1 minute overview
- Who would be a telco ? Competition has never been more fierce.
- The amount Telstra, Optus, Vodafone and the rest can charge for 1GB of data has fallen 75% in the last 2 years.
- Instead of maintaining second place in a ‘race to the bottom’, Optus has made a substantial investment in a single sports ‘property’ – rights: The English Premier League soccer season for this and the next 2 years.
- Telstra have responded in kind, making three significant announcements in the area in the few weeks since Optus revealed their decision.
- Picking a phone plan was never been easy in the first place. Many people struggle to stay on top of the current prepaid and postpaid plans from even the major providers.
- Now phone and plan shoppers have to consider content as well.
- A new breed of content phone provider who apparently provide the best of both worlds – content and affordable plans – has also arrived. OVO Mobile are setting the tone.
- We explain what the phone companies offer by way of content and attempt to offer some insight what that could mean to you.
Getting access to sport, TV shows and music on your phone
You could reasonably be questioning whether the right phone plan for you includes a season of English Football, or Australian Rugby or V8 Supercars.
So, you’ve seen the news that Optus has invested in EPL rights. You might have seen the follow up a few weeks later that Telstra made a very similar investment in the NBL. You might even know that Optus allows free music streaming on its prepaid plans and that, in a tit for tat move, Telstra has released details of free Apple music streaming.
Together, these facts might make you wonder about what content and phone companies are doing together. You could reasonably be questioning whether the right phone plan for you includes a season of English Football, or Australian Rugby or V8 Supercars. In this article we examine the situation and outline your options and keep it as simple as possible. Before we get in to the content, let’s take a look at what got is here.
The phone companies are getting squeezed from all sides
The way we watch TV is changing. Everything is on demand, time shifted, convenient and mostly free.
How many times have you read, just this week, the lives of Australians are being digitized? As soon as one new Digital phenomenon arrives, it’s overtaken by another. Free to air broadcast TV went digital and since then has seen much of its advertising revenue move to the internet. They have launched more channels and upgraded to High Definition standards. Now the phone companies are competing with them, providing video and audio to users when they can’t see a TV.
The Digital Revolution is behind these changes. Companies you never thought were competitors turn out to be stealing your revenue. From a Telstra and Optus point of view, Facebook works largely over their networks. People engage with their Facebook accounts through their phones. Even the adverts which are exploding Facebook’s revenues are transmitted over Optus, Telstra’s and Vodafone’s cellular networks. They never see a penny of that advertising money. They are part of Facebook’s ‘platform’.
From Channel 7 and Channel 9’s point of view, Netflix, Presto and Stan have made significant changes to the way people watch TV. Together with You Tube and PVR (Personal Video Recorders) the way we watch TV is changing. Everything is on demand, time shifted, convenient and mostly free. It is with expectations of service like this that the phone companies start to offer us their content.
What exactly is content for a mobile phone:
When we talk about content for mobile phones, we usually mean one or more of these things. Fundamentally, each of the following levels of content available to you on your phone represents the movement of everything ( including films, TV and music ) to the cloud. It is this trend towards cloud everything and the connection between the individual and the cloud that telcos offer which has prompted the market moves we’re seeing.
Typically, the phone companies are offering one or more of the following content types associated with one or more of their mobile phone plans.
- Streaming music:
Streaming music, from services like Pandora, Google Play Music, Apple Music and / or iHeartRadio involves accessing audio content over the wireless internet from your phone. The music itself is stored as an audio file somewhere in the cloud. Your phone then accesses that file when you want to. Some files may be stored ‘temporarily’ on your device. Streaming music means you don’t have to tie up your phone’s memory with a lot of audio files and it gives you access to thousands of music files (often recommended to you personally, according to your tastes by the service).
- Streamed Video:
A reasonably new technology we have covered in other articles, streamed video or SVOD is just a video file accessed a frame at a time from a cloud service like Netflix, Stan or YouTube. SVOD is different from normal TV. Streamed Video Content is delivered far more on the users’ terms. People decide what they want to watch, when and how – including the device they want to watch on. SVOD supports the current trend of binging on a series rather than waiting for it to be provided in weekly installments.
- Content may be ‘zero rated’ / ‘not metered:
Make sure you are clear on this one. You may not have heard it from a telco before. If the streamed audio or video contents are ‘zero rated’ or ‘not metered,’ your use of them, measured in kB, MB or GB will not be removed from your data allowance. Zero rated means you can use as much as you like and never get charged on your phone bill.
How much data does streamed music or video use?
