Cablecos winning back against telcos for control of the household

A new report from The Convergence Consulting Group, The Battle for the North American Couch Potato: Bundling, Internet, TV Telephone, notes that cable companies are ahead of the telephone companies in terms of controlling the household. The notion holds true both in Canada and the United States. There are obvious differences in terms of Internet penetration for example, but pricing advantage of cable telephony is one similarity between the two countries. Below is an excerpt of the report detailing key highlights from the Canadian section of the report. By YE2006 we forecast cablecos will have 12% of residential telephone subs and by YE2009 27% (up from 6% YE2005). Whereas we forecast telcos will have 2% of TV subs by YE2006 and 9% by YE2009 (up from 1% YE2005). Overall Canadian telco residential telephone lines loss for 2005 was approximately 4%; we forecast 8% for 2006. Canadian cablecos have on average 50% of their TV customers taking Internet with them, whereas the telcos have on average 30% of their residential telephone customers taking DSL with them. Hence cable adding a significant amount of telephone customers in a short time is highly achievable given the high overlap, bundled price and convenience. Cable VoIP with its multiple features and unlimited LD currently has the price edge against the telcos traditional phone offers, and is typically the key price differentiator in the cable versus telco bundle battle. Telcos have answered back: Bell has been the most aggressive with its new VoIP offers and LD price cuts, SaskTel and MTS have also cut LD. We expect this battle to only intensify with the altering of plans/prices (we are not expecting radical cuts in the short run) going forward. Due to their early entrance and pricing strategy, MTS and SaskTel have been holding their own with telco TV and are spending further on their networks to offer HD and faster broadband. Aliant and Telus have both recently entered the TV game; Bell like AT&T has changed the timing of its IPTV entrance. We are uncertain as to whether Aliant, Bell and Telus’ current capex commitments to network upgrades will be enough in the long-run to satisfy the capacity needs of offering multiple HD streams and higher broadband speeds. We are not forecasting as robust a 2006 and onwards for ExpressVu and StarChoice given more telcos pushing into the TV space (including Bell itself) as well as in ExpressVu’s case a move towards less discount pricing (DVR and HD promotions and bundling has been eliminated). Cable gained basic TV subscribers in 2004, the first time in years, and 2005 basic TV sub gains were even stronger; we also forecast basic gains in 2006 (we expect small basic cable losses 2007-2009 due to telco TV). Digital cable subscriber additions continue to accelerate (digital cable subs exceeded satellite at YE2005). Cable’s triple play is helping raise/sustain both TV and Internet subscriber gains. Cable continues to maintain its market share lead in residential broadband subscribers (cable has 55% and telco 44%) due in part to cable’s speed, in almost all cases, for the price advantage. We expect that cable will continue its strategy of raising speeds. Cable added more residential broadband subscribers than the telcos in 2005, and we forecast that cable will continue to add more subs than the telcos per annum for the rest of the decade.

Cablecos winning back against telcos for control of the household

News | October 13, 2006

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