& 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.
Educational Resources
sponsor supplied content
Educational Resources Archive
From The Founder
Light Reading today starts a new voyage as part of a larger Enterprise.
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
ETSI's CTO Talks NFV, 5G & NGP

12|5|16   |   09:45   |   (0) comments


Adrian Scrase, CTO at standards body ETSI, talks about the various initiatives and specifications developments related to NFV, 5G and NGP (next-generation protocols) that will underpin next-gen networks.
Women in Comms Introduction Videos
Korn Ferry Consultant: How to Find, Cultivate & Be the Best Talent

11|30|16   |   4:10   |   (1) comment


Erin Callaghan, a managing consultant for Korn Ferry Futurestep, shares strategies for companies to improve how they recruit and for women to ensure they don't get lost in the pipeline.
LRTV Custom TV
We Can Make the World More Sustainable

11|29|16   |     |   (0) comments


GeSI is a global e-Sustainability Initiative organization bringing together 40 big multinational companies around the world. According to GeSI's report, information and communication technology can make the world more sustainable. Luis Neves, chairman of GeSI, shared with us his opinion at Ultra-broadband Forum (UBBF2016).
LRTV Custom TV
Finding a New Way to Engage Customers & Drive Revenue

11|29|16   |     |   (0) comments


Mobile revenues are declining. Digicel, a player in the Caribbean telecommunications/entertainment space, has found a new way to engage customers and drive revenue. John Quinn, CTO of Digicel, shared with us its story at Ultra-broadband Forum (UBBF2016)
LRTV Custom TV
Do You Really Need Gigabit Infrastructure?

11|29|16   |     |   (0) comments


Altibox is the biggest fiber-to-the-home (FTTH) player and the largest provider of video and TV in Norway. They started out with zero customers in 2002. Now they have close to half a million households and companies attached to their FTTH business. Nils Arne, CEO of Altibox shared with us their story and insight on 5G at Ultra-broadband Forum (UBBF2016).
LRTV Custom TV
BT’s Openreach Strategy & Its Updates in 2016

11|29|16   |     |   (0) comments


A lot of developments at Openreach this year in terms of strategy and planned investments. Peter Bell, CIO of Openreach BT, shared with us the updates of Openreach at Ultra-broadband Forum (UBBF2016).
LRTV Custom TV
ITU: The Broadband Is Our Future

11|29|16   |     |   (0) comments


At Ultra-broadband Forum, Houlin Zhao, Secretary General of ITU, discussed how important it is for countries, companies and everybody to be working together to help to build the broadband and digital economies (UBBF2016).
LRTV Custom TV
Tackling 5G in Dallas

11|28|16   |     |   (0) comments


Here are our highlights of the 5G North America show in Dallas, Texas with Light Reading's Dan Jones.
LRTV Interviews
Cox Prepping for Virtualization Trials

11|14|16   |     |   (0) comments


In this video interview, Cox's Jeff Finkelstein discusses MSO's plans to test managed business services in early 2017 and tackle Distributed Access Architectures.
LRTV Custom TV
Drivers & Potential of NGP

11|11|16   |     |   (0) comments


ETSI has created an Industry Specification Group to work on Next Generation Protocols (NGP ISG), looking at evolving communications and networking protocols to provide the scale, security, mobility and ease of deployment required for the connected society of the 21st century. The NGP ISG will identify the requirements for next generation protocols and network ...
LRTV Custom TV
Huawei IP 2020 for Future Networks

11|11|16   |     |   (0) comments


Future Networks should satisfy many requirements such as high throughput, extremely low latency, flexible mobility, intrinsic security, networking automation, and so forth. The Chief Architect of Huawei Future Networks addresses a holistic solution, i.e., IP 2020, to achieve these requirements for various future life scenarios (e.g., autonomous driving, tactile ...
LRTV Custom TV
Digital Object Architecture

11|11|16   |     |   (0) comments


Digital Object Architecture provides a basic information infrastructure that can facilitate interoperability between or among different systems, processes, and other information resources, including different identity management systems. Digital objects are networked objects that are named by digital object identifiers and instantiated by an infrastructure service ...
Upcoming Live Events
December 6-8, 2016, The Westin Excelsior, Rome
May 16-17, 2017, Austin Convention Center, Austin, TX
All Upcoming Live Events
Infographics
Hot Topics
Cable Nodes Becoming a Choke Point
Brian Santo, Senior editor, Test & Measurement / Components, Light Reading, 12/5/2016
Apple Seeds 5G? Seeks 'Multi-Gigabit' Chip Designer
Dan Jones, Mobile Editor, 11/30/2016
Altice Plans FTTH for Entire US Footprint
Iain Morris, News Editor, 11/30/2016
Altice FTTH Bill Could Hit Almost $9.6B in US
Iain Morris, News Editor, 12/1/2016
Like Us on Facebook
Twitter Feed
BETWEEN THE CEOs - Executive Interviews
Eyal Waldman, CEO of Mellanox Technologies, speaks to Steve Saunders, CEO of Light Reading, for an exclusive interview about the 100 GB cable challenge, cybersecurity and much more.
Join us for an in-depth interview between Steve Saunders of Light Reading and Alexis Black Bjorlin of Intel as they discuss the release of the company's Silicon Photonics platform, its performance, long-term prospects, customer expectations and much more.
Live Digital Audio

Even when there's a strong pipeline of female talent in the comms industry, it tends to leak all the way to the top. McKinsey & Company says women experience pipeline leakage at three primary points: being unable to enter, being stuck in the middle or being locked out of the top. Each pipeline pain point presents its own challenges, but also opportunities to stop the leak. Wireless operator Sprint is making a conscious effort to improve its own pipeline from new recruits to the C-suite, and it wants the rest of the industry to do the same. In this Women in Comms radio show, WiC Board Member and Sprint Vice President of Enterprise Sales Nelly Pitocco will give us her take on the industry's pipeline challenges. Pitocco, who joined Sprint in May and has spent 20 years in the comms industry, will also offer solutions, share how Sprint is tackling the challenge within its own organization and take your questions live on air.