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Home Communication Services - US - March 2016

"The issues that face home TV, internet, phone, and security services are daunting. Pay TV service is on the decline with 25-34s, who are the least likely to subscribe, a trend indicative of the desirability of internet delivery of video in lieu of linear channels."

- Billy Hulkower, Senior Analyst, Technology and Media

This report looks at the following areas:

  • Dangerous drops in subscription among 25-34s
  • Loss of landlines leads to fewer bundles, more churn
  • Internet growth hits pause as mobile becomes more competitive

In the context of this rapidly changing environment, Mintel explores attitudes to internet service inclusive of interest in receiving the highest speeds of service, willingness to pay for them, and the entertainment habits that make them necessary. This Report also explores interest in changing service for internet, video, and phone service, as well as opportunities in forming new bundles of service with home security and cross-selling home services with wireless services.

This Report explores residential subscription sales of internet, phone, TV, security, and automation services. Video service delivered OTT (over-the-top) of internet services are considered from the perspective of the competitive context they provide to traditional pay TV service, and the extent to which they propel the need for high-speed internet services, but is not the focus of the Report.

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Table of contents

  1. Overview

    • What you need to know
      • Definition
      • Executive Summary

        • The issues
          • Dangerous drops in subscription among 25-34s
            • Figure 1: Subscription to pay TV and home phone service, by age, February-September, 2015
          • Loss of landlines leads to fewer bundles, more churn
            • Figure 2: Subscription to home phone and bundles of services, January 2013-September 2015
          • Internet growth hits pause as mobile becomes more competitive
            • Figure 3: Penetration for home internet service, January 2013-September 2015
          • The opportunities
            • Those who can afford services hold on to them
              • Figure 4: Subscription to pay tv, home phone, home internet, and home security, February-September 2015
            • Concern over the safety of the home exceeds security subscriptions
              • Figure 5: Concern over the safety of the home, December 2015
            • More than half of 18-44s willing to pay for faster speeds
              • Figure 6: Willingness to pay more for higher-speed internet, December 2015
            • What it means
            • The Market – What You Need to Know

              • No growth in unit volumes 2012-15
                • Home phone weighs down subs, bundles
                  • Video, internet, security all see competition from new technology
                  • Market Size

                    • Total subscriptions in decline
                      • Long-term outlook problematic
                        • Innovation in the works
                          • Figure 7: US residential TV, internet, phone, and security subscriptions, 2012-15
                      • Market Breakdown

                        • Industry tent poles: TV and internet
                          • Figure 8: Share of subscriptions, by type of service, 2015
                        • Limited declines in pay TV
                          • Figure 9: US residential pay TV subscriptions, 2010-15
                        • Growth slows for broadband
                          • Figure 10: US residential broadband subscriptions, 2012-15
                        • Home phone continues sliding
                          • Figure 11: US home phone subscriptions, 2010-15
                        • Home security sees small gain, encompasses home automation
                          • Figure 12: US home security subscriptions, 2012-15
                      • Market Perspective

                        • OTT subscriptions growing
                          • Figure 13: Subscription to Netflix and Amazon Instant Video, May 2015
                        • Subscriptions individually cheap, pricey as a full substitute
                          • 5G to challenge residential internet
                            • DIY security to keep lid on subscription pricing
                            • Market Factors

                              • Growth in US households
                                • Figure 14: Number of US households, 2010-15
                              • Video and gaming generate bandwidth needs
                                • 4K high-speed internet’s best driver
                                  • Half of youngest adults play graphics-heavy gaming
                                    • Figure 15: Use of online video, 4K, and graphics-heavy gaming, December 2015
                                  • One in four worry about safety of home
                                    • Figure 16: Concern over the safety of the home, December 2015
                                  • Younger adults more likely to worry about their home
                                    • Figure 17: Concern over the safety of the home, December 2015
                                • Key Players – What You Need to Know

                                  • Subscribers shift to higher-speed providers
                                    • TV losses cross all types of service
                                      • Cable grows voice subscriptions
                                        • Losses in phone lines weigh on bundles
                                        • What’s Working?

                                          • Cable and fiber win subscribers from DSL
                                            • Figure 18: Internet subscriptions, by provider, 2014-15
                                          • Cable services retain or grow voice connections
                                              • Figure 19: Home phone subscriptions at leading cable services, 2014-15
                                          • What’s Struggling?

                                            • No growth for pay TV providers
                                              • Figure 20: Pay TV subscriptions, by carrier, 2014-15
                                            • Bundles in decline
                                              • Figure 21: Subscription to bundled services, January 2011-September 2015
                                            • AT&T bundles wireline and wireless
                                              • Figure 22: AT&T marketing collateral, October 2015
                                              • Figure 23: AT&T direct mail collateral, December 2015
                                          • What’s Next?