If there is a single thing to be clear on when you are choosing the content you want to watch on your phone, it is whether the data is included / zero rated / unmetered. If content is not included in your plan, (i.e. if you have to pay for the data used to transport the content to your phone) especially if you are watching video, it can get expensive, quickly.
How much data does streaming video / music use?
- Short answer:
A lot . Which is why you need to be clear if what you are watching or listening to is zero rated or not.
- Slightly longer answer:
Video uses a great deal more than Audio when streamed.
- Streamed audio files:
Taking Spotify as an example. Set to it’s basic (‘normal’) setting, Spotify will use 100 kbps. That means it would take you one full day (24 hours) to use about 1GB of data. Using the best quality they have available, however (which is what most people would do if it was free) increases the throughout to over 300 kbps which means you would use 3GB in a 24 hour period.
- Streamed video:
Using YouTube, Presto or Netflix consumes around 1GB of data per hour when it’s accesses with Normal Definition’. Boosted to ‘High Definition’ that can change to up to 3 or even 4GB per hour. Half an hour each day (very doable during a commute) would consume 10-15GB of data per month, even at normal streaming levels.
- Comparing streamed video and streamed audio:
It’s not too hard to see that streamed video uses a lot more data than streamed audio.
Remember, you will only use this data, from your plan, if your telco charges for it. And in most of the situations we outline below, that is not the case. The role of smaller phone companies – a burning platform for big phone companies
Phone company data revenues have fallen by 75% in the last 2 years. That’s a kick in the guts for the phone companies. Data was their great savior. It was how they were going to make their money. But intense competition from MVNOs like Kogan (on the Vodafone 4G network), OVO Mobile (on the Optus 4G network) and Boost Mobile (who use parts of the Telstra 4G network) has trashed the intentions the phone companies had of growth.
Competition from these MVNOs (more often referred to in real life as ‘smaller phone companies’) belies another relevant point for the tier 1s: Optus, Telstra and Vodafone. The market is moving to SIM Only plans. A rapidly increasing proportion of the population is sick of singing a 2 year contract to get a ‘free phone and are weighing up the advantages of buying a phone outright and adding a SIM themselves. Financially, they are often much better off for so doing. Buying A Mobile Phone Outright – Will I Save Money ? Being out of contract makes a great deal of sense when, as we’ve just said, data pricing is dropping every few months.
Why are Optus, Telstra and Vodafone providing this content?
There are a couple of key decisions which are likely behind the steps they’ve taken in to providing content. You may be surprised at the level of science involved in what they’re doing.
The fundamental feat the telcos have is that they are scared of becoming a ‘bit pipe’ or a ‘dump pipe’. They have been scared of this for years. For the last decade, research houses (Gartner, Ovum, Forrester and the rest) have warned phone companies that they have a largely undifferentiated product and the value in the industry is rolling up to over the top players.
To this fear we add 2 important features :
- Australians are mad for sport:
The phone companies know this. Behind the scenes, there is a great deal of science involved in the decisions we see manifest on the Australian market. That’s where sports rights and the EPL stand out. They are one of the few things that people will actively leave their old telco to get. With sport, the telcos want to attract new customers and prevent those who have an increasingly broad array of offerings from leaving.
- People will move phone company to get it:
I’ve worked in telco and even I was surpised at the research I saw indicating how strongly feel about sport. When asked, many people said they would actually go to the trouble of changing phone company.
- Those MVNOs are stealing the low ground:
MVNOs compete with the bigger phone companies on core voice, SMS and data services. Compare Kogan Mobile and Vodafone’s pricing. They use exactly the same network. Vodafone provides Kogan’s telephone support. But Kogan give you more data and voice service for your buck. The big phone companies cannot compete on price for lower spend levels, especially in SIM only. Content gives them something else, something memorable, to provide Australians when they’re choosing their phone plan.
All of this interest is good for Australia, Australians and Australian Sport
Not all but many of the sport rights being purchased by these mobile providers are Australian. OVO has invested in V8 Supercars ad Audi Customer Racing. Telstra in Australian Basketball (NBL) as well as the bigger, headline sports of Rugby (the NRL) and Australian Rules Football (AFL. )
There are many winners from this sort of competition. The sports get an injection of money to bolster their coffers and indirectly the facilities offered by their sporting bodies around the country. In some cases, sports are broadcast which would otherwise not have been made available, increasing the reach of sometimes niche sports to eager audiences. OVO’s investment in Australian Gymnastics is a good example.
Unfortunately, there can be losers in these deals too. Where these sports were being broadcast on free to air TV (like the EPL) people who did have access, without having to pay, now have to chip in (directly from next year with a charge to access the service on top of their bill and indirectly now by having to buy a plan from Optus) to see the sport.
