cutting the cord: what do consumers want?
TRANSCRIPT
Cutting the Cord:What do Consumers Want?
Michael Suby - Director of Stratecast
A Division of Frost & Sullivan
Consumer Communication Services
January 27, 2010
Frost & Sullivan’s Growth Consulting can assist with your growth strategies
2
Focus Points
• Consumer Communication Services
• The Consumer Preferences Survey
• An Average Consumer
• Cutting the Cord
• A Natural Limit to Cord Cutting
• Ramifications for Service Providers
• Conclusions/Recommendations
3
Consumer Communication Services
4
Consumer Communication Services
•The Consumer Communication
Services (CCS) practice is focused on understanding the dynamics of communication service consumption by the residential consumer.
•CCS looks at three essential layers in the service delivery continuum:
•Services•Consumer preferences and the
consumer decision to buy•Distribution infrastructure
Wireless
Wireline
Broadband
Services
CONSUMER
5
Consumer Preferences Survey
6
Consumer Communication Services Preferences Survey
• A phone survey of 1003 residential communication consumers
• Confidence level of 99% with a confidence interval of plus or minus 3%
• Focus on communication services use, preferences and purchase options
• Data gathered in November 2009
CONSUMER
7
The Average Consumer
8
The Average Consumer
• The average consumer interviewed in this survey is:
• Female (64%)
• Married (49%)
• 45 to 54 years of age (31%)
• Caucasian (83%)
• Making less than $35K a year (37%), but more than twice poverty level ($11K a year)
• Lives in the suburbs (44%)
• Owns home (64%)
• The average consumer is also most likely to subscribe to both wireless and wireline services
Which of the following services do you subscribe?
Traditional land
line only (from a
traditional
telephone
company), 15%
Cellular wireless
phone service
only, 23%
Both, traditional
landline and
cellular, 62%
Source: Stratecast
9
The Average Consumer
Home Ownership
Own65%
Rent
30%Other
(live with
relatives, etc.)5%
Ethnicity
86%
6%1% 1%2%1%
3%
African-American (not Hispanic) American Indian
Asian-American Caucasian (not Hispanic)
Hispanic/Latino Multi-ethnic
Other (Please specify):
Education Level
2%
47%
18%
20%
10% 3%
No formal education / Have not completed High School
Completed High School
Completed an Associates Degree
Completed a Bachelors Degree
Completed a professional or advanced degree (i.e., CA, MBA, MD, etc.)
Prefer not to answer
In which type of residential setting do you live?
In the city
26%
Suburb
(a residential
district located
on the
outskirts of a
city)
44%
Rural
(living in or
characteristic
of farming or
country life)
30%
Source: Stratecast Source: Stratecast
Source: StratecastSource: Stratecast
10
Cutting the Cord
11
Residential Voice Tracker: Revenue Generating Units by Quarter (United States), 2008-2009
-3.3%-3.6%
-4.3%
-5.0%
-5.6%-5.9% -6.0%
92,000
94,000
96,000
98,000
100,000
102,000
104,000
106,000
108,000
110,000
Q1 2008 Q2 2008 Q3 2008 Q4 2008 Q1 2009 Q2 2009 Q3 2009
Nu
mb
er
of
Su
bscri
bers
(000's
)
-7.0%
-6.0%
-5.0%
-4.0%
-3.0%
-2.0%
-1.0%
0.0%
Yea
r-o
ver-
Ye
ar
Gro
wth
Rate
Perc
en
tag
e
Subscribers YoY Growth Rate
Cutting the Cord
Cord cutting refers to the practice of dropping traditional land line delivered phone services in favor of wireless or other phone service alternatives (VoIP for example).
CCS tracking indicates that there is a continuing trend towards cord cutting.
12
Likelihood to cut cord
Very unlikely, 46%Somewhat unlikely,
17%
Undecided, 19%
Somewhat likely,
11% Very likely, 6%
Cutting the Cord
Most would not cut cordMost would not cut cord
Source: Stratecast
13
Urbanites are somewhat more likely to cut cordUrbanites are somewhat more likely to cut cord
Likelihood to cut cord
0%
10%
20%
30%
40%
50%
60%
Urban Rural
Residence
Very unlikely
Somewhat unlikely
Undecided
Somewhat likely
Very likely
Cutting the Cord: Residence Dependency
Source: Stratecast
14
Likelihood to cut cord
0%
10%
20%
30%
40%
50%
60%
70%
18 to 24 25 to 34 35 to 44 45 to 54 55 to 65 >65
Age Range
Very unlikely
Somewhat unlikely
Undecided
Somewhat likely
Very likely
Cutting the Cord: Age Dependency
Younger are more likely to want to cut cordYounger are more likely to want to cut cordSource: Stratecast
15
Cutting the Cord: Is there a Natural Floor?
The question is: why wouldn’t a subscriber cut the cord?
• One reason is perceived reliability:
• 36% of respondents rated their cellular service reliability as excellent
• 48% of respondents rated their wireline voice service reliability as excellent
• Another is perceived quality:
• 40% of respondents rated their cellular service quality as excellent
• 45% of respondents rated their wireline voice service quality asexcellent
• Implication is that, for certain uses, wireline service may be amore trusted alternative
16
Implications for Service Providers
17
Implications for Service Providers
• Cord cutting is a continuing trend, however
• There may be a natural floor to the cord cutting phenomenon
• Indications are that consumers trust land line communications more than they
trust alternatives
• Implication is that wireline telephony could be repositioned as a value added
adjunct to other service bundles
• Implication is that wireline telephony is, to use a Monty Python-ism: “Not quite
dead yet!”
• Challenge is to discover applications that capitalize on the use of wireline
communications.
18
Conclusions-Recommendations
19
Conclusions-Recommendations
• Carriers who wish to stop the erosion of their landline voice subscribers need to
emphasize the attributes that consumers value beginning with reliability and
quality
• Carriers need to seek applications for voice telephony where reliability and
quality are essential: emergency backup communications service as an
example
• Landline voice services can be thought of as an insurance policy and for certain
applications could be priced as such
• Implication for wireless carriers is that currently consumers think landline is
more reliable and of higher quality: an opportunity for improvement
20
Next Steps
� Register for the next Chairman’s Series on Growth:
The Growth Excellence Model: Competitive Benchmarking & Growth
Investing (February 2, 2010) (http://www.frost.com/growth)
� Register for Frost & Sullivan’s Growth Opportunity Newsletter and keep abreast of innovative growth opportunities(www.frost.com/news)
21
Your Feedback is Important to Us
Growth Forecasts?
Competitive Structure?
Emerging Trends?
Strategic Recommendations?
Other?
Please inform us by taking our survey.
What would you like to see from Frost & Sullivan?
Frost & Sullivan’s Growth Consulting can assist with your growth strategies
22
Follow Frost & Sullivan on Twitter
http://twitter.com/Frost_Sullivan
Frost & Sullivan on Twitter
23
For Additional Information
Jake Wengroff
Director of Corporate Communications
Information & Communication Technologies
(210) 247-3806
Mike Jude, Ph.D.Program Manager: Consumer Communications Services Stratecast | Frost & Sullivan(303) 466-2377 [email protected]
Angie Montoya
Global Analyst Briefing Coordinator
Marketing
(210) 247-2435
Craig Hays
Sales Manager
Information & Communication Technologies
(210) 247-2460