close
GeneralNews

Broadband demand higher than video for cable companies

    Google TV

    Google TVValue propositions for cable providers are changing as broadband becomes more indispensable than TV.

    Moody’s Investors Service says in a new report, “Couch Potatoes Are Switching Screens” as Broadband demand becomes higher than video for cable companies.  Most companies are well positioned to reap the benefits, and manage the risks, of the transition.

    Our recent article How to cancel cable and save with free internet TV   shared how easy, and attractive, it is now to cancel your cable TV for Streaming Internet TV.  So many consumers today are looking for faster broadband hook up, rather than how many channels they can get from their provider.  Some are apprehensive, but not for long.  Because once you have the fast Internet Service in place, the rest is easy.  However, as Moody’s points out this week this can be hurtful to the cable companies.  And, will at least require them to re-evaluate their business model.

    “Cable providers’ largely upgraded networks and high-speed capabilities can make them the first call for consumers seeking fast Internet connections,” says Vice President — Senior Analyst, Karen Berckmann. “But if cable companies want to sell their video product as well, the onus is on them to provide a compelling video experience at an attractive price.”

    High-speed data subscriber numbers will surpass video subscribers for Moody’s-rated cable companies in the next year, Berckmann says. Fewer video customers means lower programming costs (which are paid on a per subscriber basis) and servicing the video product tends to be the most challenging and costly part of the business, so margins could benefit from the mix shift.

    But an eroding subscriber base for video also poses risks. Companies with a dwindling number of video subscribers lose economies of scale when it comes to technicians and customer service, driving up costs per customer. And a company’s brand may suffer if it seems to be giving up on video in favor of broadband.

    Companies with significant overlap with Verizon’s FiOS and AT&T’s uVerse, such as Cablevision Systems and Time Warner Cable, will need to invest in a competitive video product to survive, Moody’s says, while those with a less intense competitive footprint will find it easier to thrive as primarily broadband companies. An operator that loses a customer to FiOS or uVerse is likely to lose that customer entirely, whereas one losing a customer to Dish Network or DirecTV could still maintain a broadband relationship.

    Among companies, Comcast is both large and diverse enough to invest in video, and is demonstrating it can sustain its video position. Given their industry-leading positions in all products, Cox Communications and Cablevision could struggle to grow, while overbuilders such as Grande Communications Networks and RCN Telecommunications Services have proved cable operators can build a sustainable, albeit smaller, business on video penetration of about 20%. And for smaller operators, partnering with Tivo should bear fruit for at least the next couple of years.

    Read more at Moodys.com.

     

      Leave a Response