One possible scenario for the telecoms industry during the current economic slowdown is that fixed-to-mobile substitution (FMS) will be accelerated as consumers reduce their communications bill by cutting their fixed line in favor of mobile.
With mobile broadband deals now more readily available and affordable, there is a potential "double whammy" to this in that fixed line operators could not only lose further fixed voice revenues but valuable broadband revenues as well. Ovum therefore commissioned a survey of over 8,000 consumers to find out their plans.
The majority of consumers will scale down rather than cancel their broadband service
At the top level broadband seems to remain a "˜sticky' service. Ovum's survey data shows that only 7% of respondents would ditch their fixed line for both voice and broadband in favor of mobile services, and only 1% said they would be prepared to keep their fixed voice but cut their broadband access. Cutting the mobile subscription stood at 6%, making fixed broadband access actually even "stickier" than mobile to those that are planning on keeping the fixed telephony line.
The majority of respondents, 65%, said they would simply look to reduce spend in certain areas, rather than canceling one of their services altogether. At the top level, how they reduce that spend was fairly evenly split across reducing fixed voice calls, mobile voice calls and pay-TV subscriptions.
Unfortunately for pay-TV operators, more consumers look to be planning to cut back on extras such as pay-per-view movies, rather than increase spend in this area with the idea of saving on other social activities. Ovum suspects that this will be more related to movie rental subscriptions, rather than true pay-per-view, which we still suspect will see an increase as consumers go out less.
Unsurprisingly, the decisions around whether to reduce spend on fixed and mobile communications differ with age group. People aged between 16 and 25 are more likely to either drop their fixed line altogether (10% of 16- to 25-year-olds) or keep a fixed connection but rely more on their mobile phone for calls (28% of 16- to 25-year-olds) than any other age group.
As the users get older they are less likely to rely on their mobile and more likely revert back to their fixed line, with only 5% of over 55s saying they would cut their fixed line. Keeping both mobile and fixed voice services but cutting broadband access is not a popular option across all age groups. Countries with a younger population will therefore see different trends to those with an older population.
As well as age, culture also plays its part. Ovum's data shows clear differences in countries where mobile services and applications are already firmly engrained into the culture, such as Korea.
In Korea 15% of respondents would cut their fixed line altogether, compared to roughly 5% in most Western European countries - other than Italy, where 11% said they would. Conversely, in Germany and France 11% of respondents said they would rather keep their fixed line and cut their mobile service. In part this will be related to age demographics, but cultural differences also play a large part.
There will always be differences between the various social segments and cultures.
However, what is common across the world is that broadband Internet access is becoming an essential part of everyday life. It has become part of how people communicate, book their holidays, search for work, find out news, purchase goods and educate their children.
When money becomes tight consumers obviously look for ways to save money, but for the vast majority of people cutting out their access to the Internet and associated services and applications is just not an option.
The more mobile segments of the community will favor pure mobile solutions, and as the technology improves this segment will gradually grow. However, the economic slowdown will not see a mass defection away from fixed broadband.
Having said this, operators can expect to see an overall reduction in ARPU as consumers look to trim their overall communication bills where possible, and this goes for mobile as well as fixed operators.