& cplSiteName &

Cable's Speed Addiction

Michael Harris
LR Cable Opinion
Michael Harris
1/31/2008
50%
50%

In February, the Association of Cable Communicators will announce the winners of its annual Beacon Awards "honoring excellence in communications and public affairs throughout the cable industry." (Stop laughing, we haven't reached the punch line yet.)

Were there an instructive "What-Not-to-Do" category in the judging, Time Warner Cable Inc. (NYSE: TWC) would undoubtedly share top honors for its "Usage-Based Billing in Beaumont" PR campaign with co-recipient Comcast Corp. (Nasdaq: CMCSA, CMCSK) for its "BitTorrent Throttling" customer appreciation program (chortle here). (See TWC to Test Broadband Toll Booth and Comcast's P2P Problem.)

Tongue-in-cheek cable PR comments aside, both episodes highlight a real problem for MSOs – the cost of their unchecked addiction to selling speed.

It's no secret that broadband Internet access has been the engine for cable operator cashflow growth over the last decade. To keep that motor humming, MSOs have continually ratcheted up the advertised peak downstream burst speed for their broadband Internet products. The motivation is twofold.

First, creative marketers that they are, cable operators have concluded that being "the fastest" is their optimal differentiation in the broadband marketplace. Second, by continually adding more megabits to their product, MSOs have avoided lowering broadband Internet prices in the face of DSL competition. So far, the approach has worked insofar as it as helped MSOs maintain broadband Internet ARPU (average revenue per user). However, cracks in the façade are starting to appear.

It's not surprising. Logically, increasing access speeds opens the door to increased consumption, and thus, the expenses required to fulfill it. That means more capital outlays for infrastructure hardware upgrades, as well as skyrocketing expenses for fatter backbone connectivity.

So, while ARPU may remain steady, two other key metrics by which MSOs are judged – operating cashflow and capital spending – are put under pressure. Hence the recent maneuvers by MSOs to curb consumption, either by throttling bandwidth-hungry applications (like Comcast) or tinkering with usage-based billing plans (à la Time Warner).

Here's a sign of the severity of cable's speed addiction. At the same time MSOs are feeling the pain from spiraling consumption-related costs, they are touting plans to further increase access speeds, as high as 100 Mbit/s, by shelling out more capital for Docsis 3.0. It seems they just can't help themselves. And unfortunately, the conflicting messages MSOs are communicating to the marketplace are confusing consumers.

An MSO talking 100 Mbit/s out of one side of its mouth and usage caps out the other is like a bi-polar buffet restaurateur. They continue adding more entrees to an all-you-can-eat spread, and then reduce the size of the plates and tell diners they only have 10 minutes to chow. It's a recipe for dissatisfaction. The buffet looks bigger and tastier – so the patron's hunger grows – and then they are asked to practice portion control.

Confused and cranky customers tend not to be loyal customers, particularly in a soft economy, when they are on the prowl for savings.

Even for bigger spenders, cable's "being the fastest" positioning has drawbacks. Because MSOs have convinced consumers that speed should be the primary criterion for their broadband purchasing decision, all a competitor needs to do is offer a faster product to win away cable customers. Can you spell "FiOS"? Additionally, ultra-fast pipes enable competition from over-the-top video providers. Worst of all, though, the always-increasing speed strategy rewards (from a profitability perspective) cable's worst customers.

By its own estimates, Time Warner Cable reckons it is suffering from "5 percent of subscribers who utilize over half of the total network bandwidth."

Back to the buffet analogy, it's like an old Hill Street Blues episode where a raging, rotund fellow pulled up a rolling stool to an all-you-can eat salad bar and started coasting around and pigging out. His defense: "But it says all you can eat!"

Wisely, the manager called the cops on the guy, instead of telling everyone else in the restaurant to eat less. Cable operators should do the same. Rather than capping – and irking – 100 percent of their customers, MSOs should simply refuse service to the hogs. Let them switch to FiOS and cripple a competitor's cashflow.

