Open Mic - Smaller ops can regain an edge
New network upgrade options allow small ops to focus on running their business.
Independent cable operators that met recently at the NCTC’s Winter Educational Conference in Austin, Texas, were focused on a number of issues, but none as critical as the growing competition from satellite and other service providers that threaten their very existence.
Popular demand for high-definition TV and the need to migrate to Internet protocol video delivery pose severe challenges, particularly for smaller operators with constrained resources.
In a recent report, SNL Kagan estimated that 41 percent of the top nine cable operators’ digital cable subscribers are being served by switched digital video technology, which is 1.8 million additional subscribers from a year ago, for a total of 17.6 million subscribers near the end of 2011.
Tier 1 operators can bring their large-scale and many talents to bear in meeting HD demand and transitioning to an IP-based infrastructure that better enables content portability and monetization. However, the approaches adopted by large MSOs – analog reclamation, SDV, and now custom-built bridges to the IPTV future – are simply not optimized for smaller-scale operations.
The dilemma faced by independent operators is that the two primary bandwidth-enhancing techniques adopted by large MSOs have not translated well:
• Traditional SDV, while extremely powerful and proven, has a deserved reputation as a very costly and complicated set of technologies. For operators lacking scale and short on “white coat” video engineering and IP networking expertise, it has remained a non-starter.
• The all-digital strategy of reclaiming 300 MHz of spectrum once devoted to analog signals is more limited in terms of capacity-enhancing capability and requires time, effort, and considerable upfront and operating capital, and it means significant subscriber disruption. Significantly, under the DTA strategy, only 100 additional MPEG-2 HD channels cause the spectrum to be full again. In addition, the digital terminal adapters (DTAs) required are, by design, dumb devices and afford no transition to an IP future. Small operator dilemma
For small operators, especially those serving lower-income markets, the need to respond to competitive video threats is urgent.
A mid-2011 study from Leichtman Research Group (LRG) reported that 13 percent of multichannel video subscribers with household incomes under $50,000 were likely to switch from their current provider within the next six months. Consumers who want the best return on their big-screen investment are likely to turn to providers with the most eyepleasing HD content.
The LRG study also indicated that 9 percent of multichannel video subscribers with incomes under $30,000 are likely to disconnect and not subscribe to any TV service. With free over-the-air (even HD) programming and content from online aggregators such as Netflix and Hulu, many budgetcutting consumers could “cut the cord” and get by with an antenna and a broadband connection.
One independent operator that deployed DTAs told a group of NCTC members that while monthly revenue per customer had increased, the increase was just slightly more than the massive, corresponding capex and opex costs and resulted in significant customer disruption during deployment.
ALTERNATIVES NOW AVAILABLE
Recently, new approaches to economically increasing bandwidth have begun to be utilized by independent operators, enabling them to compete with, or even better their rivals for, HD video and other advanced video services.
Cable Cable, a small Ontario-based operator that deployed a hosted and managed SDV solution two years ago, reported last year that it quadrupled its number of digital subscribers. It also saw a corresponding increase in average revenue per unit (ARPU). The operator’s HD channels also increased from 25 to 100, and the company continues to add more each quarter.
Under the hosted and managed scenario, SDV provides a virtual expansion of capacity, surpassing that of analog reclamation, but without the limits or costs of DTAs or the usual complexity of SDV – all while building a bridge to an IPTV future (or, perhaps even an IPTV present), with an advanced, next-generation UI for interactive Web applications and widgets traditionally associated with the latest IPTV implementations.
With new network upgrade options available, independent cable operators can now focus on running their business instead of running scared.
BigBand Networks will tackle the topic of targeted advertising to IP devices in the next edition of Open Mic.