Consumer Communication Services Share of Wallet Analysis 2014
This report examines the general trends in consumer spending, and provides insights into the future of communication services spending. It will be of special interest to network operators as well as communication policy makers.
Consumer spending, especially in the communication services space, is under assault. Generally low expectations for economic improvement as well as increasing anxiety about the impact of such things as increased health care costs and additional taxation are all conspiring to introduce caution into consumer expenditures for discretionary goods and services.
This dynamic is clearly apparent in this year’s share of wallet report. When examined over the last four years, the wallet size for communication services is, at best flat, and when compared to last year’s wallet size is actually down a bit. This would seem to be very bad news.
Yet, the news is actually not really bad. This year’s telemetry suggests that consumers, rather than reducing spending overall, are actually adjusting their spend to reflect a growing desire for broadband access, both fixed and wireless, rather than discrete services. When asked how they value their services, consumers find greater value in the Internet and their cell phone than they do in their video or voice subscriptions.
The problem is, though, that as consumers cut the cord for voice and video—services that are in many cases priced above the commodity level—they are switching their communication consumption to services that they value highly, yet which are priced at or below the commodity level. In other words, as they shift their spending to highly valued services, the margin generated for operators by those services is much lower. If the pricing reflected the value placed on broadband access, the wallet size would actually be increasing.
Ironically, the general consensus of many in the industry is that what is being reflected in consumer spending is actually a symptom of market saturation. In other words, just about every possible customer has been engaged. This consensus, however, ignores the developing market for wearable communication and computing devices, the propensity for every subscriber to utilize many computing and communication devices, and the expansion of service delivery in the over-the-top (OTT) space. Looked at from the perspective of devices and services, the market has never expanded so quickly. Yet, a focus on access makes it appear as though the market is approaching a plateau. Based on this distorted vision, the market players are engaging in the sort of competitive actions expected in a saturated market. They are competing with each other on the basis of price rather than value.
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