How soon will AT&T and Verizon, whose revenues once were driven by voice products, find they both generate more fixed network revenue from video and high speed access than from voice?
Answer: AT&T will likely get there sooner than Verizon.
In fact, AT&T might find that voice is just the third most important revenue source, in the consumer fixed network segment, just as soon as it acquires DirecTV.
AT&T Revenue Mix
Right now, AT&T earns $33.6 billion annually from its “Data” category, which includes all U-verse video revenues.
Assume video accounts generate $960 annually ($80 a month per video account), and that AT&T has 5.5 million such accounts. That implies annual revenue of about $5.3 billion in video revenue.
But DirecTV alone earned $31.8 billion in 2013.
In other words, should AT&T succeed in its bid for DirecTV, video entertainment would possibly reach $37.1 billion, eclipsing even data services–at about $28.3 billion in annual revenue–as drivers of AT&T fixed network segment revenues.
Voice services generate about $20.3 billion.
After a DirecTV acquisition, voice would be only the trailing third most important revenue source for the fixed network segment.
Of $89.7 billion in total revenues, voice would represent 22 percent of fixed segment revenues.
Video would represent 41 percent of total fixed network revenues. Internet access and other data services would represent 32 percent of total fixed network revenues.
The Picture at Verizon
The picture at Verizon might be different. Verizon had $39.2 billion in fixed network revenues during 2013, but with a different composition of revenue.
About half of Verizon’s fixed network segment revenue comes from enterprise or wholesale sources.
So $17.3 billion is earned from “mass markets,” including small business. Removing small business accounts, the consumer business generates about $14.7 billion annually.
Verizon has about 5.3 million FiOS video customers. Assuming the same $80 a month contribution from a video account, Verizon might earn $960 per account, or about $5.1 billion from video services.
So video would represent about 35 percent of consumer segment revenue.
Assuming only $480 in annual revenues from Internet access, Verizon might generate about $4.3 billion from consumer Internet access, or 29 percent of consumer fixed network revenues. Voice might contribute about 36 percent of total fixed network revenues earned from consumers.
So, at Verizon, video entertainment and voice might be about equal contributors of revenue, while Internet access provides less revenue, in the consumer segment.
But keep in mind that the whole consumer segment is only half of fixed network revenue. Overall, voice and data revenues are much more significant at Verizon, than at AT&T.
Also, revenue compositions would be different, for either carrier, if one does not agree with the revenue contribution assumptions. Perhaps $80 a month is too much, or $40 a month for Internet access too low.
And just what to attribute for voice, in a triple-play bundle, also is a big issue.
In a triple-play bundle, all contributions are a matter of “allocations,” since voice, video and data all are sold as one retail package. Some might simply assign a third of total revenue each to video, Internet access and voice.
Others might say it is more realistic to assign $70 for video, $40 for Internet access and then perhaps $10 for the voice line.
Perhaps only half of customers who buy a triple play actually would buy the fixed voice line, otherwise. That would make the revenue for voice, for the customers who actually would buy it as a stand-alone product, about $20 a month for triple-play accounts.
The point is that relative contributions for consumer video, Internet access and voice, for consumer fixed line accounts, now are a matter of allocations, when the product is a triple-play bundle.
Still, voice is destined to decline, as a percentage of total revenue, for consumer fixed services accounts. AT&T simply will see voice drop to the smallest contributor, the quickest, should the DirecTV acquisition be approved.