Optus’ content for mobile devices
We’ve started here, in this article, going in to specific on content plan inclusions with Optus. We’ve done that because it appears to be their investment in EPL which has set Australian telco going mad on the subject of mobile content.
Confusingly, Optus has different content offerings for each of it’s prepaid and postpaid services. Their much anticipated investment in to this type of sports content has fallen short of expectations. As we’ve seen from the above, their purpose is clear. They want to make a bold strategic step towards a very different future than the one they are facing.
Content included in Optus’ prepaid plans
Optus offer access to free streamed audio as part of their prepaid plans. Them doing this was a nice to have, welcome addition to their plans. It’s not, by any stretch of the imagination, a revolutionary move. Vodafone offered an almost identical facility last year.
Specifically, Optus will give you the following in a prepaid plan.
- Free streaming music:
Until mid July 2017 (that’s when it’s currently scheduled to end, anyway,) on their prepaid plans, Optus customers will be allowed to stream Spotify, iHeartradio and Pandora as much as users want, for free.
- This could save you more than you think:
As we’ve seen from the information above, if you were paying for this streamed audio yourself, it could easily cost you 1GB-2GB per month.
- That’s in addition to their regular data offers:
Optus also periodically throws in some free data and has even started offering ‘flash sales’ on line on the weekends sometimes !
Get an Optus prepaid SIM, have some recharge on it and you’ll be able to listen to as much streaming music as you’d like to. Spotify, Pandora and other OTA streamed Audio providers.
Free content in Optus’ postpaid plans
- Free access to the EPL :
On postpaid plans signed up to before the season started on August 22nd Users need to take out a SIM Only plan with a 12 month contract for at least $30 per month. You’ll get every game, and quality analysis from famous players of the sport including Ian Wright.
- Optus use an app :
Optus provide a free to download app to help you when you’re watching the games. The app improves the viewing experience and controllability of your access to the service. Plus you know everything you use is free from a data point of view when it’s installed on the app.
- Note :
They intend to charge you another $15 for the service from 2017 !
Optus lack experience in this. It’s not unfair to describe Optus marketing of their (reportedly) $180m spend on the football rights as a disaster. As soon as the news of their successful acquisition was announced, staff leaked that 200 people were going to be made redundant as a direct result of the costs associated with the new license agreement.
Optus denied it and then, coincidentally, less than a month later, laid off 200 people. Shortly after that, they released pricing for the EPL service to market that was so bad, Social Media went bonkers. People hated the Optus pricing and resented the high prices they proposed.
Optus went back to the drawing board and came up with some new pricing including free access for some to the EPL games. What will come of that next year when those customers have to pay is yet to be seen. All in all, Optus has suffered a great deal of damage as a result of the mismanagement of the situation.
Telstra’s Mobile Content for phones
Telstra have a stated aim of owning sport on a mobile device. Following Optus’ EPL announcement, Telstra have upgraded an already pretty good content offering. The full details of their content has not yet been released. It’s too new. They say they will be adding Australian basketball to the list of content services they provide as well as 3 months access to Netflix, presto and Stan.
There was a time a few years ago when Telstra would have developed it’s own content portal or streamlining music service. Instead, this time, they have decided to partner.
Telstra’s streamed video content for phones
- 3 months free Netflix, Preso or Stan:
Telstra owns part of Presto, so that bit is not a surprise. The full details of the plans to which these 3 month free subscriptions will be provided have not yet been released. We anticipate that they will be provided free, for postpaid plan users, through an app with no charge for the data.
- Streamed access to Australian sport:
Telstra already offer a single season pass for the NRL or AFL as part of their prepaid and postpaid service. Access is through an existing app and is zero rated. In mid 2016, Telstra bought the rights to the NBL although that has not yet been integrated in to their current offering. We anticipate that it will soon be. Interestingly, with Telstra, non customers can pay for a ‘season pass’. Subscriber numbers for this particular app are non trivial – between 1m and 1.5m visitors – representing the interest people have in the subject matter.
- Free access to Channel 7’s coverage of the Olympics:
While the Olympics was on in 2016, Telstra offered ‘free’ (users were still charged for the data they used ) to a large number of ‘channels’ showing the Olympic Games as shown on 7. At times, a quarter of all the traffic on Telstra’s network was a direct result of this facility.
- 6 months Unmetered Apple music:
Again, in what appears to be a direct response to Optus’ content play, Telstra have partnered to work with Apple Music. They will provide 6 months free music streaming from the Apple service. We anticipate this will be for both prepaid and postpaid customers and will be zero rated on Telstra’s network.
- Helpful ‘content information app:
Intelligently, Telstra also have a TV+ app which lets people search across service for the content they watch.
