AT&T will launch Netflix competitor next year

In an SEC filing, AT&T has confirmed it will launch a new streaming service focused around HBO content to challenge the dominance of Netflix and Amazon Prime.

While details are relatively thin for the moment, though AT&T Entertainment boss John Stankey formally announced the new offering at the Vanity Fair New Establishment Summit in Los Angeles confirming the Time Warner assets would form the foundation of the streaming platform, with some third-party content building out the breadth and depth.

“On October 10, 2018, we announced plans to launch a new direct-to-consumer (D2C) streaming service in the fourth quarter of 2019,” the SEC filing states.

“This is another benefit of the AT&T/Time Warner merger, and we are committed to launching a compelling and competitive product that will serve as a complement to our existing businesses and help us to expand our reach by offering a new choice for entertainment with the WarnerMedia collection of films, television series, libraries, documentaries and animation loved by consumers around the world. We expect to create such a compelling product that it will help distributors increase consumer penetration of their current packages and help us successfully reach more customers.”

HBO, Turner and Warner Bros content will create an interesting proposition, though this of course relies on a successful merger with Time Warner. As it stands, District Court for the District of Columbia Judge Richard Leon has given the green light for the deal, though the Department of Justice is appealing the decision, suggesting Judge Leon did not appropriately consider the implications of the merger. It looks to be a done deal, though the DoJ is being as awkward as possible.

The question which remains is whether the Time Warner content will be enough, even with its library of titles and additional third-party content. Netflix and Amazon Prime are surging ahead of the competition in terms of subscriptions, 130 million and 100 million respectively, though Disney’s new streaming service could be an interesting offer with the 21st Century Fox programming assets. Hulu might not be on the same scale as these three, but with 20 million subscribers it is certainly a platform worth considering. AT&T is entering a very competitive market.

What this does also offer AT&T is potential entry to the international content market. This is where Netflix is targeting future growth, suggesting at IBC 2018 competitiveness in the US market won’t bring the growth figures investors consider appropriate.

The Time Warner acquisition has been one of the biggest talking points of the industry for the last 18 months, though one of the big questions is whether AT&T can effectively manage a business in such a different vertical. The traditional telco approach to risk and expansion will not work here, for this venture to be a success AT&T will have to be a lot more aggressive and embrace the concept of the fail-fast business model.

With the cards now laid out on the table, it won’t be long before we find out whether AT&T has the capability to effectively diversify outside of the traditional telco battlefield.

Smart home is $11.2bn opportunity, but are the telcos ready for it?

ABI Research estimates the smart home segment could potentially be worth in the region of $11.2 billion by 2022, but the diversification question still remains for the telcos.

The smart home is a concept which has been on the horizon for some time, we’ve been debating the merits of talking fridges for years, but until recently it has perhaps been little more than a gimmick. The advantages of the expensive upgrades were limited, and in all honesty, there seem like little point in connecting your toilet to the internet. That said, during the last 12-18 months applications and services have started to appear to make the prospect genuinely interesting. And we’re talking about more than just connecting your bog.

This seems to be the point of the ABI Research note, the consumer is starting to welcome the idea of the smart home. AI-powered products are becoming more the norm off the shelf, while the concept of the data-sharing economy is no-longer a baffling idea. But are the telcos ready for this evolution?

“CSPs are being threatened in a market increasingly driven by the likes of Google and Amazon with a range of products and services from AI-powered smart home voice control smart speakers to security solutions,” said Pablo Tomasi Senior Analyst at ABI Research.

“But things are changing and CSPs are accelerating their strategies for the smart home. Telefonica with Aura, Orange with Djingo, and SK Telecom with Nugu lead the way of CSPs developing AI assistant to support their smart home play. Now is the time for CSPs to be more aggressive in tying the usage of their AI assistants to their other connected and smart home offerings.”

The smart home will also offer a small opportunity for the telcos, all of these devices will have to be powered by the internet, therefore those who are happy with the utility tag can sit back and wait for the trend to kick-in. However, for telcos who want to diversify revenue streams and interact with the consumer in a more meaningful manner, they will have to demonstrate they are capable of competing with some of the most innovative companies on the planet.

A platform approach is one way in which this can be done, with telcos favouring the ‘freemium’ model over the traditional ‘bundled services’ option, according to ABI. By creating an extensive and varied ecosystem, and leveraging current assets all around the home (connectivity, content delivery, etc.) and emerging concepts such as monitored security, the telcos have a wider reach than others attempting to capitalise on the smart home enthusiasm.

The issue here is timing. As with any hype curve, getting in ahead of competitors is critical. There was an opportunity to act as the middle man between the consumer and the manufacturers of smart home devices, leveraging the excellent relationship telcos have developed, though this is still a distinct possibility.

Research from consultancy firm EY suggests consumers are not settled on where they would like to purchase their smart home devices from. Broadband providers proved to be the most popular choice, at 19%, but tech websites were a popular choice on 18%, while going direct to the specialist manufacturer was as well on 17%. Utility providers collected 15% and household appliance manufacturers took 13%. 11% choosing smart phone manufacturers is encouraging for that segment, though MNOs only took 4%. Variety is important right now, as it demonstrates there is still an opportunity for someone to take a strangle hold of this relationship with the consumer.

