory. But as mobile becomes a broadband-caliber access platform capable of delivering a full slate of premium TV as well as other OTT services, the cable-branded service suite, exploiting whatever advanced features and functionalities have been devised to strengthen the provider’s sales pitch to consumers and businesses, will likely be on offer everywhere.
There’s always the possibility that MSOs could eventually forge an alliance where the national mobile service would be offered jointly under some kind of new group brand. But, given the divergent corporate cultures and competing aspirations among the top four, which also include Cox Communications, we’ll likely see these companies, with the possible exception of Cox, competing as mobile players in tandem with OTT offerings of their branded service portfolios, possibly with some affiliated Tier 2s and 3s tied to one brand or another.
Which points to another key area of activity contributing to the transformation of NSPs. Not only are major players creating the IP cloud infrastructures essential to competing in the mobile and OTT arenas through acquisitions and internal development; they’ve also positioned themselves as vendors to market their new cloud platforms to other NSPs as well as to TV networks and other content owners.
AT&T has acquired QuickPlay, which has been hard at work developing a cloud-based turnkey service for OTT distribution of high-value video. Verizon Digital Media Services, leveraging the 2014 acquisition of CDN provider Edgecast and the recently completed purchase of broadcast post-production supplier Volicon, is a well-established OTT supplier and now is being used by the parent company to support the Verizon Wireless go90 video service agenda. Comcast’s foray into marketing the X1 platform has landed Cox Communications and Shaw Communications as its first big customers. And, Google, as an NSP and OTT provider with plans to launch a skinny pay TV bundle under the YouTube Unplugged banner, has acquired Anvato, which puts the search giant in the cloud TV platform vendor business as well
As these behemoths break out of their traditional NSP molds the strategic details of how they hope to grow their businesses will differ. But it now looks like the combination of wireless as the access platform and the OTT cloud as the distribution platform will dominate in the shaping of a cluster of branded service providers who will look nothing like the NSPs of old.
While ownership of network facilities will remain a distinguishing factor and contributor to the bottom line, the defining feature will be their success as service companies that can deliver massive aggregations of content and applications that take the hassles out of the connected life. What all this means for smaller NSPs remains to be seen, but it’s clear their strategic planning must take this new reality into account.