DISH will Need a Differentiator: Mobile-centric Multiplay with Prepaid Options?

By Susan Welsh de Grimaldo, Director, Service Provider Strategies and Phil Kendall, Executive Director, Service Provider Group

New entrants have had a REALLY hard time cracking the competitive US wireless market. In the last year or two we have seen some growth by Xfinity, Charter, and Google Fi, but getting to scale at a national level is challenging as a new brand in wireless.  While DISH already has a national presence and brand, as well as wireless spectrum assets and some experience working to widely deploy a wireless network, building a competitive national wireless  broadband network and acquiring subscribers is hard work – and expensive. Getting some prepaid subs through a deal with T-Mobile/Sprint is useful in terms of giving Dish a little bit of scale, but they really need to figure out how to differentiate and how to be cost efficient in the process.

A multiplay emphasis may be a good approach for DISH, but will come at a time when consumer demand is shifting and other competitors are also eyeing a multiplay strategy. KPN's Q2 2019 results today say that churn for converged households is 75% lower than churn for their mobile-only households. If someone can really crack proper quad-play bundles in US they are a good stable source of growth, but differentiation and great customer experience will be key.

As we await the details of the concessions being made by T-Mobile and Sprint as they attempt to get DoJ approval for their merger, particularly details around the spectrum assets component, here are some key trends in the US market that any newly configured contenders will have to build into their strategies and go-to-market execution.

Shifting demand:

• US PayTV subscriptions are declining, as seen in Strategy Analytics’ “North American Pay TV Index (1Q 2019)”– and we project even more shift and subsequent revenue growth to other subscription video options in our “Subscription TV Forecast: North America .” User behavior around subscription video is changing – with room still for providers to create improved experiences. (See our report, “More SVOD Services Means Continued Fragmentation, Frustrated Consumers”)
• Wireless market growth has slowed, with much net growth coming from connected devices beyond smartphones, and churn is at low levels. (See Strategy Analytics’ forecasts for our prediction of how the market will evolve: “Worldwide Cellular User Forecast 2019-2024.”) Operators need to better understand key value proposition for the range of user segments, including drivers for spend, upsell, and potential churn, as the US moves into more 5G competition and shifting provider landscape.
• Home broadband demands continue with need for speed as more devices connect and video streaming pushes data requirements, and mmWave 5G services threaten to disrupt the last mile.

Shifting supply:

• Where is the money in PayTV?: In the pay-for-video content space, the skinny bundle, the snackable, the attempts to woo advertising dollars are all in vogue – and no one is making lots of money (yet). DISH itself has been under pressure in its core business, it needs wireless to survive but can’t rely on a strong cash cow current subscriber base as it seeks growth in new areas. Both AT&T, with its AT&T TV thin client video service expected to trial in Q3 and T-Mobile with its own (delayed) video content play in the works are also aiming for a piece of the hard-to-find-good-profits pie as they push on building multiplay offers.
• Prepaid is highly competitive: In the saturated US wireless phone market, prepaid has become a strong fighter for subscriber growth. AT&T, with Cricket as its big prepaid push, netted 283k prepaid phones adds in Q2 (out of a total of 355k net phone adds for the quarter). T-Mobile has also seen good prepaid results through both its Magenta and Metro brands, adding 460k total branded prepaid net adds in 2018. With the rebranding to Metro by T-Mobile in 2018, T-Mobile bundled in value added premium features such as Amazon Prime and GoogleOne to its Metro brand plans– extending benefits of the type that used to be only in postpaid plans and pushing the prepaid competitive landscape.
• Multiplay bundles aim to prove their power: The US is moving away from a mobile-only provider market to competition that is likely to center on the power of the multiplay bundle to create stickiness with households. Cable players are taking a strong Wi-Fi centric approach to adding mobile to their bundles – and Altice is jumping in the mix with a new low cost wireless offering.
• 5G is early stage, but the game is on: A strong 3-horse race of top carriers if the New T-Mobile is formed will create a formidable front for pushing 5G out across America – and this indeed may be one of the biggest benefits of the T-Mobile/Sprint merger as it stands to accelerate 5G deployments and competition. Fiber is a secret weapon in 5G, and using 5G Fixed Wireless Access to enter new markets as a competitor is also an important part of 5G. Operators have a good opportunity to position 5G to address consumer pain points, as discussed in Strategy Analytics report based on consumer focus group research: “5G's Biggest Selling Point is its Ability to Resolve Consumer Pain-Points.”

What does all this mean for T-Mobile and Sprint?  The New T-Mobile – if its merger is approved – will need to keep on the pressure as a disruptor /fighter in the market even as it begins to rival the top two carriers in size.  New T-Mobile has also pledged not to raise prices for three years– which is one of the concerns in the State Attorney Generals in their law suit. We do see quite a bit of room for more innovation in 5G pricing to better target a wide range of users  to give them value they want and are willing to pay for – whether beefed up premium bundles or more personalized, pay for only what you need smaller offers. This might mean higher price point options but also even lower ones.

AT&T will want to focus on upping their game on differentiated multiplay and prepaid, building on their Warner Media assets and strength in connected devices beyond the phone, as well as its Cricket brand that has been delivering growth in the prepaid space. AT&T has been building some cool experience features into its loyalty rewards program that build a converged experience around some of its Warner Media content assets. Turning subscribers into fans will be key to fend off poaching of subscribers and create uplift in ARPU.

Verizon will still be #1 in terms of subscriber base – and as defender will also want to be more aggressive in its innovation and focus on improving people’s lives and businesses with strong 4G and expanding 5G to minimize churn and gain new wins in enterprise and smart city in the face of stronger competition from the New T-Mobile—and a still strong AT&T playing both defender and offense.

Strategy Analytics tracks quarterly operator metrics ; for Q1 see Wireless Operator Performance Benchmarking Q1 2019 – and watch for our Q2 update after the carriers all report.

Did you know: Strategy Analytics has a wide range of capabilities and expertise to help you position for success in 5G through custom designed projects with business impact? Reach out to us at custom@strategyanalytics.com to explore how we can help, including:

• Actionable, results-focused primary consumer and enterprise assessments – including leading edge maxdiff techniques to define value propositions for key target segments and considerations for willingness to spend/decision triggers around total cost for users to buy up to 5G (across device and service elements)
• Support for strategy, roadmap and partnership development and prioritizationaround use cases and 5G pricing and positioning, as well as extensive modeling of device mix, revenues ROI, etc.