Selling by speed, and then compensating with caps, is a recipe for trouble.

What really matters to broadband consumers is the overall quality and value of the experience, a blend of access speed, low latency, reliability, support, bundled applications, and freedom from worries about usage penalties – all at an attractive price, of course. It's time for cable to slow down with speed-related hype and sell on quality and common sense.

— Michael Harris, Chief Analyst, Cable Digital News




Interested in learning more on this topic? Then come to Docsis 3.0 Strategies: From Product Development to Service Deployment, a conference that will take a comprehensive look at the cable industry's plans to roll out its next-generation architecture around the world. To be staged in Denver, March 19, admission is free for attendees meeting our prequalification criteria. For more information, or to register, click here.


(1)  | 
Comment  | 
Print  | 
Newest First  |  Oldest First  |  Threaded View        ADD A COMMENT
dontcallmedarling
50%
50%
dontcallmedarling,
User Rank: Light Beer
12/5/2012 | 3:48:39 PM
re: Cable's Speed Addiction
I tire of directionless tirades like this. There's nothing to write about this week. Let's complain about usage throttling again. Yawn.

Yes, MSO feed on speed as a selling point. Dude, no one said you can't take stuff down the fastest. To you use your analogy BUT correctly, you can eat as fast as you want. But that is completely different from volume or usage. The Buffet, as you so incorrectly allude to, is SPEED. It's right in your title. So you can eat as fast as you want up to their advertised rates. It's the race it's not a Roman eat-a-thon. It's a Chariot race.
From The Founder
Following a recent board meeting, the New IP Agency (NIA) has a new strategy to help accelerate the adoption of NFV capabilities, explains the Agency's Founder and Secretary, Steve Saunders.
Flash Poll
Live Streaming Video
Charting the CSP's Future
Six different communications service providers join to debate their visions of the future CSP, following a landmark presentation from AT&T on its massive virtualization efforts and a look back on where the telecom industry has been and where it's going from two industry veterans.
LRTV Interviews
AT&T: Creating Dynamic Networks to Meet Business Needs

5|26|17   |   4:24   |   (0) comments


As enterprises need more dynamic networks, service providers need to deliver on-demand, virtual services to meet those needs. AT&T is creating a networking fabric to mix-and-match SDN technologies for enterprise customers, says Roman Pacewicz, AT&T senior vice president for offer management and service integration, in an interview at Light Reading's
LRTV Interviews
EdgeConneX on Industry Headwinds & Tailwinds

5|26|17   |   2:41   |   (0) comments


At Light Reading's Big Communications Event 2017, EdgeConneX CTO Don MacNeil discussed the value of partnerships in the digital world.
LRTV Documentaries
4 Steps Toward a Higher Network IQ

5|26|17   |     |   (0) comments


At the Big Communications Event in Austin, Texas, EXFO CEO Philippe Morin explains how sensors and analytics can boost a network's intelligence and enable on-demand customer experiences. Find more BCE 2017 coverage here.
LRTV Interviews
BT's McRae Sheds Light on 4K Strategy

5|25|17   |   4:45   |   (0) comments


At Light Reading's Big Communications Event 2017 in Austin, Texas, BT Group's Chief Network Architect Neil McRae talks about what it took for BT to broadcast live sports in 4K. Catch up with all our BCE coverage at http://www.lightreading.com/bce.asp.
From the Founder
How the NIA Aims to Advance NFV

5|25|17   |   08:07   |   (1) comment


Following a recent board meeting, the New IP Agency (NIA) has a new strategy to help accelerate the adoption of NFV capabilities, explains the Agency's Founder and Secretary, Steve Saunders.
LRTV Custom TV
Better Solutions That Address Growing Scale

