Light Reading

Cable Broadband Surpassing Video: Moody's

Alan Breznick
7/28/2014
50%
50%

In a potentially game-changing shift for the cable industry, US MSOs will soon have more broadband subscribers than video subscribers for the first time in the industry's 65-year history.

In a new report issued last week, Moody's Investors Service predicts that US cable operators will amass more high-speed data customers than pay TV customers by next year, as they keep gaining more broadband users and shedding video viewers. In fact, the debt-rating agency calculates that the crossover point is already occurring, with both services now boasting about 50 million subscribers.

Several major US MSOs already have more broadband customers than video customers, or are closing in on the crossover point. Both Time Warner Cable Inc. (NYSE: TWC) and Charter Communications Inc. -- the second- and fourth-largest US MSOs, respectively -- now have more broadband than video customers, while Cablevision Systems Corp. (NYSE: CVC) may well have reached the crossover point at the end of the second quarter. (See Cable Leaves Telcos in Broadband Dust.)

Broadband replacing video as the anchor product for the industry could have both positive and negative effects for cable companies, according to Moody's. On the positive side, the rating agency notes, fewer video customers will lower cable operators' programming costs, which have been sharply rising for years. In turn, operators' profit margins should improve, because high-speed data is a higher-margin product than TV.

On the other hand, the Moody's report points out, "an eroding subscriber base for video also poses risks" for cable providers. That's because their economies of scale may suffer for such areas as technical and customer service, driving up costs per customer. In addition, cable operators that seem to be giving up their video base easily may see their brands suffer, as well.

Given these factors, the report suggests that it may make sense for some cable providers to unbundle their broadband and video offerings, and put greater emphasis on broadband, especially in less-competitive markets. The report stresses that such small and midsized cable operators and overbuilders as RCN Corp. , Grande Communications , and Wave Broadband have all built "sustainable" businesses with relatively low video penetration rates but much higher broadband adoption rates.

However, Moody's contends that cable operators in more competitive markets will likely need to maintain strong video offerings because of the danger of losing double-play and triple-play subscribers to telcos. In particular, the agency warns that such MSOs as TW Cable, Cablevision, and Cox Communications Inc. could struggle because their regions have significant overlap with the fiber buildouts of Verizon Communications Inc. (NYSE: VZ)'s FiOS and AT&T Inc. (NYSE: T)'s U-verse networks.


If you want to keep up with all the latest developments on the cable/telco broadband wars, keep your eyes glued to Light Reading's cable modem/CMTS channel.


"Cable providers' largely upgraded networks and high-speed capabilities can make them the first call for consumers seeking fast Internet connections," said Karen Berckmann, vice president and senior analyst for Moody's. "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."

— Alan Breznick, Cable/Video Practice Leader, Light Reading

(4)  | 
Comment  | 
Print  | 
Newest First  |  Oldest First  |  Threaded View
mendyk
50%
50%
mendyk,
User Rank: Light Sabre
7/29/2014 | 8:57:28 AM
Re: Caps?
Putting in restrictions on broadband use to preserve video revenues would be a bad move. Cable operators clearly understand their future is in providing broadband service. That's the asset that needs cultivating. Video services aren't going away, but they aren't the growth part of the business.
KBode
50%
50%
KBode,
User Rank: Light Sabre
7/28/2014 | 6:20:29 PM
Caps?
"On the other hand, the Moody's report points out, "an eroding subscriber base for video also poses risks" for cable providers."

 

It makes one wonder if 2015 won't see a greater push toward usage caps as companies try to counter the potential lost TV revenues as broadband increasingly becomes more important?
mendyk
50%
50%
mendyk,
User Rank: Light Sabre
7/28/2014 | 3:24:38 PM
Re: Let's not forget customer support/experience
Quality of customer care would definitely be an issue if there were a discernible difference among providers. In general, that's not the case with telecom or video services. A happy customer tends to be one who hasn't had to deal with customer service for a while.
Ray@LR
50%
50%
Ray@LR,
User Rank: Blogger
7/28/2014 | 12:27:00 PM
Let's not forget customer support/experience
In terms of the triple play/broadband battle in general.... 

I think it's key to remember that the quality of customer support and service also comes into play -- it can be just as important a criterion whne deciding to stay/leave/join a service provider as broadband speed, TV channel choice etc

For example, there are some people, I'm sure, who will certainly think twice about signing up with Comcast after the recent high-profile customer service meltdown that went viral on social media....

