bundled communication services - uk - june 2010 (1)

7/31/2019 Bundled Communication Services - UK - June 2010 (1)

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Bundled Communication Services

June 2010


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1 2010 Mintel International Group. All rights reserved. Confidential to Mintel.

Issues in the Market

Why do consumers buy bundled home communications services?

How will the advance of technology reshape the bundling market?

What are the key battlegrounds in competition for customers?

Which bundle elements do consumers value most?

What motivates our purchasing decisions?

What impact has the recession had?

What are the main deterrents to bundle buying and how canproviders counter them?


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Internal Market Environment

Super-fast broadband puts internetconnectivity at the heart of homecommunications services.

Multichannel TV now the UKs defaultviewing platform. This creates interestin new and interactive services thatcould extend the bundles reach.

Technological convergence trends likelyto benefit bundling.

Legislative and regulatory change (egfibre network unbundling) will enablebundle providers to expand their offer.

More tech-savvy, demandingconsumers could force the market tobecome more competitive.


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Broader Market Environment

Bundled home communicationsservices have been insulatedagainst the worst of the recessionby their money-saving potential.

In-home leisure has risen andbroadband internet access andmultichannel TV have taken onessentials status.

Expansion of upscale, tech-savvysocio-economic grades could shiftthe focus of bundle marketingfrom the products price to itsperformance.

Growth in one-person householdspresents a challenge to themarket to create bundles thatmeet the needs of this group,which will differ significantly fromthose of its large family core.


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Strengths and Weaknesses

Recession resistance

Mainstream status

Technological change

Enabling legislation

Choice

Consumer confusion

The utilities factor

Price focus

Limited promotion

Demographic change


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Market Size and Forecast

New entrants to the market andproviders continuing ability toconvert existing customers totriple-play products havedelivered rapid and sustainedgrowth in market value.

More products and providers are

expected to give the marketfurther momentum in the shortand medium term, butcompetitive price pressure meansgrowth is more marked in volumethan value terms.

At current rates of growth, take-up of bundled services will havereached majority status before2012, and may be driven furtherupwards by new technologiesaround TV and internet.

Consumer expenditure on bundled home communications

services, triple-play only, 2005-15

Source: Ofcom/Mintel

0

1000

2000

3000

4000

5000

6000

7000

2005 2006 2007 2008 2009 2010(est)

2011(fore)

2012(fore)

2013(fore)

2014(fore)

2015(fore)

m

At current prices At 2010 prices


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Usage of Communications Service Providers

Only Virgin Mediahas established itself

as a natural bundleprovider in theconsumerimagination, with itsrivals still seen assingle-servicespecialists offeringadd-on products.

Potential for bundlebuying is strongestamong demographicgroups that exhibithigh levels ofinternet usage,suggesting thatbroadband productswill be best placed tobring them on board.

