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Big changes—again—for cable operators’ business

The business landscape for cable operators continues to change, and MSOs need to adjust to it to remain successful. Let’s look at 5 ways business is changing in 2016.

TV CONSUMPTION

“Change is the law of life. And those who look only to the past or present are certain to miss the future” – J.F. Kennedy

TV consumption is changing. Time spent watching traditional TV is steadily declining, whilst on-demand takes hold fast with OTT companies such as Netflix streaming huge amounts of SVOD content. As operators adjust, new bundles and options start to appear. Of particular interest is the younger demographic (<35) who currently subscribe to as much OTT streamed service as they do traditional TV subscriptions.

This group of users also is trending towards mobile/tablet viewing, as highlighted by the Accenture Digital Media Survey which found a 33% drop in utilizing the TV as the first screen for the 14-17 year demographic.

In terms of TV quality itself – ultra high definition TV will become the norm and nearly dominate sales by 2020 according to strategy analytics.

INCREASED BANDWIDTH DEMAND

“We’re still in the first minutes of the first day of the Internet revolution” – Scott Cook

Industry analysts agree that global consumer internet traffic, of which about 80% is IP video, has increased more than fivefold in the past 5 years. Bell labs indicate that this trend will continue and increase nearly threefold by 2020 but could surpass 4 times current values depending upon the amount of innovation applied to consumer services in areas such as internet of things (IOT) or immersive experiences. There is a continuous push for higher speed access as data usage explodes.

Data transfer projections to 2020

Data transfer projections to 2020 (source: Bell Labs)

MSOs were quick to leverage this trend and have enjoyed a clear broadband leadership over recent years thanks to DOCSIS capabilities offered on their DS3.0 networks. Many have chosen to:

  • Upgrade at least part of the network to DS3.1 in an attempt to squeeze more bandwidth out of existing cable runs
  • Strategize on architectural changes to push fiber deeper into the network - as the whole world talks about Gigabit networks and connected homes

This is increasingly important for MSOs as other operators (or anyone with a fiber network) are rapidly improving reach and bandwidth capabilities with FTTX and G.fast technologies. Cable operators will not be able to easily maintain their broadband leadership against encroaching FTTX and it is now common practice to also look to deploy fiber for greenfield extensions in preparation for cable 2020 and beyond.

FOCUS ON MOBILITY

“The trend has been mobile was winning. It's now won.” - Eric Schmidt

Cable operators have already invested in Wi-Fi® and now look to scale and monetize this technology further, making “Wi-Fi First” a hot cable industry voice and data discussion topic. Wi-Fi usage accounts for a very high percentage of mobile data consumption, mainly centered around the home environment (40%) and then nomadically in public areas (20%) and venues (20%) for example. Connectivity on the move and in-between the aforementioned is achieved via cellular (20%).

Subscribers require always on mobile connectivity, and mobility is a required compliment to fixed services, and affects loyalty. Mobile enabled MSOs will notice an important difference in churn levels of their quad play subscribers versus other customers.

As Wi-Fi usage ramps up, there is an increased focus on capabilities to manage voice and data connectivity between Wi-Fi and cellular. Also issues related to the quality of home Wi-Fi connections, which can affect – amongst other things – the video streaming experience and hence the MSO brand.

In the residential space, a plethora of connectivity, online content, advertising, and consumer product companies are vying for consumer attention. New types of differentiators and revenue sources are required.

NEW REVENUE OPPORTUNITIES

“You must be the change you wish to see in the world” – Mahatma Gandhi

In the search for new revenues and customer retention tactics, other industry trends are being considered by MSOs. The Internet of Things is a hot topic across the industry that could become a lucrative focus area for cable operators once standards are in place and clear business models can be established. Business insights and big data collection is another area that MSOs can benefit from in the same way as large OTT providers are doing today – with personalized offers and discovery, proactive service assurance, etc.

B2B is another new revenue candidate. Enterprise spending increases and new ways of working, especially for the small to medium segments, creates a window of opportunity with new offers centered around fixed and mobile connectivity bundles enhanced with services and enterprise applications. MSOs may leverage virtualization technologies to create differentiated offers that align with enterprise customer needs.

3 BUSINESS IMPERATIVES

“Intelligence is the ability to adapt to change” – Stephen Hawking

As cable operators strive to maintain their lead, as they adapt and grow within this environment, imperatives such as “build quality into everything we do”, “enable my network for business in 2020+”, and “grasp opportunity to create new revenue streams” become increasingly important.

We can see this implies an enhanced focus on key projects, each bringing along a particular set of challenges such as:

  • Evolving the video offer and delivery capabilities. This requires being prepared for new content, new formats and devices, new IP delivery models, new consumption models and unpredictable scale.
  • Evolving cable access and transport networks for Gigabit service delivery. Having the right technology investments in place to ensure the gigabit home and enhanced business services become a reality.
  • Delivering quality wireless/mobile services. Having the correct tools in place and core capabilities to ensure brand worthy home Wi-Fi experiences and hybrid wireless access connectivity.
  • Grasping growth opportunities in commercial services (e.g., SMB enterprise) by offering services at cloud speed to appeal to the enterprise new way of working.
  • Improving operations and customer experience. Includes focus improvements in net promoter score /customer satisfaction, creating the capability to drive service agility as well as OPEX reduction via simplification and consolidation of operations.

Big changes are afoot for 2016 as the market looks for bigger, better, more flexible TV and the freedom brought by entertainment and communications anywhere. Cable operators are not strangers to change. As operators look towards gigabit homes and ponder cloud services and wireless business models with 5G on the horizon, strategies we’ll see more of include becoming more intimately connected with subscribers and delivering recognizable quality.

Our authors look forward to your questions and comments.