US cable and telecom companies are vying to offer the most competitive bundle of voice, Internet and TV services. Where does this leave the satellite TV providers such as Rupert Murdoch’s DirecTV?
In the multi-channel video market, direct broadcast satellite (DBS) providers continue to grow more quickly than cable multi service operators (MSOs) recording year-on-year growth between Q1 2005 and Q1 2006 of approximately 8%, according to eMarketer’s estimates. During the same time, basic cable subscriber growth was flat.
While 8% subscriber growth looks strong compared to the growth of basic cable subscribers, it is a significant fall from the 14% subscriber growth DBS providers experienced a year earlier. Furthermore, cable MSOs are now beginning to win the digital TV battle, no doubt assisted by their ability to bundle digital voice, video and data services together.
In the past, DBS providers had a natural ally in the telecom operators. Or, perhaps more accurately, they each had a common competitor in the cable MSOs. So AT&T and Verizon, the two leading telecom operators in the US, have been able to offer a triple-play bundle by partnering with the DBS providers to include digital TV in their suite of services. However, as the telecom operators roll out their own Internet Protocol TV (IPTV) services over the next 12 months, this relationship is likely to shift from partner to competitor.
eMarketer surveyed a selection of the leading US broadband access providers in June 2006 to assess their multi-play offers. The data shows that a basic triple-play bundle is currently available for approximately $100 per month. It is worth pointing out that, typically, the cable providers offer significantly greater Internet bandwidth than the telecom operators so ‘value’ is in the eye of the beholder.
Why has the bundle become so popular? For the operator it has the potential to reduce subscriber churn and improve economies of scale; for the consumer it can enable the consolidation of bills to just one and bundles are likely to be cheaper than purchasing each product individually.
The problem for DBS providers is that you need the appropriate infrastructure to offer two-way interactive services such as telephony and Internet, and satellite technology just doesn’t cut it. But can alternative broadband technologies such as WiMAX offer a solution?