Cable Divided on OTT, DOCSIS 3.1 Strategies

Smaller players are choosing to integrate OTT and shy away from DOCSIS 3.1 while the big guys do their own OTT thing.

March 10, 2016

3 Min Read
Cable Divided on OTT, DOCSIS 3.1 Strategies

DENVER -- Cable Next-Gen Technologies -- A clear division is emerging between the major MSOs and their smaller cable brethren in how they respond to video market shifts and technology changes, Light Reading Cable/Video Practice Leader Alan Breznick said here today.

In his opening presentation at the annual Cable Next-Gen Technologies event, Breznick noted that the cable industry is gaining market share in both the pay-TV and broadband markets -- the first of which is shrinking for all players, due to the steady rise of online video streaming.

The cable players' response to the threat of over-the-top (OTT) video has varied according to company size, Breznick said. While larger companies such as Comcast Corp. (Nasdaq: CMCSA, CMCSK), Charter Communications Inc. and Rogers Communications Inc. (Toronto: RCI) are developing their own OTT packages to compete with the likes of Netflix Inc. (Nasdaq: NFLX) and Hulu LLC , smaller cable companies are choosing to integrate the OTT offerings into their existing video packages.

"The smaller guys are adding Netflix and Hulu to their service bundles while the big guys are trying to create their own Netflixes and Hulus," he said. "It will be interesting to see which strategy does better."

One critical cable strategy in the broadband arena is to deploy DOCSIS 3.1, which will enable operators to deliver up to 10 Gbit/s downstream and 2 Gbit/s downstream, in order to compete with telecom operators that have deployed fiber to the home. But even on that front, there is a split in cable adoption plans.

"It's not clear that many of the smaller cable operators will deploy DOCSIS 3.1, because they may not see it as financially or technically feasible," Breznick commented. Instead, they may choose to deliver fiber to the home in areas where they go up against other gigabit players.

Read more about OTT video strategies in the OTT segment of our video section here on Light Reading.

On the video front, the trends are much clearer. While cable is losing video subscribers overall (down 600,000 last year), its share of the pay-TV market is actually up because satellite companies are losing customers faster and, for the first time, telecom operators failed to grow their video customer base in 2015.

Darker clouds may be looming for cable, however. More than 4 million potential pay-TV homes don't currently subscribe at all, and nearly half (48%) of cable subscribers have considered cancelling their subscriptions, Breznick said, citing a Clearleap study. The same report shows that 71% of US households are using video streaming, and 58% use at least one OTT service, based on a Parks Associates study.

All of this adds up to a major challenge to the cable business plan, he noted. But if there is an upside, it is the cable industry's dominance of the broadband market, where it continues to take market share from telcos. Cable now has a 61% of market share in the US broadband space, compared to just 39% for telcos.

"So basically cable is holding its own in a declining video market and continuing to dominate broadband services," Breznick said.

— Carol Wilson, Editor-at-Large, Light Reading

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