The potential for the smart home is massive, and this potential will only become bigger as the voice user interface becomes more commonplace. The important factor here is to take a risk and secure a leadership position. With the emergence of the connected and sharing economy a couple of years ago, the telcos took a backseat and suffered because of it. They sit at the bottom of the totem pole waiting for the crumbs to fall down, largely collecting revenues from connectivity alone.

The smart home is an opportunity for mistakes of yesteryear to be corrected.

Apple, a perfect example of what can be achieved through customer loyalty

The telco world is filled with companies who are constantly chasing new customers, but considering the success of Apple focuses on sweating the brand, should executives be looking inwards more often.

The term ‘sweating the brand’ is an interesting one, and relates to the much hyped convergence strategy. A company develops a relationship with a customer, and then uses the power of that brand, alongside the connection with the customer to sell additional products and services. The two important aspects of this concept are developing a strong, independent brand and a trusted relationship with loyal customers.

Through years of creative advertising and carefully protecting the fruity image, the Apple brand is one of the most recognisable and respected in the world. On the customer service side of things, the teams dedication to servicing customers and creating a welcoming environment in its stores, has creating a cult-like following of iLifers who would possibly sacrifice a finger for their iPhone. It took years, some mistakes and a few obnoxious statements, but Apple has created an incredibly enviable position. And what is the result, buckets of cash.

Apple recently reported its numbers for the last three months and the spreadsheets were bunging. Total revenues stood at $53.3 billion, a year-on-year increase of 17%. For the first nine months of the 2018 financial year, $202.695 billion has been bled out of the iFollowers.

Looking at how the business makes money, 41,300 iPhones were sold for $29.906 billion. This is the core aspect of the Apple business today, but the immensely popular devices was developed through diversification. Personal computers were the bedrock Apple built its business on, and the team sold 3,720 Macs across the last three months. Perhaps the most successful venture over the last couple of years has been the services business unit, which contains AppleMusic and AppleCare as two examples, bringing in $9.548 billion over the quarter. These are all the headline products, but when you factor in Apple TVs, smart watches, smart speakers and other subscription services, the message is quite clear; Apple can make money out of pretty much anything.

Of course, there have been some disasters. Original content has not been great to date, Shark Tank was truly awful, though using the power of the Apple brand, no-one seems to remember it. The next couple of months will see releases of various original content, including a multi-year content partnership with Oprah Winfrey.

All of the products are successful because of the Apple brand. A brand which has been created through creativity and dedication to current customers.

The convergence business model should be built on the same principles but it is not. Customer service has never seemingly been an interest of the telcos, who are constantly fighting to steal customers from each other. The strategy of these companies is simple; acquire more customers as quickly as possible, though there are numerous studies which suggest caring for and maintaining your current customer base is a much more success route.

For divergence to work, the core business needs to be sound. For the core business to be sound, customers need to be loyal. For customers to be loyal, the business needs to care for them. This is the fundamental oversight from the telecommunications industry; the customer never feels like anything more than a statistic. Telcos might be searching for the right formula to make convergence work, but they are failing at the first hurdle.

Unfortunately, the ‘sweating the brand’ strategy which Apple has moulded so effectively takes time. It also takes the right culture, foresight and innovation. Demanding investors, many of whom only focus on the next three months, remove such blue-sky ideas from the realms of possibility, while you also have to question whether the telcos are set up to achieve even the smaller fraction of what Apple has done.

Everyone wants to achieve the level of profitability which Apple makes look so simple, but few are willing to build the same foundations the iLeader has. Apple has only dominated the world over the last decade, but the culture of creating loyal customers goes back to 1976 when Apple was founded.

Ericsson develops a cunning plan for generating IoT revenue

Networking vendor Ericsson has been having a think about how service providers can make a few quid out of IoT.

That thinking has been distilled into a report entitled Exploring IoT strategies – Insights on IoT value chain positioning from leading telecom service providers. Ericsson spoke to a 20 service providers and found that 70% of them don’t have a well-defined IoT strategy and that 80% of them “aim to create value beyond connectivity either by providing differentiating services or by becoming IoT service enablers or service creators.”

The latter finding seems to be a lead up to the bulk of the report, which aims to segment a number of different approaches service providers can take to monetising the IoT opportunity. “The report confirms the importance of IoT to the current and future business of leading service providers, no matter where they operate in the world,” said Jeff Travers, Head of IoT at Ericsson.

“Regarding IoT as a new type of business, service providers are investing in new technologies and establishing new business models for revenue sharing and increased use of indirect channels. They are also creating new delivery models for as-a-service and online services and driving innovation with partners and customers.”

The tables below show the four roles service providers see for themselves in this context. The first two are the foundational roles for CSPs, which they still expect to drive the majority of their revenues. The opportunities beyond connectivity are split into Service enabler and Service Creator and further differentiation can be achieved by following one or more of the sub-roles too.

Ericsson IoT framework 1

Ericsson IoT framework 2

Ericsson IoT framework 3