Broadband Continues to Deliver on its Promise for Cable

The year 2016 is off to a great start for the cable industry. Craig Moffett of MoffetNathanson recently raised several MSO industry stocks’ to a buy noting, “Cord cutting fears have been swept aside by unexpectedly strong market share gains in both video and broadband, both of which look sustainable and which have more than offset weakness at the Pay TV category level.”

Then there’s Leichtman Research Group’s (LRI’s) Broadband 2015 study which reported that 84% of households now have home Internet service, up from “about one in four broadband households a decade ago.” The study also measured broadband at 97% of all households, with 68% of broadband subscribers—59% of all households—subscribing  to a bundled service from a single provider. Compare that with the only 13% of households that have broadband Internet service but do not subscribe to pay television.

In addition, as evidenced by the LRI report, cable is gaining ground over Internet offerings from local telephone carriers. “In the first three quarters of 2015, cable companies added about 2,300,000 broadband subscribers, while telcos lost about 130,000 subscribers.”

“Don’t hang up” (On Telephone $$$)

Conventional wisdom identifies telephone service as the place where cord cutting has been the most prevalent. It’s important, though, to distinguish between the demise of POTS—the plain old telephone service of days past, and VoIP—voice over Internet Protocol or Internet telephony. In fact, the Future Market Insights (FMI) research group says it expects the number of global corporate VoIP customers to grow from 2012’s 98.9 billion subscribers and $43.3 billion in annual revenue to roughly 204.8 billion subscribers and $86.2 in annual revenue by 2020.

In addressing the global market for residential users, the study found the individual consumer segment had 52.7 million subscribers in 2012, and contributed $20.7 billion in revenue. FMI predicts both residential subscribers and revenue will increase rapidly between 2014 and 2019 as the market shifts from traditional telephony to VoIP services and consumer demand for international calling climbs.

Internet of Things Needs Cable’s Speed

The International Consumer Electronics Show, CES 2016, also helped to underscore the pivotal role that cable MSOs can provide in supporting the Internet of Things (IoT). A chart on NCTA’s website shows IoT’s dramatic growth, pointing out, “there are more connected devices than there are human beings on the planet.”

Cisco and others are predicting that the number of connected devices could exceed 50 billion by the year 2020. However, Kyle Hollifield, senior vice president at Magellan Advisors, is reported to have warned CES attendees that consumers could decide to abandon these smart home products if their network can’t handle the traffic.

The cable industry is well positioned to meet this demand. Cable’s broadband networks are powered by 200,000 strand miles of fiber optic cable according to a recent report from NCTA. In addition, data tracked by NCTA and the CableWiFi Alliance show that the industry already offers more than 400,000 public Wi-Fi hotspots nationwide and is adding more every year.

Set Top Boxes: “The King of IoT”

In an interview last month with Cablefax’s Joyce Wang, Bob Hallahan, vice president of solutions architecture at Xavient Information Systems, outlined how MSOs are working to make the cable set top “the king of IoT.” Hallahan, whose company provides IT solutions to most of the country’s top MSOs, said technology is being developed to allow all of a home’s IoT devices to be networked to the cable box, enabling customers to do everything from seeing video camera feeds when the doorbell rings, to turning down the thermostat, to shutting off a connected oven or even pausing a movie when answering the phone.

Echoing the sentiments at CES concerning network capabilities, Hallahan advised, “What will matter in the end is delivering on the promise. With so many intelligent devices and smart home services, content correlation, aggregation, data analytics, consumer behaving patterns, intelligent profiling, predictive analysis for targeted content delivery and cloud solutions take on major roles.”

Hallahan’s observations combine with cable’s role as the preferred provider for broadband Internet to illustrate the opportunities that can be achieved in a market driven by demand for IoT applications. Similar to the way cable programming added value to the legacy offering of local broadcast stations some 40 years ago, MSOs can improve customer retention and grow revenues by helping customers manage the 50 or more Internet-connected devices expected to be in the average household within the next five years.

(Mary M. Collins is president & CEO of the Media Financial Management Association and its BCCA subsidiary.)