Wider Integration Ahead for Bundles

Jan 16, 2006  •  Post A Comment

First there was the bundle of phone, high-speed data and television services. Then came separate next-generation offerings such as interactive television and video-on-demand. Now cable operators are taking steps to integrate all of their services and products into a bigger bundle.

Experts believe that such integration is the wave of the future for the cable industry. In the next few years consumers might be able to watch TV content from their cable company on the Internet or via Internet video on the TV or program their digital video recorders from a cellphone.

“Those kind of services where you take what we have today as TV … and you make it more valuable and convenient, that’s where a lot of the growth is coming [in cable],” said Robert Norcross, a VP for technology consulting firm Capgemini. “The convenience is valuable.”

Cox Communications began the process last month in its Florida Gulf Coast market. It’s the first Cox market to offer the company’s interactive TV suite as well as its Phone Tools service, which allows Cox’s high-speed Internet customers to listen to voicemail and view their call logs on the Internet.

Linking phone and video services is an initial move toward a seamless vision of the future. “We have been talking about the value of the bundle for some time,” said Mimi Thigpen, VP of strategy for Cox. “When we started, that [bundle] was more around a customer service opportunity to combine the billing and one number [for] care and support.”

The result affected the bottom line-churn has been reduced by 40 percent for customers who take all three services from Cox.

The next step is converging the actual products, she said. Phone service is a natural choice because phone capabilities have evolved so quickly in the past decade with the ubiquity of cellphones and the advent of add-on services for them, such as specialized ringtones.

Cox’s Phone Tools lets customers access and listen to their voice messages online and also view their call logs online. Later this year Cox will upgrade those capabilities so that customers can access Caller ID on their TV screen. Time Warner Cable was one of the first cable operators to introduce Caller ID on the TV, rolling it out last summer in South Carolina. Caller ID on the TV has been cited by numerous cable executives as a “killer application” of phone and cable convergence.

Ms. Thigpen sees other ways that services will merge down the road, especially as Cox and other multiple system operators move forward with their joint venture with Sprint Nextel for wireless service. Customers could use a mobile phone to upload photos to a computer or TV under the venture’s plans.

“We have mastered how to make a phone call. Now how do we drive more usage of that device and add richer applications?” she said. “So rich multimedia content is very desirable.”

That could include accessing some video services such as clips or previews of favorite shows on the phone or portable media device. To move in that direction will require the proper digital rights management, Ms. Thigpen said. “You will see video evolve along the way, but rest assured MSOs are very concerned about the value they create and opportunity to get content where they want and when and how they want. … If we can do that across all our products, then we are on path to a home run.”

There are other ways Cox will link its services. When the operator launches VOD and interactive TV in Northern Virginia this quarter, it will make VOD content accessible through the ITV portal on the TV screen.

Down the road, Cox wants to make more on-demand content available via its high-speed service, said Bob Nocera, director of new video services for Cox. That content could be its VOD library or material for which it has struck deals specifically for delivery via its Internet portal.

“You might choose to DVR something or consume it on the TV or port to a mobile device,” he said. “We think convenience is sticky, and as our customers buy more of our products there is added value there.”

Just how much consumers want of this kind of integration is still largely unknown since it’s a new area, said Todd Chanko, analyst for JupiterResearch. However, there will be some sort of ceiling on how much consumers will pay for even a big bundle of services, thus necessitating these other forms of integration, he said.

“There are only so many add-ons you can add, so they need to branch out and find other ways to keep the consumers,” he said.

Mr. Chanko, for one, does not view Caller ID on the TV as a killer app. He believes the ability to program a DVR through a cellphone, for instance, would be a much more attractive form of convergence.