Online Access to Cable Programming Is Next Test for Multichannel Providers

Customers Will Default Without ‘Web Replicas,’ Study Warns

By Daisy Whitney

The ability of multichannel providers to launch companion online services for viewing cable programming will divide them into the haves and the have-nots over the next decade, according to a report from the Diffusion Group scheduled to be released today.

The research firm concluded that cable operators that don’t introduce online portals for their on-air programming will be relegated to dumb-pipe status by 2020, meaning they’ll lose those customers who subscribe to their TV programming and eventually become merely providers of Internet connectivity.

“If you have an integrated service now, you are better positioned to be a full-fledged video provider in 2020,” said Andy Tarczon, general manager of the Diffusion Group. “Most are still asleep behind the wheel: They have no idea as to the threat posed by open Internet-delivered TV services.”

This is sobering news for operators that haven’t jumped yet to develop online access to their programming, but it’s good news for cablers Comcast and Time Warner, which both have been bullish recently about their plans to offer online programming access starting later this year. Comcast likely will begin rolling out its “On-Demand Online” this summer, while Time Warner is inking deals with programmers and testing a service that would mirror its on-air lineup on the Web.

These “Web replicas” are increasingly essential for multichannel providers, according to the report. Easy online access to cable shows on the Web can reduce the possibility of consumer defections to broadband-only programming and the promise of Hulu, YouTube, iTunes and Amazon as potential replacements for cable TV.

Operators need to move fast: Time Warner Cable and Comcast shed more than 350,000 customers between them in the fourth quarter.

How consumers access such services is another question. Time Warner is experimenting with offering cable programming on owned portals and possibly on third-party sites as well, while Comcast is likely to begin with its own sites such as Fancast.net and Comcast.net. Cox also is evaluating how to offer online access to its programming.

“Starting next year, the MSOs will supplement their linear programming with walled-garden online access,” Mr. Tarczon said. “They’re fighting against being the dumb pipe.”

While cable operators aren’t expecting to charge consumers extra for online access to cable programs, TV viewers likely will foot the bill through higher Internet bills. Streaming video requires more bandwidth than most online services, so heavy users may need to pay more for some sort of tiered Internet connection—likely also provided by their cable operator.

The Diffusion Group’s report also found that in three years, Internet connectivity will be commonplace in new TVs, with most set-top boxes capable of delivering traditional cable and TV programming as well as Internet video.