Broad-based support for broadband services

Dec 2, 2002  •  Post A Comment

The alphabet soup technologies of the cable business-VOD, SVOD and PVR-might be the flavors of the month, but high-speed Internet access is a bona fide winner.
Consumer appetite for new technology has indicated that high-speed Internet and the platform that fuels on-demand services-digital cable-are the new services with the most staying power.
The cable industry has been exploring new technologies over the past few years, and despite the growing success of emerging technologies broadband remains a force to be reckoned with, said Bruce Leichtman, analyst with the Leichtman Research Group.
“When we say `new,’ we shouldn’t put away things that are new and seem old to us, like high-speed access and digital,” he said. “High-speed is doing very well.”
Broadband penetration has reached 15.6 million users, with cable claiming 10 million of the pie. Cable also added 1 million high-speed customers in the third quarter. “Before thinking about niche services, when you are adding 1 million you may want to put off some of the niche services,” Mr. Leichtman said. “It’s all about priority.”
Broadband is the second-fastest-adopted new technology behind DVDs, he said.
They won’t ask, so don’t tell
Digital cable, which claims 17.3 million customers, makes on-demand services possible. “You have to go with on-demand services-those make the most sense, because they build on a platform that exists and a concept they know works,” he said. Consumers aren’t concerned with how on-demand services are delivered, whether by personal video recorder, network-based PVR or VOD, he said.
High-speed data is one of the few must-haves, said Ian Olgeirson, senior technology analyst with Kagan World Media. It has become a golden child that doesn’t appear to have a downside for cable operators, since most have already invested the capital to make their plant two-way. He predicts one-fourth of cable subscribers will have the product in five to seven years and nearly one-third will within 10 years.
For broadband to push beyond its current subscriber levels, more content and broadband portals are needed, said Adi Kishore, analyst with the Yankee Group in Boston. The business will start to run out of early adopters and will need to mine the next group of customers with content and tiered pricing, he said.
Make it easy
On the VOD front, the slow pace of forging agreements with movie studios has caused operators and networks to be more creative through offerings such as SVOD and ad-driven VOD, Mr. Olgeirson said. When VOD contains first-run movies regularly, likely next year, the service will have a tangible impact in driving digital penetration and reducing churn. “VOD will become a must-have when deployments are out there and content is in line,” he said.
Before on-demand services achieve widespread acceptance, the user interface needs to improve, said Mark Hess, VP digital services with Comcast. “As the world changes and evolves to have more on-demand content, we need to make it easier to get to the content-easy to learn, easy to use and always one click away from watching something,” he said.
Early VOD results are encouraging, said Lynne Elander, VP video product development with Cox. In the operator’s San Diego market usage has increased 25 percent for VOD over pay-per-view, and transactional movie revenue has risen 50 percent over PPV. In addition, free ad-supported VOD has attracted about 5 percent to 10 percent of customers each month since Cox launched it earlier this year.
Mr. Kishore expects cable operators will continue to focus on on-demand services rather than PVRs. At best, PVR functionality will help achieve parity with satellite providers, while on-demand services offer a better value proposition, he said. “Selling VOD is going to be considerably easier than selling a PVR. It is an important differentiator,” he said.
Trivia, sports, interactivity
Interactive TV remains, on the other hand, a conundrum. Issues include who will use it, what the business model will be and which MSOs will pay for it, Mr. Olgeirson said. “Trivia gaming looks like it could work,” he said. “Games based around sporting events could [as well]. Other areas are more of a leap of faith, like enhanced ads.”
While services such as HDTV, on-demand and PVR functionality are or will be must-have applications for cable operators, interactive TV is more of an add-on, Mr. Hess said. Instant weather, sports scores and news could be appealing, he said, as fellow cable operator Insight has shown with its LocalSource suite of services, which includes local weather, sports, movies and event listings.
Interactivity for its own sake doesn’t make sense, but presenting television programming in a more interactive fashion does, he said. Mr. Hess pointed to Comcast’s on-demand offering of the NBC Nightly News immediately after it has aired in the Philadelphia market as an example of interactivity that works.