Digital Consumer Spending for a cord-cutter.
I spend $40 a month on fixed broadband. That includes a bundle for voice minutes that you can’t opt out of.
On mobile I pay another $40 a month. You get a bundle of 500 minutes and mobile broadband for 500MB. I’d like to opt out voice, but I do not dare to because mobile networks coverage is far more reliable for voice than for data, and because of the cap in mobile data. That might change one day with LTE.
But I digress, let me go to he point. At $80 a month, you pay almost $1000 a year to a telco for connectivity —although that includes voice too.
How much do you pay for the services that connect you to friends, store your files, let you share your photos, videos, ideas? In other words, how much do you pay for Gmail, Dropbox, Google Drive, YouTube, Maps, iCloud, Whatsapp, Instagram, Skype, Twitter, Facebook and Linkedin? Most likely you pay zero, unless you are one of the few paying premium upgrades.
And the best part about all these Internet Services from the cloud, is that no matter what telco you choose to churn into, all those services follow you. Without any migration, without you noticing any impact.
Why would you want any of these services to be attached to a telco? Why would you want to hinder your bargaining power for the bulk of your digital expense, connectivity?
If your services are over-the-top (OTT), decoupled from any telco, you are free to bargain for a lower price for those $1000 a year you pay them. As a consumer, you prefer the telco to be a commodity. That gives you buying power.
Add to that a history of telcos abusing on roaming fees or with the expensive mobile data packages of early days. For many people, the perception is that telcos charge you for what Internet players give you for free. Leave aside that Internet startups have beaten corporate R&D departments on innovation, seen from the consumer angle.
Consumers see OTTs as a way to counter balance the historical telco power. Same goes for Cable.
This is bad news for telcos, in the long run. As of today, telcos still grab the biggest piece of consumer spending in Digital. The problem in the long run is that as connectivity gets commoditized, all the new services with their promising revenue will be OTT. For a telco there are two options, either playing the OTT game too, or prepare to run the business as a pure utility.