3 Rivers Cuts the TV Cord
In a flashpoint indicative of broader changes sweeping the industry, a small service provider in Montana will soon dump its pay-TV service to instead focus on broadband services that can stream in a vast array of OTT video options.
3 Rivers Communications of Fairfield, Mont., announced this week that it will stop providing pay-TV services on October 31, 2019, holding that it simply can no longer compete in the video market amid a growing mix of OTT options as well as ongoing competition from satellite TV providers.
It will instead amplify its focus on broadband, a service that, for most telcos and cable operators, delivers much higher margins than pay-TV.
"With all the new streaming options available ... in addition to traditional satellite providers like Dish and DirecTV, we just can't really compete anymore," Don Serido, 3 Rivers's marketing director, told local TV news station KRTV.
According to MoffettNathanson estimates, traditional pay-TV providers lost a record 1.4 million subs in Q1 2019, a 4.8% loss versus a year earlier. Meanwhile, virtual MVPDs have about 8 million subs, still a minority of about 20 million cord-cutter/cord-never homes in the US.
Like many incumbent telcos and MSOs, 3 Rivers has seen its pay-TV base decline. Per KRTV, 3 Rivers has about 15,000 broadband subs against only 1,800 that get pay-TV. As it gets ready to throw in the towel for pay-TV, the company will waive early termination fees for customers that decide to drop video before their current contracts end.
The pay-TV service 3 Rivers has been offering isn't all that alluring. While that service, branded 3RTV, does offer a line-up of HD channels, pay-per-view and whole-home DVR options, it was never upgraded to support VoD, an offering that has become a must-have for any video service provider. According to a YouTube video showcasing some features of 3RTV, Minerva Networks appears to be one of 3 Rivers's pay-TV tech partners.
The margin 3 Rivers gets on broadband isn't known, but its broadband services aren't cheap. It's "Social" package offers 10 Mbit/s plus local voice service for $84.45 per month, while its "Streaming" tier delivers up to 20 Mbit/s for $104.45 per month, and its 30 Mbit/s "Total Connect" package runs $124.45. 3 Rivers also offers up to 1-Gig in some areas.
3 Rivers also resells satellite broadband through an agreement with Viasat.
Fitting a trend
3 Rivers, a member of ACA Connects, an organization formerly known as the American Cable Association that represents the regulatory interests of small and independent cable operators and telcos, is an extreme example of a trend that's making its mark across both MSOs and telcos.
While few have opted to drop pay-TV completely, several operators have de-emphasized pay-TV or have made moves to embrace new OTT options. That's partly been driven by an expanding number of consumers who are cutting the cord or have never taken a traditional pay-TV service. Some traditional pay-TV operators are also being turned off by rising programming costs that chip away at video service margins.
Here's a snapshot of examples indicative of the trend.
- Cable One is no longer investing more in its pay-TV product, instead focusing on broadband and delivering broadband ARPUs that are well above its publicly traded US cable operator peers. It's increasingly likely that Cable One will put together a business arrangement with at least one of the nation's virtual MVPDs.
- The National Cable Telecommunications Cooperative, a group that does tech and programming deals for various independent cable ops, has forged agreements with a set of virtual MVPDs -- PlayStation Vue, fuboTV and Philo.
- Altice USA is still focusing on its own video service, but has indicated that it is working on a deal that will enable a major US OTT-TV provider to offer service on the company's Altice One box.
- Rather than developing its own OTT-TV product, Verizon has inked a deal to integrate and sell YouTube TV to its mobile, 5G Home and Fios Internet customers.
- WideOpenWest has forged a deal with Philo to market the OTT provider's sports-free streaming TV service to WOW's broadband subs.
- CenturyLink bagged its own OTT-TV service, called CenturyLink Stream, in March 2018, and has halted the marketing of Prism TV, its in-footprint, managed IPTV service.
On the other end of that trend is Comcast, which has continued an effort to protect its pay-TV base with X1 and to target broadband-only customers with Xfinity Flex, a video streaming product that will also allow users to upgrade to a fully fledged pay-TV service.
T-Mobile, in the wake of its acquisition of Layer3 TV in early 2018 is also bucking the trend by pursuing both in-home and mobile pay-TV services. However, its first branded, in-home offering, TVision Home, and its lofty price has failed to raise the bar with respect to bringing innovation to the pay-TV arena.
- Altice USA Expects to Bring 'Major' OTT-TV Player to Set-Top Platform
- Comcast Targets 'Xfinity Flex' at Broadband-Only Subs
- WOW & Philo Bundle Up
- T-Mobile Launching 'TVision Home' Against Cable TV
- Philo Partners With NCTC
- Verizon to Hawk YouTube TV to Mobile, 5G Home & Fios Broadband Subs
- US Pay-TV Subs Erode at Record Pace in Q1
— Jeff Baumgartner, Senior Editor, Light Reading