• E-mail
• Print
• Comment
• Font Size
• Digg
• del.icio.us
• Discuss article

Shifts In Spending-Consumer Market

Posted on: Thursday, 30 September 2004, 06:00 CDT

Email, email, email. Can't live without it, but there are plenty of days when I'd like to try. Each day I receive tons of email, describing new products that solve problems I didn't know I had and the merger of companies that I never knew existed.

Not all of these missives are a waste, however, and recently I received an email describing a study by TNS Telecoms, which provides market information to telecom service providers. Using proprietary databases, TNS analyzed bills in 32,000 U.S. households (Bill Harvesting database), and information on spending by small, medium and large businesses (BusinessWave database), also limited to the U.S.

This TNS Telecoms study yielded interesting data, and while I usually focus on the business/enterprise market for telecom, this column focuses on the results TNS gathered about households. The residential market is changing, which not only affects each of us in terms of our personal lives, but also has big implications for business use of and applications for telecom.

Let's begin with the basics. Table 1 shows the average monthly expenditures for household communications service in the first quarter of 2004. The distribution of the expenditure and the change from the previous quarter in Internet spending reflect the growing penetration of broadband, a point reinforced by the lack of growth in the traditional wired category. However, the fact that "Other" remains the preferred ISP (Table 2) indicates that smaller ISPs still serve an important market need.

TABLE 1 Average Monthly Spending-U.S. Households

TABLE 2: Preferred ISPs

When it comes to market share for capital-intensive cable/ satellite television service, the big names-Comcast, DirectTV, Time Warner and Dish Network top TNS's marketshare charts. While a cable company, Comcast, has the overall market lead with 24 percent, DirectTV, a satellite service, is in second place with 13 percent. Moreover, DirectTV and Dish Network grew their market share compared to the previous quarter, while Comcast dropped two points and Time Warner stayed flat.

Market share in phone service is all about bundled vs. unbundled service. When TNS analyzed the market share for bundled local and long-distance service, the leading vendors were, no surprise, traditional telcos-Verizon, SBC, BellSouth, Qwest and Sprint. Their success, however, seems to be more a matter of inertia than creative marketing. TNS found that the average consumer long-distance bill is only $9.10 per month, and many consumers may simply find it easier to write a single check to the same company from which they buy local service. It is certainly much easier for a local telco to provide long distance than it is for an IXC to deliver local dial tone.

TABLE 3 Market Share Bundled Communications Services

TABLE 4 Market Shares-Total Communications Expenditures Per Month

When TNS looked at market leaders for more expansive bundlescombinations of dial tone, long distance, DSL, cable television and cellular-not only do the numbers change but new names appear on the list (Table 3). The lack of growth and/or loss of market share by companies that were, only recently, seen as "dominant" competitive carriers has been much in the news of late. AT&T, MCI and others blame their poor showing on the FCC's recent UNE-P decisions, but DNS's numbers suggest that by the time the FCC finally made its decision, the proverbial horse had left that barn. The forces that caused AT&T to retreat from the consumer long- distance market aren't of recent vintage.

Conclusion

Table 4 shows a summary cut at the total consumer spend for communications- which vendors were receiving what share of the pie, which includes wireline, wireless, video and Internet. With entertainment now accounting for roughly one-quarter of the total, I can't help but think we're migrating towards fundamental, never- beforeexperienced industry realignment

Companies Mentioned In This Article

TNS Telecoms (www.tnstelecoms.com)

It wasn't the UNE-P decision that drove AT&T out of the consumer business

Residential customers will likely drive industry realignment

Richard A. Kuehn is the president of RAK Associates, a telecom consulting firm in Cleveland, OH. Mr. Kuehn is a well-known telecommunications lecturer and writer, and he was one of the founders of the Society of Telecommunications Consultants.

Copyright Business Communications Review Sep 2004

More News in this Category