Light Reading

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
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.
Flash Poll
From The Founder
Networks of the future will rely on "white box" switches and servers rather than proprietary hardware and that's going to alter the shape of the communications industry. Who says so? John Chambers.
LRTV Custom TV
The Benefits of HyperScale Clouds for NFV

3|27|15   |   01:50   |   (0) comments


Hyperscale cloud has been developed by the Internet giants to support the creation and delivery of software-based services at blistering speeds, and at the lowest possible cost. The original ETSI NFV vision was to adopt hyperscale cloud architecture and practices. This vision has become somewhat obscured along the way, due to misunderstandings about the hyperscale ...
LRTV Huawei Video Resource Center
eLTE Rapid Meets the Need for Speed

3|26|15   |   4:45   |   (0) comments


Designed especially for emergency and dedicated ad hoc local mobile communications coverage, Huawei's eLTE Rapid solution can deliver trunked voice, video and data coverage for multiple users over a 6km range and be set up in just 15 minutes, explains Huawei's Norman Frisch.
LRTV Huawei Video Resource Center
On Videos: Challenges & Opportunities

3|26|15   |   5:56   |   (0) comments


Most everything is now connected. And along with 4K and 4G technologies, everyone could be creating and broadcasting video contents. Users are expecting better video experience with any screen, anywhere and anytime. Operators will meet new challenges, but also see some big opportunities.
LRTV Custom TV
JDSU: Delivering Dynamic Networks for a Personalized Experience

3|26|15   |   5:59   |   (0) comments


Light Reading speaks to JDSU at Mobile World Congress 2015 about new solutions in the areas of HetNets, VoLTE, backhaul, virtualization, big data analytics, and real-time intelligence.
LRTV Custom TV
Smarter Service Chaining & New Ways to Benefit From Qosmos Technology

3|25|15   |   03:11   |   (0) comments


David Le Goff, director of strategic and product marketing at Qosmos, explains how the company has added application awareness to subscriber information to make service chaining more efficient and reduce costs for networking and infrastructure. In addition, Qosmos technology, which has been delivered as C libraries, is now also available as a virtual machine, ...
Between the CEOs
Qosmos CEO: The Changing Face of DPI

3|24|15   |   13:53   |   (0) comments


LR CEO and Founder Steve Saunders sits down with the head of Qosmos to talk about the changing state of the art in deep packet inspection technology, including its role in SDN and NFV architectures. Also, how the comms market is becoming more like the automotive industry.
LRTV Huawei Video Resource Center
FC Schalke Scores With Its Agile Stadium

3|24|15   |   6:23   |   (0) comments


Top German soccer club FC Schalke 04 has deployed a new, agile WiFi network from Huawei in its Veltins-Arena stadium and is reaping the benefits in terms of customer satisfaction and business opportunities, explains marketing chief Alexander Jobst.
LRTV Huawei Video Resource Center
Huawei’s Insights on Mobile Video

3|24|15   |   7:51   |   (0) comments


More people than ever are now watching videos on smartphones. Seventy percent of mobile traffic will be video traffic until 2018. In this video, Huawei's exports give their insights on mobile video in terms of business model, network planning and 4G network construction.
LRTV Documentaries
The Rise of Industry 4.0

3|24|15   |   02:26   |   (9) comments


Are you ready for the fourth industrial revolution? It's a big deal for influential operators such as Deutsche Telekom.
LRTV Huawei Video Resource Center
Getting Connected With eLTE

3|23|15   |   06:04   |   (0) comments


Trunked radio communications have entered the 4G LTE world, and with Huawei's eLTE solution, can now deliver a full range of data and video services as well as push-to-talk voice, explains Huawei's Norman Frisch.
LRTV Huawei Video Resource Center
Funkwerk’s on Track With Huawei

3|19|15   |   3:23   |   (0) comments


GSM-R technology specialist Funkwerk and Huawei have forged a partnership that is benefiting both parties, notes Funkwerk's Gottfried Winter.
LRTV Documentaries
How EANTC Tested Cisco's Virtualization Solutions

3|18|15   |   5:49   |   (0) comments


Carsten Rossenhövel, managing director of independent test lab EANTC, tells Light Reading founder and CEO Steve Saunders about the innovative approach his team had to take when validating Cisco's service provider virtualization and cloud solutions.
Upcoming Live Events
April 14, 2015, The Westin Times Square, New York City, NY
May 5, 2015, Hyatt McCormick Place, Chicago, IL
May 6, 2015, Georgia World Congress, Atlanta, GA
May 12, 2015, Grand Hyatt, Denver, CO
May 13-14, 2015, The Westin Peachtree, Atlanta, GA
June 8, 2015, Chicago, IL
June 9-10, 2015, Chicago, IL
June 9, 2015, Chicago, IL
June 10, 2015, Chicago, IL
September 29-30, 2015, The Westin Grand Müchen, Munich, Germany
All Upcoming Live Events
Infographics
Hot Topics
The Rise of Industry 4.0
Ray Le Maistre, Editor-in-chief, 3/24/2015
Google Hires Wall Street's Most Influential Woman as CFO
Dan Jones, Mobile Editor, 3/24/2015
AT&T Woos SMBs With Small-Scale WiFi
Sarah Thomas, Editorial Operations Director, 3/26/2015
Net Neutrality Suits: Only The Beginning?
Alan Breznick, Cable/Video Practice Leader, 3/24/2015
Average US Broadband Speeds No Great Shakes
Mari Silbey, Independent Technology Editor, 3/25/2015
Like Us on Facebook
Twitter Feed
Webinar Archive
BETWEEN THE CEOs - Executive Interviews
LR CEO and Founder Steve Saunders sits down with the head of Qosmos to talk about the changing state of the art in deep packet inspection technology, including its role in SDN and NFV architectures.
Chattanooga’s EPB publicly owned utility comms company has become a poster child for how to enable a local economy using next-gen networking technology. Steve Saunders, Founder of Light Reading, sits down with Harold DePriest, president and CEO of EPB, to learn how EPB is bringing big time tech to small town America.
Cats with Phones
Interspecies Phone Love Click Here
"No, you hang up."
"No, YOU hang up."
Latest Comment