Video services put under microscope

Aug 13, 2001  •  Post A Comment

Cable more than holds its own against satellite and DSL in head-to-head competition in Phoenix-one of the most competitive video, telephone and high-speed Internet markets in the country-when it comes to services offered and future potential, though some services can be more expensive when a multiple system operator is the provider.
That’s the bottom-line conclusion of a new report on the city comparing Cox Communications, the nation’s fifth-largest MSO, to a full spectrum of high-tech competitors-EchoStar’s DISH Network and Hughes Electronics-owned DirecTV, both of which offer direct broadcast satellite services, and Qwest Communications, the area’s telephone company, which offers both video and DSL service.
Though the report focuses entirely on Phoenix, which is the third-ranked cable market in the country by numbers of subscribers per individual system, exceeded only by New York’s Time Warner Cable and Long Island’s Cablevision Systems, the results are certain to have national implications as the satellite, telephone and cable competitors continue to battle for the hearts, minds and pocketbooks of potential subscribers.
The study from International Research Center, a Phoenix-based consulting firm, compares the competing services in several areas (see accompanying chart), including installation/service costs; basic “low-end” video packages; “typical” video packages the average consumer is most likely to buy, both with and without two premium movies services; and all-inclusive “high-end” video packages, which differ not only in total number of channels the Phoenix competitors offer but most importantly in numbers of sports and local channels available.
The study also compares the four Phoenix systems’ general technical capabilities and their present and future high-speed Internet capabilities.
In assessing the chart and the IRC summary analysis, which finds that in Phoenix “cable is the overall winner,” it is important to note that Cox is an IRC client.
The study, however, was not funded by Cox, IRC President Mark Goldstein said. He called the study “objective” and designed to “assist consumers” in choosing among options that are confusing and difficult to compare.
Nor will Cox be happy with all the study’s findings. For example, “In pricing, Cox only equalizes in the upper tier,” Mr. Goldstein said. “They’re right in the money there. At the lower end, they absolutely lose.”
That’s true of their “typical” package cost as well, where Cox “doesn’t compare that well in price,” Mr. Goldstein said. At the low end, the Cox service, which provides 81 channels, is entirely analog, Mr. Goldstein said. “They lose on picture quality; they only win [in that category] on local content and unlimited number of TVs you can hook up. … When you go to [the] typical [category], you’re on their digital system, with two set-top boxes, two converters.”
Reasons consumers often cite when choosing one form of service over another are availability of local channels and availability of sports channels, with the latter being a “hot-button” issue for many potential customers.
Both Qwest and Cox provide the most local channels (20 and 25, respectively), compared with DISH and Direct’s five and six, and that is an “absolute advantage” over satellite for the two terrestrial forms of TV services, Mr. Goldstein said. Direc-TV’s local channel count includes the national Public Broadcasting Service channel, so “that’s actually a little futzy,” Mr. Goldstein said.
“The next real difference, as a consumer hot button, is sports,” Mr. Goldstein said. “When you look at DISH, they’re pitiful. They only have soccer. When it comes to airing the major [sports], Direct does the best job because they have [the] NFL, and Cox doesn’t. So there is a differentiator there.”
When it comes to network offerings that tempt the avid sports fan, Mr. Goldstein said, “Cox and Direct have done their homework; Qwest and EchoStar fall out.”
Several factors have combined to make Phoenix a hotbed of high-tech testing and broadband competition, Mr. Goldstein said. In the early 1990s, the first cable Metropolitan Area Network trials anywhere were done in Phoenix by Cox’s predecessor, Dimension Cable, and in 1997 the first commercial DSL rollout in the United States was in Phoenix by U.S. West, Qwest’s predecessor.
“Even though Qwest is based in Denver, Phoenix is their largest market, and Tucson [Ariz.] is their seventh,” Mr. Goldstein said. While Cox is the fifth-largest MSO overall, it is No. 3 in cable-modem subscribers and No. 2 in voice telephony subscribers, Mr. Goldstein said.
“What that indicates is that Cox is particularly aggressive among the cable MSOs in deploying and outreaching to consumers in those high-tech categories. … Qwest made a conscious strategic decision to go head-to-head with Cox in Phoenix, its strongest cable market, [and] to learn from that.”