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Issue Date: April 2008

Consumer is king when it comes to convergence of communication and technology

April 2008

We are seeing greater digital convergence than ever before, as evidenced by the integration of computers, telephones, recording and broadcast technologies, all leading to newer and more effective means of communication. The traditional BBC is now broadcasting on the Internet, Apple Computers supplies digital music and video downloads, Google is more of an advertising company than a search engine and Microsoft has proclaimed it is a media, not an IT, company. The traditional divides between those in technology, those in information and communications, and those in entertainment and media have become extremely blurred.

Angeli Hoekstra, PricewaterhouseCoopers global leader for IT Governance and SA leader for Technology Solutions, says that various factors have been driving this trend of convergence. "Costs of communications, including those of fibre-optic networks, continue to decline, broadband is becoming an easily available option, almost all forms of media can be digitised in some form, and technological processes allow for processor and storage capacities to double every year."
And consumers themselves are demanding convergence. A recent PwC study focusing on the digital consumer shows that the man in the street, who makes use of several social networks, does not mind seeing advertising on various platforms, particularly if free downloads are available.
There is some resistance to advertising on cellphones, but consumers will overlook this if the cost of calls is reduced.
Hoekstra says we need to thank the Internet Protocol, which has enabled us to go from communications contained in separate silos, such as those for voice vs video vs data, to something that accommodates all of these applications. "IP serves as the convergence layer, facilitating various services such voice, e-mail and video conferencing and links these back to the underlying structures, be they fixed or mobile line carriers, cables or wireless setups."
This trend of convergence has had a significant impact on the consumer, who would previously passively receive data in a form dictated by the sender in standalone or separate forms of communications. "Now the power has shifted to the consumer who can consume on demand, in a format he has designed and dictates, whenever and wherever he likes, and through the application(s) he has selected."
Hoekstra says this trend of convergence has significant implications for online distributors and all companies in this chain need to be aligned with the various components that make for an effective convergence environment. "This is why the industry is seeing heightened activity in mergers and acquisitions and alliances and other forms of partnership."
Through appropriate corporate structures, all players (such as the content owner, advertisement provider, service provider, infrastructure platform provider, content aggregator, channel to end user, content application provider, end user device provider) need to be in sync with each other. Otherwise, one weak link could destroy the customer experience.
With greater convergence a given, Hoekstra says the question arises as to who will survive and who will dominate the future landscape. One scenario is that distributors of content, such as radio or cable companies, take top spot and own the customer relationship. Another possibility is that content owners such as music, online gaming or movie conglomerates develop direct relationships with customers. Another scenario is that the service providers such as Google, Yahoo or AOL prevail by offering one-stop shops for access to several personalised applications.
The trend of convergence will include far greater use of VoIP. Digital homes and businesses will become the norm, with numerous applications and devices that link everything, from security to games. A central media server will integrate all content devices instead of these being standalone. In fact, we are already seeing these products in the marketplace, such as Philips' 'connected home' offering.
Although convergence is gaining momentum, Hoekstra says there are a number of factors hindering its progress. These include a lack of standards, absence of regulation, piracy, protection, privacy and security issues, confusion stemming from technology choices, the pace of change in technology, deflation, and uncertainties in competition and partnerships.
For companies wanting to maximise the opportunities of convergence, the business model needed is more open-ended than the traditional approach and must be agile, innovative, integrated, risk heightened, and completely understand the customer. "Because in the end, the customer is what it is all about."

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