Vodafone’s mobile content
Vodafone Australia dipped their feet in the water of providing content over the last couple of years.
Comparing the content provided by Optus, Vodafone and Telstra
Given the marketing dollars which have been spent by the big 3 Australian telcos it is remarkably hard to get a clear view of the content they include in their plans. Establishing what they provide on their own plans isn’t easy – let alone comparing content services between them. Here are the headlines.
- Optus’ free access to the EPL starts, for free on the $30 postpaid plan. They provide an app to help you manage your access to the service and maintain the experience for you. This is the cheapest entry price level for access to content of any of the big three operators. However, it applies only to postpaid plans. For those who lack interest in the EPL it will hold extremely limited appeal. And remember, from next year, you’ll be paying an additional $15 to watch the season with Optus.
- Vodafone offer up to 12 month access to three facilities as a trial on some of their ‘Red’ plans. With Vodafone, you can get content with a slightly broader appeal than the other two major telcos. Vodafone offer up to 12 months access to either Stan, The Sydney Morning Herald or Spotify. Importantly, Vodafone charge you for the data you use. The major stumbling block for Vodafone’s content is that it’s provided on plans with an $80 or above spend level which rules out the bulk of the market.
- Telstra are clearly the most experienced content player around the telco landscape. Their already broad range of sports content facilities is being augmented, following Optus’ EPL announcement with Basketball and 3 months access to SVOD content through Netflix, Presto or Stan. Telstra provide you with an app, they don’t charge for the data you use watching it and it appears at this stage that any postpaid plan user will be provided access to this video content. We think the streaming Apple Music will be for both prepaid and postpaid customers.
As we’ve said here, the catch with all of this is that you’ve really got to want to watch what they’re offering. Vodafone’s inclusions will appeal to a broader base – it has a more ‘light entertainment’ feel to it. Critically, of the major telcos, Vodafone is the only one which charges for the data you use. Telstra’s offering is the most mature and broadest. Optus’ is great if you love the EPL.
OVO Mobile’s content
Against the ‘big boys’, there is one other company to consider OVO Mobile. OVO set the bar around content streamed to a mobile device for a number of reasons. We have seen interest in OVO go through the roof in recent months as their message gets to market. People are starting to realize that this small telco is outplaying the bigger phone companies when it comes to both content and pricing.
- They offer great pricing as well as great content:
Australians are like customers from all around the world. They want everything for nothing, yesterday. People baulk at paying extra for their phone plan ‘just’ because it contains some content they want. OVO have incredible rates on their Prepaid Plans which match and often better Optus’ rates. And remember, they use exactly the same Optus 3G / 4G network.
- They have great content targeted at specific segments:
OVO’s list of content is always growing and currently includes V8 Supercars, Audi A8 Customer Racing and Australian Gymnastics.
- They augment the content:
As well as standard video content, OVO provide a bunch of ancillary services and information to increase your interest in the sport. For example, when you’re watching the V8 supercars live, you can see 160 data points from telemetry in the car you’re following, right from your phone. Cool.
- They are authentically ‘#ForTheFans’:
Sadly, it seems Optus have dropped the ball a bit with their marketing, PR and other messaging around the release of the EPL rights.Conversely, OVO have one a fantastic and very credible job of supporting the sports they have bought rights to and acting in line with the best interest of their fans. One example is OVO’s recently announced investment in Australian Gymnastics – a sport that previously received very little attention but which is interesting to hundreds of thousands of Australians.
But is content on mobile phones what people really want?
Who would be a telco. If they stay as ‘bit pipes’ and add no value to their plans, they see their revenues and profits slashed every year through competition cutting the price of data, especially through price competition on core network services from smaller phone companies. The regulator has ensured there will be plenty of that. Optus, Telstra and Vodafone face stiff competition from each other, let alone from MVNOs who don’t have anything like the same costs to cover.
These already turbulent waters will be churned up further in the next couple of years with the arrival of the eSIM and schemes like Apple’s leasing option. A more SIM Only plan and Prepaid Plan focused market represents additional threat to the three major Australian networks.
In a world full of people buying their phones outright, Optus, Telstra and Vodafone have fewer of their customers under contract and more risk of what the industry calls churn. That’s why Telstra is offering many of these deals to recontracting as well as new services.
The answer is slightly obscured by Optus’ very poor execution
However it’s executed (acknowledging that Optus have much to learn, it seems, about how to go to market with content rights), providing sports rights can be appealing to some customers. But it’s a knife edge and the only people we’ve seen that do it well are OVO. Without expensive infrastructure to maintain, OVO can do both great content and great pricing. They also appear to ‘get’ the end user. They have simplified every aspect of their offering. It can be understood at a glance. They say a lot of very ‘untelco’ things like ‘when we drop our pricing, we will pass that on to you.’
