What is the impact of triple play on telecoms and ICT?

Source: KaribeCaribe

Triple play, and even multiple-play, operations are becoming increasing popular in the telecoms/ICT space  in the English-speaking Caribbean. This post outlines some of the economic, technical and regulatory considerations of those operations, and briefly discusses triple play in the region.

Today, telecoms and cable operators can both offer voice, Internet and video services over their networks. The provision of these three distinct services is often referred to as “triple play”, and they can be carried over fibre optic, coaxial cable, copper wire, mobile, or even satellite networks.

Triple play networks and services are generally considered effective at fuelling competition in telecoms and ICT markets, since their retail prices tend to be highly competitive. Additionally, they can be quite innovative in the types of services they offer, as well as with regard to service delivery and pricing.

Key economic considerations

One of the key benefits of triple play operations is the economy of deployment. In establishing any network, fixed-line or wireless, a significant portion of the overall cost is due to construction – digging up roads, laying conduits, purchasing land, erecting towers, etc.  In being able to use the same infrastructure to carry other services, triple play operators (TPOs) are able to realise considerable savings. It also means that expanding or modifying their service offerings can usually be undertaken relatively inexpensively.

In addition to the savings realised in network deployment costs, establishing triple play operations allow telecoms and cable operators to offset losses in revenue due to competition in their traditional service markets. Further, since more than one service is being offered, TPOs can benefit from economies of scale realised in marketing, e.g. one budget, but branding and promoting three (or more) services.

On the flipside, customers benefit from highly competitive pricing packages, which TPOs usually offer. This, along with consolidated billing for a number of services, can lead to greater customer retention and increased revenues.

Key technical considerations

Since triple play services share infrastructure, the focus and expense tends to be on the equipment at the ends of the network, i.e. at the provider’s exchange and at customers’ premises that facilitate provision of the various services.  At the customers’ premises, the various services must be disaggregated. Hence considerable attention is given to the types of set-up boxes or multi-purpose gateways that are required, since those devices ensure accurate delivery of the services specified by the customer.

At the same time, it is highlighted that depending on the medium that is being used to carry the services – fibre optic, coaxial cable, copper wire, etc – the equipment requirements and network design tend to be more complex than for networks carrying a single service. Further, some types of infrastructure are better suited to carry certain services than others. This is particularly evident with regard to broadband services, where wire-based networks tend to offer considerably higher transmissions speeds than wireless or even mobile/cellular networks. It therefore means that the TPOs regularly need to address a broad range of technical shortcomings, based on the infrastructure deployed, in order to provide quality services.

Select regulatory implications

Regulating TPOs can be particularly challenging for a number of reasons. For example, since infrastructure is being shared across a number of services, it can be difficult to fully disaggregate the costs of providing each individual service. Typically, TPOs launch with a single service, which would have borne most of the expense of deployment. It therefore means that determining the true cost of providing an add-on triple play service can be quite complex, since much of the core expense would have already been covered in the initial roll-out.

Further, for add-on triple play services in particular, since the cost of providing those services are relatively minimal, it means that regulators are often concerned that TPOs will engage in predatory pricing. As result, in many countries where TPOs exist, regulators have established pricing floors, which set a lower limit for the retail prices offered for specific services.

Triple play in the region

Within the English-speaking Caribbean, triple play offerings are evident in a few of the countries, such as the Bahamas, Jamaica, Grenada, Saint Lucia, St. Vincent and the Grenadines and Trinidad and Tobago. TPOs in those countries offer voice, Internet broadband and cable TV, which can either be purchased separately, or as bundled packages comprising two, or all three of the services.

Source: Flow

In the region, telecoms regulation is still focussed on overseeing voice (telephony and mobile) communications. Internet (ICT) regulation is still a new area; the rules and best practice are still being developed. Additionally, depending on the country, content or broadcast services often do not fall under the remit of the telecoms regulator, which means that a TPO could be subject to two or more regulatory frameworks.

Further, telecoms regulation in the region is still skewed towards regulating incumbents, or those that are determined to possess significant market power for specific services. Many TPOs tend to be newer entrants to the telecoms market, usually expanding their operations from broadcast/cable TV services. They often are not subject to considerable oversight, and tend to be focussed on increasing their service coverage in order to compete more directly with other voice and Internet operators in the sector.