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Cable must “move on” from triple-play

Guy Bisson

Guy Bisson

Broadband is driving cable’s RGU growth but digital TV is driving its ARPU growth, while operators now have to look beyond the triple-play to ensure their future, according to Guy Bisson, research director, television at IHS Screen Digest, speaking at Cable Congress this morning.

Seventy per cent of TV revenue comes from digital services in Europe now, according to Bisson.

Bisson said that Europe’s DOCSIS 3.0 rollout was now almost complete, giving cable a way to compete with and beat telcos that often can not provide the same broadband speeds.

“If we analyse the top four markets, DOCSIS 3.0 has enabled parity in pricing with DSL incumbents and that’s a good thing. Because of the speed they can offer, cable can bring the price up to match what is on offer from DSL. What they are still winning on however is speed,” said Bisson.

“Cable is offering twice the speed of DSL at roughly the same price point.”

Bisson said that cable is now beating DSL in net additions, even given its more limited reach in markets.

“This is very significant,” he said.

Cable’s RGU growth has generally been driven by broadband and telephony in recent years and Bisson said the rate of RGU growth is now slowing. “One has to look to the future to see where growth will come from looking forward,” he said.

Cable has changed dramatically over the last decade, where both central and eastern Europe and western Europe deliver half of revenue from broadband and telephony. In central and eastern Europe, this revenue stream has risen from zero over the last 10 years, said Bisson.

While RGUs have increased, the overall number of cable homes is flat or decreasing thanks to competition.

“When we look to the source of this decline we are looking at television, because of competition,” said Bisson.

“Is TV important? Absolutely, because digital TV is the strongest segment in term of net additions,” said Bisson. “Also, telecom services are commoditising. In ARPU terms, the one that is positive [in growth] is television. TV is important to boost the value of the customer as well as in dragging customers towards triple-play. That is why telcos are increasingly interested in television.”

Whereas up until 2009, western European telco growth was driven by DSL, now TV additions are stronger than DSL additions, said Bisson, leading telcos increasingly to look to content acquisition to drive their TV strategy. BT is a prime example.

Mergers and acquisitions since 2008 showed that the value attributed by investors to eastern European cable homes had risen from EUR600-700 to about EUR1,000 since 2008, but w3estern European homes were now worth three times as much.

Bisson said that infrastructure remains important. OTT players’ services have to be delivered over somebody’s network. Unicast delivery of popular content is still hugely more bandwidth-demanding than multicast. “The problem the Netflixes have is they have to go over someone else’s network at some point,” he said. Hence Netflix’s deals with Virgin Media and Com Hem, as well as Netflix’s recent deal in the US to pay Comcast for direct access to its network.

“Infrastructure matters and that is the key to the future of cable,” said Bisson. However, he said, the cable model has to move on from its existing triple-play model to embrace hybrid delivery.

“It’s about embracing OTT, multicast IP, CDN, control of the home network, the WiFi out of home network and of course embracing mobile,” he said. “The problem cable faces is that it’s going to have to embrace all of these services and make them pretty.”