                                            • 1-gig services arrive
                                              • Figure 24: Google Fiber mentions in social media, February 2010-February 2016
                                            • Competitors build-out 1-gig services
                                              • Figure 25: CenturyLink 1-gig internet collateral, January 2016
                                            • Marketing 1-gig service via quantification of activities
                                              • Figure 26: Cox G1GABLAST direct mail collateral, December 2015
                                            • A secure home is a connected home
                                              • Figure 27: Xfinity Home direct mail collateral, January 2016
                                            • ADT, Xfinity Home target DIY home security
                                              • Cable looks to wireless
                                                • New services from Charter, Comcast, TWC
                                                  • Figure 28: Cablevision Freewheel direct marketing, September 2015
                                                • VR, AR on the horizon
                                                • The Consumer – What You Need to Know

                                                  • Reports of pay TV’s death somewhat exaggerated
                                                    • 18-24s, Blacks top opportunities in internet service
                                                      • DSL exodus to continue
                                                        • Faster speed core market opportunity
                                                          • Time to consider expansion
                                                          • TV, Internet, Phone, and Security Subscriptions

                                                            • Income central determinant of subscription
                                                              • Figure 29: Home TV, internet, phone, and security subscription, by household income, February-September 2015
                                                            • Youngest adults weak on residential internet
                                                              • Figure 30: Home TV, internet, phone, and home security subscription, by age, February-September 2015
                                                            • Blacks, Hispanics behind curve in internet
                                                              • Figure 31: Home TV, internet, phone, and security subscription, by race/Hispanic origin, February-September 2015
                                                          • Interest in Changing Service

                                                            • Few subscribers plan to switch service
                                                              • Figure 32: Intent to change services, December 2015
                                                            • Focusing on urban residents
                                                              • Figure 33: Intent to change carrier, by area, December 2015
                                                            • Higher-income groups more likely to be planning a change
                                                              • Figure 34: Intent to change carrier, by household income, December 2015
                                                            • DSL remains a soft target for cable
                                                              • Figure 35: Intent to change carrier, by type of internet service, December 2015
                                                              • Figure 36: Intent to change carrier, by ISP, December 2015
                                                            • Hispanics on the move, Blacks staying put
                                                              • Figure 37: Intent to change carrier, by race/Hispanic origin, December 2015
                                                          • Pay TV: The Search for Growth

                                                            • TV penetration falling
                                                              • Figure 38: Penetration for pay TV service, February 2009-September 2015
                                                            • Younger adults opting out
                                                              • Figure 39: Subscription to pay TV, by age, February-September, 2015
                                                            • Rising ARPU holding up sales
                                                              • Figure 40: ARPU at Xfinity and Dish, 2013-15
                                                            • Rock bottom offers for BBO households
                                                              • Figure 41: Verizon direct mail collateral, December 2015
                                                            • Dish Sling experiment appears to be working
                                                              • Figure 42: Dish sling direct mail collateral, December 2015
                                                            • Courting technology sophisticates
                                                              • Figure 43: Affinity for technology, by age, February-September, 2015
                                                          • Attitudes to Speed of Internet Service

                                                            • One in three willing to pay more for faster speeds
                                                              • Figure 44: Attitudes to speed of internet service, by age, December 2015
                                                            • Age central to interest in speed
                                                              • Figure 45: Attitudes to speed of internet service, by age, December 2015
                                                          • Internet Carrier Selection

                                                            • New entrants will be welcomed
                                                              • Figure 46: Attitudes to internet carrier selection, December 2015
                                                          • Security Service Selection

                                                            • Familiarity and expertise central factors in security selection
                                                              • Best price selected by only 19%
                                                                • Figure 47: Factors in the selection of home security provider, December 2015
                                                              • Selection in transition as younger households sign on
                                                                • Figure 48: Factors in the selection of home security provider, by age, December 2015
                                                            • Security Service Carrier

                                                              • ADT maintains dominance in security
                                                                • Figure 49: Home security service provider, December 2015
                                                              • MVPDs gain strength among younger households
                                                                • Figure 50: Home security service provider, by age, December 2015
                                                            • Interest in Home Security Hardware

                                                              • Interest in security/monitoring hardware suggests broad TAM for services
                                                                • Figure 51: Interest in owning home security hardware, December 2015
                                                            • Appendix – Data Sources and Abbreviations

                                                              • Data sources
                                                                • Sales data
                                                                  • Consumer survey data
                                                                    • Direct marketing creative
                                                                      • Abbreviations and terms
                                                                        • Abbreviations
                                                                          • Terms
                                                                          • Appendix – Additional Consumer Data

                                                                              • Figure 52: Intent to change carrier, by age, December 2015
                                                                              • Figure 53: Intent to change carrier, by TV provider, December 2015
                                                                              • Figure 54: Home security service provider, by age, December 2015
                                                                          • Appendix – Additional Market Data

                                                                              • Figure 55: US residential TV, internet, phone, and security subscriptions, 2012-15
                                                                              • Figure 56: US residential pay TV subscriptions, 2010-15
                                                                              • Figure 57: US residential broadband subscriptions, 2012-15
                                                                              • Figure 58: US home phone subscriptions, 2010-15
                                                                              • Figure 59: US home security subscriptions, 2010-15

                                                                          Companies Covered

                                                                          • Time Warner Inc.

                                                                          Home Communication Services - US - March 2016

                                                                          £3,277.28 (Excl.Tax)