HAMPTON, N.H. – Earlier this week T-Mobile announced it will launch a nationwide internet-based video service in 2018 that will aim to disrupt the traditional pay-TV industry in the same fashion the carrier has transformed the U.S. wireless market through its Un-carrier movement.
The service will be built on T-Mobile’s acquisition of Layer 3, a streaming platform currently offered in five U.S. cities featuring over 275 HD and 4K channels and integrates the HEVC video compression standard to optimize viewing quality. The service will be accessible via T-Mobile’s LTE and upcoming 5G networks as well as residential internet connections from any broadband provider.
Though specific details of the service are currently minimal, alleviating the “pain points” consumers associate with cable and satellite providers is at the crux of T-Mobile’s strategy.
In the same manner T-Mobile revolutionized the wireless industry via Un-carrier initiatives including ending early termination fees and prioritizing unlimited data plans, TBR believes the success of T-Mobile’s video offering will be largely driven by remedying grievances which deter pay-TV customers including contract commitments, rate hikes and limited programming options.
Though programming costs will weigh on T-Mobile’s margins, the carrier will minimize CPE and installation costs by delivering content mainly on mobile devices and third-party platforms such as Roku, Apple TV and Smart TV apps. T-Mobile will also be able to capitalize on revenue opportunities offered by the digital advertising market as digital channels are encroaching on the traditional pay-TV market given increased targeting capabilities.
T-Mobile will face an uphill battle, however, standing out in the crowding OTT space which continues to add new entrants to compete against the likes of SlingTV and Hulu Live. Traditional pay-TV providers are also revamping their strategies to better attract cord cutters through offerings such as Comcast’s Instant Stream service and a potential new OTT offering from Verizon in 2018.
Though the effectiveness of T-Mobile’s marketing will enable the company to incrementally gain market share against incumbent video providers, TBR believes the greatest initial benefit of T-Mobile’s new video offering will be cementing its existing wireless subscriber base amidst heightening pressures in the postpaid market.
The value proposition offered by potential mobile and video bundles, coupled with the convenience of combining multiple services under a single billing, will help T-Mobile retain its postpaid base in 2018 amidst threats including Sprint’s aggressive pricing tactics and AT&T’s DirecTV Now and HBO Now mobile video offerings.
(C) TBR
