Convergence: All the Rage in 2015

Way back in 1999, when DSL was cutting edge and 3G positively futuristic, "convergence" was a term getting bandied around at the consultancy I had recently joined, in what was my first foray into the telecoms industry. Nobody outside the freshly created convergence department really knew what it meant in the context of telecoms -- only that it had something to do with combining fixed, mobile and Internet services and seemed potentially important.

Fifteen years later, convergence is all the rage. Double play and triple play might still sound like fancy moves in a sports contest to the average consumer, but they have become almost as commonplace as the kettle in our homes. And quad-play hopefuls look set to make a 4G- and fiber-charged marketing push in 2015, which might also prove to be the year when convergence propels the "smart home" into mainstream consciousness.

Whether quad play will have anything like as much impact as its multi-play antecedents is seriously in doubt. It's one thing to take shared household services from a single provider, but quite another to include more personalized mobile communications in the bundle. Operators themselves have expressed qualms about quad play: For one thing, consumers typically expect to pay less for products sold in a package than if buying them separately, which could erode average revenue per user (ARPU), a metric that is closely watched by investors.

Indeed, a looming challenge for operators will lie in persuading customers to spend more of their disposable income on a broader range of connected devices. As an executive from Deutsche Telekom AG (NYSE: DT) recently told me, you might convince a customer to pay another $10 a month for in-car connectivity, but you probably won't get them to part with much more than that for all of the Internet-enabled devices that smart home purveyors are looking to provide.

Want to know more about 4G LTE? Check out our dedicated 4G LTE content channel here on Light Reading.

Yet the race to develop a quad-play capability is already well underway in some of Europe's biggest markets. In the UK, BT Group plc (NYSE: BT; London: BTA)'s £12.5 billion ($19.2 billion) bid for EE is already forcing the country's other communications players to consider their convergence options, with rumors now circulating that Vodafone Group plc (NYSE: VOD) is mulling a move for pay-TV giant Sky now that the latest round of cable M&A speculation has been put to bed. (See BT Offers $19.5B to Buy EE and Eurobites: Vodafone Squashes M&A Speculation.)

In Germany, meanwhile, Vodafone's acquisition of cable operator Kabel Deutschland was partly aimed at making Deutsche Telekom less tempting for customers who crave quad play. (See Euronews: Vodafone Strikes €7.7B Kabel Deal.)

Being in possession of both fixed and mobile networks has other attractions, too. Vodafone has repeatedly complained that the mobile subsidiaries of fixed-line incumbents have an unfair backhaul advantage over mobile-only rivals, urging regulators to ensure that all players can access fiber infrastructure at reasonable rates. Its objections to a BT takeover of EE are likely to highlight this issue, even while it continues to address its own fixed-line shortcomings.

While convergence will obviously not be the only thing that matters in 2015, it seems likely to be one of the most influential forces in developed-world economies, with implications for companies in all parts of the value chain besides the end users of their products. What seemed esoteric in 1999 is shaping the sector 15 years on.

— Iain Morris, News Editor, Light Reading

blade-studentPn 2/11/2015 | 5:04:14 PM
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jabailo 1/11/2015 | 12:33:12 PM
Divergence Working Just Fine I've been hearing about Convergence ever since the Microsoft company meeting where they presented IAYF (for those exiting the womb in the last quarter century, that stands for Information At Your Fingertips).

Definitely SDN and NFV seem to return the role of operating systems to a "central mainframe" architecture, or what we call Cloud-Centric.   However, beyond these base level features, it seems like their will be opportunities for a thousand devices to blossom.   

Is that convergence, divergence, or simple fecundity!


iainmorris 1/9/2015 | 9:41:53 AM
Hybrid Operators have been combining fixed and mobile assets in other ways, too. Deutsche Telekom's hybrid router is an interesting example - making use of fixed and mobile technologies to boost bandwidth for broadband customers.
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