Heavy Reading's Alan Breznick advises US MSOs to see the writing on the wall, spelling N-E-T-F-L-I-X as they see pay-TV subs slipping.

March 17, 2015

3 Min Read
Cable Should Jump on OTT Bandwagon Now

DENVER -- Cable Next-Gen Technologies and Strategies -- Cable is winning the broadband battle in North America and preparing to roll out even bigger guns in DOCSIS 3.1, but all that success sits in counterpoint to the shrinking market share and profit of its traditional pay-TV business. That reality argues strongly for cable integration of over-the-top (OTT) content, Heavy Reading's Alan Breznick said here today.

Breznick, head of the cable-video practice for both Heavy Reading and Light Reading, kicked off a day-long exploration of Cable Next-Gen Technologies and Strategies by contrasting cable's declining market share in the declining pay-TV market with its remarkable success in the broadband business.

In its traditional video business, cable lost 1.4 million subs in 2014 and slipped to 53% of the US market, with most of the lost subs falling to its telco rivals. This declining market share is taking place in a market that itself is shrinking as 1.4 million US TV homes cut the cord or never tied it in 2014, according to consultancy MoffettNathanson LLC , which means 3.8 million US households are now out of the market for traditional linear pay-TV.

"If you look at the annual numbers, they don't look that bad," Breznick noted, as the percentage declines tend to be in single digits. "But in some cases, the numbers don't reflect younger people who are never signing up for cable in the first place. The point is, it's a steady drip, drip, drip of decline and the drips get a little bigger every year."

That is why it is imperative that cable looks to integrate OTT video into its service mix through partnerships or other strategies, Breznick says. This is a trend taking hold outside the US and among some smaller US carriers but not yet among the big players here.

He pointed to major Netflix Inc. (Nasdaq: NFLX) growth as that video provider exceeded 50 million worldwide subs in 2014. "Netflix is determined to become a global force and they are aiming to be in 200 countries by 2017," Breznick said. "All the numbers argue that cable needs to integrate OTT video into its service offering now. If cable companies can do that, working with partners, they can at the very least cut their losses. "

Cable continues its broadband domination in part because the US companies are aggressively deploying newer DOCSIS technologies -- 3.0 in 2014 and 3.1 this year and next -- and maintaining a substantial speed advantage on their telco rivals.

"The fourth quarter was huge and the year was huge for DOCSIS 3.0," Breznick said, citing stats that DOCSIS channel shipments more than doubled in 2014, for a record sales year. "It impacted CMTS, CCAP, CMCs -- all the infrastructure gear."

But even with that investment, cable stands poised to march forward with DOCSIS 3.1, he said, and that will enable MSOs to push to 1-gig services in competition with gigabit services from the likes of Google Fiber Inc. , AT&T Inc. (NYSE: T) and CenturyLink Inc. (NYSE: CTL).

"One of the things that stands out is that even as cable operators are planning to upgrade to 3.1, they are still doing plenty of DOCSIS 3.0 mode upgrades in many places," he says.

It will be a banner few years ahead, however, for makers of DOCSIS 3.1 gear of all types -- cable modems, WiFi gateways, CCAPS, CMTSs and more, Breznick predicts.

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

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