What Can We Learn From Comcast's Customer Service Nightmare?

http://www.serviceprovideritreport.com/author.asp?section_id=3234&doc_id=563289

 

 
Flash Poll
From The Founder
The Swedish vendor has undergone a significant transformation during the past few years, adjusting to the demands of next-generation communications companies.
LRTV Documentaries
The 3GPP's Road to 5G Standardization

4|17|15   |   4:43   |   (0) comments


Satoshi Nagata, chairman of the 3GPP's TSG-RAN group and a manager at NTT Docomo, explains the standardization process for 5G, as well as the biggest challenges and opportunities.
LRTV Documentaries
AlcaLu CTO Makes the Case for a New 5G Air Interface

4|16|15   |   3:54   |   (0) comments


Michael Peeters, CTO of wireless at Alcatel-Lucent, explains why 5G will require a new air interface to meet its diverse performance targets.
LRTV Documentaries
AlcaLu + Nokia: The New Uber-Vendor

4|15|15   |   2:42   |   (4) comments


Heavy Reading Senior Analyst Gabriel Brown discusses the technological and competitive opportunities and challenges if a merger between Alcatel-Lucent and Nokia comes to pass.
LRTV Huawei Video Resource Center
Huawei's Data Center Power Play

4|15|15   |   6:22   |   (0) comments


Huawei has developed industry-leading energy efficiency capabilities for its indoor and outdoor data center solutions, explains Dr. Fang Liangzhou, vice president of Huawei's Network Energy product Line.
LRTV Huawei Video Resource Center
Huawei’s Routers, Switches Get the Green Mark

4|15|15   |   2:02   |   (0) comments


TUV Rheinland's Frank Dudley explains how Huawei's routers and switches have been successfully tested by energy efficiency experts and have gained Green Mark Certification.
LRTV Documentaries
A Finn, a Frenchman & a Guy From New Jersey Walk Into a Merger...

4|15|15   |   3:17   |   (0) comments


Stop us if you've heard this one before... Light Reading CEO Founder & CEO Steve Saunders weighs in on the technical and cultural implications of a Nokia and Alcatel-Lucent merger.
LRTV Huawei Video Resource Center
Accounting for Better Solutions

4|10|15   |   02:31   |   (1) comment


Murad Yousuf, CTO at Saudi Arabia's Ministry of Finance (Dept. of Zakat & Income Tax), talks about the benefits of deploying router technology from Huawei.
LRTV Huawei Video Resource Center
What's in Store for Huawei & DataCore?

4|10|15   |   05:44   |   (0) comments


At the CeBIT trade show in Hannover, Germany, George Teixeira, CEO of software-defined storage (SDS) specialist DataCore Software, explains why he has just signed a partnership agreement with Huawei Technologies.
LRTV Huawei Video Resource Center
Du Puts Its Faith in Huawei's Routers

4|9|15   |   3:42   |   (0) comments


Adnan Masood, director of Enterprise MS Solutions Marketing at du, the United Arab Emirates (UAE) operator also known as Emirates Integrated Telecommunications Company, explains why his company chose to use Huawei's multifunctional AR routers as part of its managed enterprise services.
LRTV Huawei Video Resource Center
Huawei Gets Active in the Data Center

4|9|15   |   3:17   |   (0) comments


With enterprise users looking to maximize the use of their data center assets, Huawei’s Chief Architect & Technical Director of IT Data Center Solutions, Bruce Su, explains how the company's six-layer active-active data center solution is eradicating the need to deploy passive, redundant data center assets.
LRTV Huawei Video Resource Center
Blue Consult & Huawei for a Better Solution

4|8|15   |   4:01   |   (0) comments


Martin Rott, CEO, and Marc Metzler, head of sales virtualization, from Germany's Blue Consult discuss their collaboration with Huawei and TrendMicro to develop a secure, scalable IT platform that can meet the needs of the most demanding enterprise users.
LRTV Huawei Video Resource Center
Beach Petroleum on eLTE & Mining

4|8|15   |   3:09   |   (0) comments


Network systems integrator Jeremy Hamlyn explains how Huawei's secure packet-based trunking communications system, eLTE, can help remote communities and companies in the mining, oil and gas sectors, deploy efficient communications networks that are perfect for video and data as well as voice.
Upcoming Live Events
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
November 11-12, 2015, The Westin Peachtree Plaza, Atlanta, GA
All Upcoming Live Events
Infographics
Network Instruments, a JDSU division, shares results from its 2015 State of the Network, a global survey on security.
Hot Topics
Verizon Scores New OTT Content Deals
Mari Silbey, Independent Technology Editor, 4/16/2015
Can WiFi Calling Find Its Voice?
Iain Morris, News Editor, 4/13/2015
Senator Proposes New 'Title X' for Net Neutrality
Carol Wilson, Editor-at-large, 4/13/2015
Nokia, Alcatel-Lucent in Merger Talks
Iain Morris, News Editor, 4/14/2015
Nokia & Alcatel-Lucent: What's Going On?
Ray Le Maistre, Editor-in-chief, 4/15/2015
Like Us on Facebook
Twitter Feed
Webinar Archive
BETWEEN THE CEOs - Executive Interviews
Data Center Interconnect, or DCI, is one of the hottest sectors in telecom currently. Since coming back to Light Reading last year, prodigal-son style, I've ...
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.
Cats with Phones
Steve's Phone Click Here
Steve Saunders's personal phone.