Less than two weeks after closing its acquisition of DirecTV, AT&T began offering bundles of satellite TV with wireless phone services. AT&T’s DirecTV $200 bundle offers high-definition television and DVR service for four TVs, with a wireless plan that provides unlimited calls and texts, and 10 gigabytes of shared data for up to four smartphones.
AT&T’s new promotion presents new challenges to Verizon, T-Mobile, Sprint, Comcast, and Dish. These firms must find new ways to adapt as people cut their traditional cable packages and spend more time watching videos and movies on their mobile devices. Verizon is moving in this direction with its mobile streaming video service. T-Mobile may also meet this challenge if it merges with Dish. Meanwhile, Comcast is exploring ways to offer wireless service.
Before Comcast can offer wireless services, it must first address a problem many enterprises face. It is stuck with outdated agreements to resell Verizon and Sprint services at prices established in 2013 that are now considered high. The market has changed dramatically since the agreements were reached, as costs for voice, text, and data plans have plummeted. Even Verizon’s Chief Financial Officer, Fran Shammo has said, “That agreement is old now, it’s stale.”
There are several lessons that all enterprises can take from this situation. First, market conditions are changing fast and in ways that can’t be easily anticipated. Second, deals that appear to be worth locking in for several years may prove to be bad in the long run. Minimum Annual Revenue Commitments (MARCs) and long term contracts should have escape clauses and outs that do not include huge penalties. Information from Telecom Expense Management (TEM) software can be used to proactively identify shortfalls before the penalties are too large. Finally, telecom managers should be actively involved in strategy sessions before the contract negotiations begin. These strategy discussions should explore future plans to avoid the problems that Comcast and others are now facing.
Mergers, innovations, and new data landscapes make these times difficult for telecom and data managers trying to look ahead and make good decisions. In our experience, enterprises that utilize TEM software to track telecom services, assets, and consumption patterns tend to come out with better deals than those who look for quick hit savings without planning for the future.