5|25|17   |     |   (0) comments


For Comcast, the X1 rollout and 17-fold increases in broadband speeds in the past 16 years are among factors driving the need for Energy 2020 solutions that reduce cost and consumption, says Mark Hess.
LRTV Custom TV
Ethernity Network Delivers Instant Offloading of Network Functions With All-Programmable Intelligent NIC

5|25|17   |     |   (0) comments


David Levi, CEO of Ethernity Networks, explains that programmability of the hardware makes the company's All-Programmable Intelligent NIC uniquely beneficial for communications service providers that need advanced data appliances with agile support of virtualization. Utilizing the company's patented network processing technology, Ethernity offers data path ...
LRTV Documentaries
BCE 2017: Vodafone Gets Obsessed With Cloud-Native

5|25|17   |     |   (0) comments


Vodafone's Matt Beal updates us on Project Ocean and explains why simple virtualization isn't enough of a goal for network transformation. Catch up with other BCE 2017 keynotes and news at http://www.lightreading.com/bce.asp.
LRTV Documentaries
BCE 2017: Intel's Take on Network Transformation

5|24|17   |     |   (0) comments


In this BCE 2017 keynote, Lynn Comp discusses Intel's vision for areas such as analytics, automation and service assurance. For more videos and BCE coverage, see http://www.lightreading.com/bce.asp.
LRTV Documentaries
Order From Chaos: The Steve Saunders BCE Keynote

5|24|17   |   17:27   |   (0) comments


Kicking off BCE 2017, Light Reading founder Steve Saunders lays blame for NFV's slow ramp-up and urges telecom to return to old-fashioned standards building and interoperability testing.
Think of this as the video sequel to the recent columns he's written about NFV and the prospect of a telecom app store. (See

LRTV Documentaries
Service Provider Panel: Partnering in the Digital Era

5|22|17   |     |   (0) comments


Coopetition has always been part of telecom, but the ecosphere now includes data centers, vendors, apps developers, cloud service providers and Internet content providers. This BCE 2017 panel explores the new attitudes among network operators as to the value and variety of ...
LRTV Interviews
Site Demo: AT&T's IoT Flow Platform

5|19|17   |   04:25   |   (0) comments


At AT&T's R&D center in Tel Aviv, Israel, project leader Eyal Segev talks about the operator's Flow platform and how it helps to prototype IoT applications.
Infographics
With the mobile ecosystem becoming increasingly vulnerable to security threats, AdaptiveMobile has laid out some of the key considerations for the wireless community.
Hot Topics
Cities Clamor for More Clout at FCC
Mari Silbey, Senior Editor, Cable/Video, 5/23/2017
What's Blocking 4K TV Today
Alan Breznick, Cable/Video Practice Leader, Light Reading, 5/22/2017
Sonus & Genband Finally Combine to Form $745M Company
Dan Jones, Mobile Editor, 5/23/2017
Like Us on Facebook
Twitter Feed
BETWEEN THE CEOs - Executive Interviews
One of the nice bits of my job (other than the teeny tiny salary, obviously) is that I get to pick and choose who I interview for this slot on the Light Reading home ...
TEOCO Founder and CEO Atul Jain talks to Light Reading Founder and CEO Steve Saunders about the challenges around cost control and service monetization in the mobile and IoT sectors.
Animals with Phones
What Brogrammers Look Like to the Rest of Us Click Here
Live Digital Audio

Playing it safe can only get you so far. Sometimes the biggest bets have the biggest payouts, and that is true in your career as well. For this radio show, Caroline Chan, general manager of the 5G Infrastructure Division of the Network Platform Group at Intel, will share her own personal story of how she successfully took big bets to build a successful career, as well as offer advice on how you can do the same. We’ll cover everything from how to overcome fear and manage risk, how to be prepared for where technology is going in the future and how to structure your career in a way to ensure you keep progressing. Chan, a seasoned telecom veteran and effective risk taker herself, will also leave plenty of time to answer all your questions live on the air.