Light Reading

Pondering Pre-Paid Cable TV

Jeff Baumgartner
The Bauminator
Jeff Baumgartner

8:00 AM -- There's an interesting idea floating about that would give cable an opportunity to offer video services under a pre-paid model that's proved popular in the cellular phone world.

The notion is to sell a simple and inexpensive set-top box at outlets like Walmart, Target and Walgreens and pair them with pre-paid cards (or maybe codes of some sort) that would load services by the hour, week or month. Or maybe it could be taken a step further and let consumers also buy some services individually – for example, an HBO card that's good for a month.

The rumor is that at least one major U.S. MSO is currently exploring a pre-paid model, and, according to a source, would involve a low-cost, two-way box that has yet to be developed. Another source said Comcast Corp. (Nasdaq: CMCSA, CMCSK) looked into this idea years ago, but didn't follow through with it. It's not known which major operator is the one that's looking at it in this go-round.

My first reaction to the idea is that it could let an operator market video services to lower-income households and remove the non-payment risk factor from the equation -- something that Dish Network LLC (Nasdaq: DISH) has had to contend with over the years by tailoring some of its packages for the lower end of the market.

But some other potential usage scenarios were brought to my attention. It could give cable a form of a la carte or a more metered option in which the customer would only buy services during a particular season (i.e., for students and snowbirds that churn out in droves in the second quarter of every year), or long enough to catch a TV series or the NFL football season. Or perhaps it could be made into something that would be attractive to consumers who have never subscribed to cable. Maybe it would make a good Christmas gift for grandma or weird Uncle Charlie. Who knows? There are lots of directions a pre-paid cable TV service could go.

But it's not without risk. Regular, recurring customers that take a cable's full subscription TV packages might be encouraged to drop them in favor of a pre-paid model.

And a lot would need to happen to make this idea go. As I understand it, the discussion also involves a two-way set-top box (so it could support video-on-demand and an interactive guide, perhaps?) that's yet to be developed. And it's not known if just any manufacturer would be allowed to make these boxes, because it's apparent that the cable operator would still be the one pulling the strings. But if the box is to be low-cost, I don't see how that happens using a CableCARD slot and module, which would keep such a device prohibitively expensive.

Digital Transport Adapter (DTA) boxes are dirt cheap (less than $50 per unit for hi-def versions) and use integrated security (thanks to an Federal Communications Commission (FCC) waiver) but are inherently one-way and can't be sold at retail under the current rules. Perhaps a two-way cable device with "removable" downloadable security could be developed that also sidesteps the FCC's current ban on boxes with integrated security. Just a thought.

And cable's billing, provisioning and backoffice systems aren't really setup for this sort of thing yet. So there are still lots of questions about how this would be put together and what a pre-paid cable service might even look like.

But if this exploration turns into something real, it could give cable a new way to establish a retail model for video services and succeed in an area that tru2way did not, and give the industry a new way to target consumers with video services. (See Tru2way: Epic Fail at Retail.)

— Jeff Baumgartner, Site Editor, Light Reading Cable

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User Rank: Light Sabre
12/5/2012 | 5:28:20 PM
re: Pondering Pre-Paid Cable TV

Jeff -- Isn't this a bit of a stretch? The user premises still has to be connected to the cable network for this to work, right?

User Rank: Blogger
12/5/2012 | 5:28:19 PM
re: Pondering Pre-Paid Cable TV

The pre-paid concept has been kicking around in cable marketing circles for awhile and I recall that some local systems use pre-paid cards for certain services (multicultural tiers, premium services, etc).

There is a sizeable population that purchases mobile and other services in this manner. As Jeff notes, it can be used for seasonal cable subs (college kids, vacation homes) and the large number of people who re-locate each year. The trick is using a cheap box -- and either selling it or making sure you can get it back at the end of the pre-paid period.

Yes, the connection already needs to be in place, but that's not a tall order since most homes and MDUs already are wired. Cable Internet and phone might come into play but at this point I think this is intended for traditional cable TV.          


User Rank: Light Sabre
12/5/2012 | 5:28:19 PM
re: Pondering Pre-Paid Cable TV

There's definitely OTT potential, but the business case for this seems more suited to a company like Netflix.

User Rank: Light Beer
12/5/2012 | 5:28:19 PM
re: Pondering Pre-Paid Cable TV



This seems like a perfect OTT addon for a cable guy.




User Rank: Light Beer
12/5/2012 | 5:28:18 PM
re: Pondering Pre-Paid Cable TV

This sounds like a job for ActiveVideo. They could run the whole thing from the cloud to a bare-bones device, and use smartphones and tablets to control the experience.

User Rank: Light Beer
12/5/2012 | 5:28:18 PM
re: Pondering Pre-Paid Cable TV

Can you get around the two-way hurdle by pairing the DTA and subscriber with an Android or iOS app? Granted, that narrows the lower income target market somewhat. 

User Rank: Blogger
12/5/2012 | 5:28:13 PM
re: Pondering Pre-Paid Cable TV

jtombes- I agree. Why deal with two-way tech and a cablecard when everything's moving in the direction of IP anyway? Especially for on-demand content. A DTA already provides the linear content. How expensive can it be to add IP connectivity to the box to provide access to an interactive guide and VOD? It would be different if the MSOs didn't have another use for those IP assets, but they do. That's not something they'd be building for this service. It already exists, or is in progress. 

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