NEW YORK, October 18, 2007 –   While communications industry executives are banking their subscriber growth and retention plans on the offering of bundled multimedia service packages – such as ‘triple-play’, the majority of consumers say they’d readily break their contract and switch to another provider if they were offered a better price for one or more of the services, according to a global study by KPMG LLP, the audit, tax and advisory firm.

According to the findings of a global telecom study, Consumers & Convergence II: The Search for Value, Choice and Convenience in the Digital Age, KPMG found that the notion of bundled multimedia packages generating ‘stickiness’ through all-in-one convenience and unified billing is not as strong as the industry believes. The data reveals that what consumers think of as convenience and ease of use may differ from what their service providers think.

Of the 4,400 consumers surveyed by KPMG in 16 countries in Asia, Europe, and North and South America, 57 percent indicated attractive pricing is the most important driver in the decision for signing a bundled service contract.  Only 12 percent acknowledged convenience as a factor. Additionally, of those who do purchase bundled service packages, three-quarters do so primarily to take advantage of lower pricing.

Moreover, 56 percent of survey respondents indicated that even if only one of the bundled elements they subscribe to were offered cheaper or better by another carrier they would readily break their contract and switch carriers.  Only 15 percent of respondents indicated that their current service package was ‘sticky’ and they would not consider switching.

“The implication of consumer price expectations for converged services has to be alarming for service providers, because it cuts to the heart of the strategies carriers are using to attract and retain customers—the triple- or quadruple-play of services,” said Carl Geppert, partner and U.S. Industry Sector Leader in

KPMG’s Communications & Media Practice.  “Providers are bundling to maximize customer convenience to increase customer growth and loyalty, and their customers aren’t buying it (if they can buy it cheaper somewhere else).” 

In addition, the study showed consumers globally are unwilling to pay a premium for having additional multimedia services on their mobile phones.  This is consistent with findings in last year’s Consumers & Convergence: Challenges and opportunities in meeting next generation customer needs  study. In fact, when asked how their usage of a particular site or application would change if the cost of that service were to rise (or if there was a cost imposed, if it was previously a free service), respondents voted with their feet, and in nearly every category indicated that they would switch – roughly 70 percent of the time. 

The categories included instant messaging, games, multimedia, blogging/networking, news access and shopping. Interestingly, the only category where consumers showed loyalty was games. Not only would less than half of gamers switch because of price, but more than 40 percent would not even alter their usage – indicating that a successful game is thus a relatively ‘sticky’ product for consumers. 

 

There are some notable differences in consumers’ willingness to pay for specific mobile content. Similar to last year, Asian consumers are more willing to see the mobile as a multimedia device. Nearly 30 percent of Asian consumers said that they would pay a slight premium for gaming, or multimedia services (music and video streams or downloads) from their phones—compared to 12 percent and eight percent of North Americans even willing to consider minimal payment for games and multimedia, respectively. 

“This should be encouraging for Asian carriers, particularly as the iPhone age dawns in the region,” added Geppert. “However, it is somewhat disappointing for those in North America marketing the iPhone or its imitators now.” 

The study also showed that consumers do have preferred devices for specific activities, but generally the mobile phone is emerging as a central point in user experience because of its ease of use and ability to help the consumer navigate through multiple media experiences.  Somewhat surprisingly, more consumers use their mobile phones as a primary device for SMS messaging (80 percent) than for voice calls (58 percent), while other mobile phone activities such as instant messaging (8 percent), music

playing (8 percent), and social networking/blogging/video sharing (5 percent) all saw the desktop/laptop computer as the primary device.

However, data showed small, but significant, pockets of converged activity are also clear in consumer responses: seven percent of all respondents feel their preferred music player is their mobile phone, and 11 percent feel that the best way to make a phone call is through their computer.

 “Phones and communications devices, telecommunications, video and broadband/Internet service packages are increasingly multimedia,” continued Geppert.  “Individuals in the networked world expect to be able to migrate from one device or place to another and have a similar usage experience. The communications, IT and media ecosystem that is emerging continues to offer opportunity for established and new players alike.”

The KPMG/TNS study asked just under 4,400 consumers in 16 countries in Asia, Europe, North and South America to describe, in essence, their on-line experience and the devices used to access such content or destinations. Surveys were conducted largely online, with the exception of two markets—China, which were conducted over the phone, and India, where most interviews were face-to-face.  

KPMG LLP, the audit, tax and advisory firm (www.us.kpmg.com) [1], is the U.S. member firm of KPMG International. KPMG International’s member firms have 113,000 professionals, including more than 6,800 partners, in 148 countries.