By Anjali Athavaley
NEW YORK (Reuters) – More U.S. consumers can buy their landline phone, Internet, television and mobile service from one company due to cable providers entering the wireless industry. But investors should not expect so-called quad-play bundles to be as popular as in some other countries anytime soon.
In a market where wireless service is typically purchased separately from the triple-play bundle offered by pay-TV companies, there are obstacles to broad adoption, investors and industry analysts said. The benefit to bundling more services together is that it makes consumers stickier, or more loyal.
“The biggest hurdle in the U.S. is footprint mismatch,” said Christopher Marangi, co-chief investment officer at GAMCO Investors Inc. “The cable companies are all regional, and the wireless business is more of a national market. In Europe, cable is more national.”
The sticker shock of having all four bills combined does not help. “Consumers don’t necessarily want to see one bill that has a massively ballooning cost to the service provider,” said Jefferson Wang, senior partner heading mobile innovation at IBB Consulting Group.
Market research firm Strategy Analytics estimates that roughly 10 percent of U.S. households use quad-play. Penetration is expected to increase to 17 percent in 2020 but is still low compared to France’s 25 percent and Spain’s 60 percent. In those countries, companies like Iliad SA
So far, U.S. companies have yet to focus on quad-play. AT&T Inc
And Verizon Communications Inc That could shift as cable companies expand into wireless and see an opportunity to undercut rivals on price. Comcast and Charter Communications Inc “We’re really at an inflection point now,” said Mark Bower, a partner with Bain & Co’s telecom, media and technology practice. Markets where quad-play has taken off have all had either an incumbent that was losing share or an aggressive new challenger that won customers through significant discounting. In the United States, that disruptor could soon be a cable company. The cable industry has experimented with wireless in the past. In 2005, Sprint formed a $200 million venture with Comcast, Time Warner Cable Inc, now owned by Charter, Cox Communications Inc and Advance/Newhouse Communications to offer combined cable and wireless services. Cable companies pulled out in 2008, citing “operational complexities.” Things could turn out differently this time, especially if cable companies eventually bought a wireless carrier, giving them ownership of a cellular network as opposed to having to rely on a third party, analysts said. It also helps that the lines between wireless and broadband connectivity are blurring as people use more connected devices over WiFi. That may provide more of a reason for cable companies to want to control both. While sources told Reuters it is unlikely that Comcast and Charter would make an equity investment in Sprint, John Malone, whose Liberty Broadband Corp (Reporting by Anjali Athavaley; editing by Anna Driver and Bernard Orr)