Usage of service providers for phone, internet and/or

multichannel TV services, April 2010

Source: GMI/Mintel

Home phoneline

Homebroadband

Multichannel TVsubscription

Mobile phone

% % % %

AOL 1 5 na na

BT 41 20 3 na

O2 na 5 na 25

Orange 2 5 na 21

PlusNet 1 2 na na

BSkyB 9 11 37 na

TalkTalk/Tiscali 14 13 1 na

Tesco 1 1 na 4

Virgin Media 21 25 19 7

Vodafone - 1 na 16

Other provider* 4 8 na 23

Do not receive thisservice

8 5 40 4

Base: 2,018 internet users aged 16+


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3

12

1

11

8

1

4

1

1

1

1

2

2

15

1

*

*

*

*

*

*

*

*

*

0 2 4 6 8 10 12 14 16

Vodafone mobile phone, home broadband and home phone

Virgin Media multichannel TV, home phone, home broadband and mobile phone

Virgin Media multichannel TV, home phone and home broadband only

Virgin Media multichannel TV and home phone only

Virgin Media multichannel TV and home broadband only

Tesco home phone, home broadband and mobile phone

Tesco home phone and mobile phone only

Tesco home phone and home broadband only

Tesco home broadband and mobile phone only

TalkTalk home phone, home broadband and multichannel TV

TalkTalk home phone and home broadband only

Sky multichannel TV, home phone and home broadband

Sky multichannel TV and home phone only

Sky multichannel TV and home broadband only

PlusNet home phone and home broadband only

Orange home broadband, home phone and mobile phone

Orange home broadband and mobile phone only

Orange home broadband and home phone only

O2 home broadband, home phone and mobile phone

O2 home broadband and mobile phone only

O2 home broadband and home phone only

BT home phone, home broadband and multichannel TV

BT home phone and home broadband only

AOL home phone and home broadband

% of respondents

Bundle Usage

63% ofrespondents takesome form ofbundled package.

36% arepotential bundlecustomers, inthat theycurrently take atleast one of theservices listed,but not a bundle.

Penetration of bundled services, by brand, April 2010

Source: GMI/Mintel

*less than 1%

Base: 2,018 internet

users aged 16+


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Bundle-buying Motivations

Consumers are eitherdisinterested orunaware of theirservices enablingpotential and so seebuying them as achore akin tochoosing utilities orinsurance providers.

The less tech-savvygravitate to brandsthey trust to deliverreliable service,ensuring aconvenience ofaccess that sparesthem servicedisruption and theneed to deal with callcentres.

Reasons for choosing a particular service provider for multiple

services, April 2010

Source: GMI/Mintel

0 10 20 30 40 50 60

Extra incentives (eg free laptop, PVR, shopping

vouchers etc)

They were the only one who offered a particular service I

wanted (eg live sports, super-fast broadband)

The set-up was already in place (eg satellite dish etc)

I already had at least one service from that provider, then

just added more

Reputation for good customer service/technical support

A brand I've heard of and trust

Convenience of having bills in one payment

It was the cheapest deal available

% of respondents

Base: 1,275 internet users aged 16+ who havea bundled communications package


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Importance of Bundle Elements

A fixed-line internetconnection is now themost important element of

the home communicationsservices bundle for almosthalf of all consumers.

Multichannel TV is popularas an add-on for thosewho prioritise otherservices, suggesting an

improved TV propositioncould make non-TVspecialists more attractive.

Broadbands strongestpoint of appeal is itsability to deliver servicesand content that other

pipes cannot, challengingit to spread word of itspotential beyond its coreearly adopter support.

Top priorities for bundled communications packages, April 2010

Source: GMI/Mintel

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Rank 1 Rank 2 Rank 3 Rank 4 Rank 5

%o

fresponden

ts

Internet Multichannel TV Home phone Mobile phone Mobile broadband



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Attitudes Towards Bundled Communications Services

Younger, more affluentconsumers are least likelyto accept the automaticcost benefits of bundling,suggesting they need tofeel in charge of theircommunications services inthe way they do of thedevices they use to accessthem.

Consumers who are wary ofbundle buying are reluctantto commit on the basis ofcost alone but lack theknowledge to choose ontechnical grounds. Thisleaves them in need of

independent expertsupport to bring them intothe market.

Attitudes towards bundled home communications services,

April 2010

Source: GMI/Mintel


0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100

%

I have had bad experiences w ith bundled packages (eg

higher bills, slow er speeds than expected)

You get a better price if you get each service separately

I'd feel too 'tied-in' if I got all these services from one

provider

Bundled packages are confusing (eg diff erent speeds,

channel combinations etc)

If I switched providers f or one service, I'd look at sw itching

for others as w ell

If all my services came through one provider I'd feel more at

risk if something went wrong

It's too much hassle to sw itch providers

I'd sw itch providers to get added-value 'extras' (eg f ree

online TV s ubscription, free laptop)

You get a better price w ith bundled packages

It's easier to have one point of call for c ustomer

service/technical support

I like the idea of paying for all these services in one bill

% of respondents

Strongly agree Agree Neither agree nor disagree Disagree Strongly disagree

bundled communication services - uk - june 2010 (1)

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