A few posts ago, I wrote about the difficulty that IPTV operators are having with differentiating their services from cable, satellite, and (in some markets) over-the-air broadcasters. Triple-play packages (landline telephone, high-speed Internet and video) are old news in most markets, and cable operators are using VoIP to compete head-to-head with the telcos. Quadruple-play packages, adding mobile service, are less common, and are more difficult for non-telcos to compete with. In order to get access to mobile services, cable and satellite operators usually have to resell services from a telco, which puts them at a pricing disadvantage.
In most places, even when you buy a triple- or quadruple-play package, you get a bundle of services that don't talk to each other. Consumers purchase on the basis of price and features; brand loyalty doesn't exist. In this situation, you can get a runaway "race to the bottom", as is happening in several countries in Western Europe, with France being the best example. There, operators are piling on more and more features while maintaining the price at 30 Euros a month. Packages that would sell in the U.S. for $99 a month or more are going for the equivalent of under $45 at current exchange rates.
The real opportunity is in what I call silo-busting--tearing down the walls between services in order to unlock consumer value and provide the opportunity to increase prices (or at least maintain prices in the face of competition.) Telcos are just now starting to let consumers get Caller ID on their television when the phone rings. Instead of running to the phone when it rings, your television can tell you who's calling, so that you can make the decision of whether or not to take the call. If that service has value to you, and the competition doesn't offer it, you're more likely to stay with your service provider. Let's take it to the next step: Add a speakerphone to the set-top box's remote control, and you can take the call without picking up the phone. Now the television and the phone service are tightly linked. That adds value and increases differentiation.
Let's take a quad-play example: PCCW in Hong Kong enables consumers to look up movie showtimes and buy tickets, right from their televisions. The tickets are sent to their mobile phones in the form of a barcode. At the theater, the barcode is scanned for admission. PCCW can do this because they control all the elements. They're now the biggest seller of movie tickets in Hong Kong. They not only generate transaction fees every time they sell a movie ticket, they offer a desirable service that their competitors can't match.
Or consider a location-based service that ties the television and mobile phones together: A parent can see where her children are by plotting the position of their GPS-enabled mobile phones on a map on her television. It's a service that non-telco competitors can't match, and it's of considerable value to a section of the market.
The last point has to do with paying for these new services. In highly price-competitive markets, there's a fear that telcos won't be able to increase their prices, and these new services will simply get sucked into consumer expectations. Most video providers, whether IPTV, cable or satellite, package their services into tiers: For the basic price, you get a basic tier. If you want more channels, you have to buy another tier at a higher price. If you want premium channels, you pay even more. Consumers are familar and comfortable with this model. The integrated (or converged) services that I'm proposing can be priced into service tiers, just like video programming. Service providers can offer a basic service at a low price to retain subscribers, and offer unique services on tiers to bring in more revenue.
In short, I believe that the real key to unlocking value is to integrate services through applications. As consumers see the power of tying these services together, they'll migrate to the service providers that let them do the most, not just to the providers that are the cheapest.