For those who invest in the former content) and are not prepared to consider the latter (very competitive phone plans) an education job remains. Optus in particular have (in my view) done a terrible job or articulating the EPL, on which plans it comes free, how the service can be watched and seeing the whole experience from the fans point of view. I work in the industry and I couldn’t tell you what they’re selling without looking at our summary above.
Summing up the phone / content situation
When it comes to telcos providing content, the innovation headline is great. With these new content offerings, the phone companies can say they are providing customers with access to services which will ‘end data price deflation !’ I can see why the strategy was signed off in the board room. As we’ve covered above, the proposal was backed by solid statistics – people will change phone company for content provided to them by their service provider.
A slightly more nuanced view reveals some structural flaws in the approach.
- This is a segment approach:
Optus’ EPL rights are essentially a segment approach : Not everyone loves English football. I don’t know a single person who does. It is extremely dangerous to apply a segment strategy at a tier 1 carrier level. The whole essence of big telco is scale. It’s a multi billion dollar investment to build and maintain a national cellular network. You cannot insure that with a segment approach – unless the segment is very broad indeed. In really simple terms – not all Optus customers love the EPL. The positive effects that having the EPL apply only to those customers that do.
- They want to charge more for it:
And Optus want to charge more for the content services, on top of the price plan. One wonders what real customer research underpinned not the idea. As I said above, I am sure people liked the idea of content provided to them by their phone company. However, were those customers, in the research, introduced to the pricing of the idea. In short, people said they wanted the EPL. But did they say they’d pay for it ? Optus’ initial launch of pricing was so bad, they had to withdraw it and replace it. They took the easy option and are providing the EPL for free in the first year – but have they just delayed the PR nightmare by 12 months ? Have they addressed the core issue ? Are their customers willing to pay for this content ?
Looking at the situation from the ground up, this is a re-education job first and foremost. Australians are still getting used to the idea of streaming video on their phones. Most have had a scary bad bill from their phone company for using too much data. Many struggle to know what ‘zero rated’ means. (That’s why we described the term above.) There is not yet unanimity between the phone companies on whether or not this sort of service is charged for. Vodafone do charge for the data used streaming content in their plans, the other two telcos appear not to – for now. The lack of consistency, rightly, raises questions in the minds of SIM shoppers.
Add to this the fact that both Optus and Telstra have had teething problems with their content service. Telstra received a lot of complaints about network speed from the Channel 7 coverage of the Olympics delivered over their infrastructure. It appears to me that they avoided more negative network commentary by a hair’s breadth, especially given the five network outages they’ve experienced. Optus, of course, was worse. Their lack of experience in content showed not just with the initial tranche of pricing that they had to withdraw but in the PR nightmare associated with the launch – firing real people to pay the bill for the content rights they’d purchased.
Perhaps unsurprisingly, one of the apparent winners of this situation are Fetch TV. Fetch are a ‘platform’ content operator, selling hardware. They have described Optus’ Sport TV as a ‘laudable success’. Fetch doubled their subscriber numbers last year and want to double them again this year. As well as EPL, they offer Netflix, Presto and, in the last year and a bit, have added another 12 channels. Fetch are winning by providing the internet based content people love, with the time shifting they are increasingly coming to expect through a model people know – Fetch content is shown on your TV, not your phone.
Content propositions from telcos do show promise. That 25% of Telstra’s network utilization was being used for the men’s Basketball final (in which the Australian team was doing well) does not indicate anything in and of itself. We don’t know how much traffic was on the network as a while and this was a ‘free’ service after all. It does, however, indicate that people will use content services where there are no charges. And it is here that, through the haze and confusion of the telco content battlefield, we see OVO Mobile standing out. OVO are the only company consistently demonstrating that they ‘get it.’
OVO’s plans include content focused on large segments. 4m people in Australians love V8 Supercars. OVO is a smaller phone company – they can afford to target segments without ‘missing’ a large part of their existing base. OVO are authentically fan focused. They are credibly pursuing groups of under satisfied potential customers and giving them access to the sport they love in a new way. Importantly, OVO’s core plan pricing is incredibly competitive. OVO are hard to beat on pricing for minutes, SMS and data. To this core, they add content which is zero rated (not charged against your plan) through an app which gives a great experience.
It’s possible that content will become something we learn to love on our phones. Long commutes and lower pricing for data allocations are factors which suggest the trend will continue. To succeed, Optus and Telstra may want to take a lead out of OVO Mobile’s book.