Over the past 1 year, the Cable TV industry - internationally as well as in India - has shifted its primary focus for investments and revenue, away from TV content delivery, to high speed internet delivery. Proprietary TV channel content is too expensive and yields paltry returns, while easily available internet bandwidth yields more than double the revenue and 5 times the profits! Going ahead .......
THE CHANGING WORLD OF CABLE TV
The World is changing .... Fast!
Did you know:
♦ Uber, the world's largest taxi company owns no vehicles.
♦ Facebook the world's most popular media creates no content.
♦ Alibaba, the most valuable retailer has no inventory.
♦ Airbnb the world's largest accommodation provider owns no real estate
♦ Apple sells over 200 million smartphones & tablets, does not own a factory.
♦ WhatsApp with 3 Billion messages a day does not own servers.
Closer to our own industry:
♦ Netflix Is Worth More Than CBS Corp which operates USA's Most Popular TV Channel.
♦ AT&T a telephone company is the largest pay TV provider (post DirecTV merger)
♦ Comcast The World's Largest CATV Company Earns More Thru Broadband Than Cable TV
Broadband Than Cable TV BROADBAND NOT TV
The last statistic is a key pointer to the future of the Cable TV industry. Cable TV's future and profitability will come not from pay TV channel sales but from retailing broadband!
THE USA EXAMPLE
Last month, the National Cable & Telecommunications Association (NCTA) held its annual trade show in Chicago, USA. This trade show was until 2014, known as "The Cable Show."
But this year, The Cable Show was renamed "The Internet & Television Expo."
Michael Powell, the former Federal Communications Commission head who now serves as president of the NCTA, said he hates the word 'cable' because it's so outdated: "It doesn't fairly capture what we do."
BROADBAND NOT TV
So that, ladies and gentlemen, is where Cable TV is headed.... The new focus for business and earning revenues will be broadband, which is far more lucrative.
Besides being more financially lucrative, broadband offers several other advantages:
♣ No proprietary content
♣ No hassles in obtaining content
♣ No copyright issues for (internet) content delivered
♣ Extremely low cost of content
♣ Both Residential & office customers
♣ Earn revenues as data charges even if TV is streamed from competitors
♣ Much Lower taxes
♣ Few regulations & licenses
Pay TV services via cable TV are convenient to get a foot into the consumer's home. However, revenues are better from broadband (internet) delivery.
Broadband services are required not only in homes but also in commercial establishments / offices, who will often pay higher revenues and prefer high speed broadband, which is best delivered via Cable TV infrastructure.
Comcast is the world's largest and most profitable MSO.
From 13 million subscribers in 2007, Comcast broadband customers rose to 21.5 million by September 2014. 47% of Comcast’s broadband subscribers receive Internet speeds of more than 50 Mbps, reflecting the superb broadband capability of Cable TV networks to deliver broadband. A month ago, Comcast rolled out 1 Gb/s broadband using DOCSIS 3.1.
In the USA, Cable TV networks have a 56% market share of Broadband consumers. Comcast is the largest broadband service provider in the USA with a 25% market share.
Currently, Comcast earns more from its Broadband subscribers, compared to its cable TV subscribers.
INDIAN MSOS SHIFTING
Indian MSOs too have realised that broadband provides far greater profitability than Cable TV delivery.
After DAS Phases 1 & 2, Indian MSOs have been pumping in money to build up their broadband business. A quick look into what each of them is doing....
Hathway Cable & Datacom Ltd, India's largest MSO, has 11.7 million Cable subs of which 8.5 million are on digital Cable. Hathway has 0.43 million broadband subscribers. It was the first Indian MSO to roll out a 50 MBps service, via DOCSIS-3 Cable modems. it has invested ` 500 to ` 525 crore during the past decade in its broadband business.
Now Hathway plans to invest another ` 500 crore in broadband during the next 2 years & targets to more than double its broadband subscriber base to 1 million.
DEN Networks, the second-largest MSO in the country, had just 23,000 broadband subscribers on end March 2015.
DEN has very ambitious plans and targets for its broadband business, for which it has set up completely separate operations, with separate offices, staff and even wiring for broadband and Cable TV. Clearly, the vision is that the more profitable broadband business will be spun off as a separate Public company, once it attains a reasonable operating level.
Like Hathway, DEN plans to invest `200 to ` 250 crore on broadband this fiscal. "Broadband over cable for MSOs is going to be a hyper growth phenomenon in the next 3 to 5 years," said DEN Networks president broadband Ramdoss Seetharaman. DEN has is targeted 3 to 4 million broadband subscribers over the next 5 years, and is willing to offer aggressive pricing to attract consumers. Currently DEN has a broadband ARPU (Average revenue Per User) of ` 750 per month, compared to the Cable TV industry average of ` 170 for TV viewing !
While DOCSIS 3.0 will be the driver technology in most markets, DEN also plans to use GPON and Ethernet technology in some markets.
Siti Cable has 54,000 broadband subscribers, as of 31 December 2014.
While the big boys are only now waking up to the revenue potential of Broadband, its the smaller, regional players that have fully exploited their wired broadband capability.While the big boys are only now waking up to the revenue potential of Broadband, its the smaller, regional players that have fully exploited their wired broadband capability.
ATRIA CONVERGENCE TECHNOLOGIES (ACT)
A regional network - India Value Fundcontrolled Atria Convergence Technologies (ACT) with 0.67 million subscribers (as on March 2015) is a bigger broadband player than any national MSO.
ACT plans to have 1 million broadband subscribers in FY16. Its Cable TV operations which already has 850,000 subscribers, will grow slower, to 1 million by FY16.
Broadband will consume more capital than cable TV. "We will invest ` 400 crore in FY16, out of which ` 300 crore will be towards broadband. Cable will gobble the remaining ` 100 crore," ACT CEO Bala Malladi told the press.
Asianet is a leading MSO in Kerala. It is owned by Hathway founder-promoter Rajan Raheja. Since its operational area is predominantly under DAS Phase 3 & 4, it is forced to divert its resources to Cable TV digitisation.
Still, with 135,000 broadband subscribers, it has more than Siti cable. "Our broadband subscriber base is growing 20% annually. The ARPU stands at ` 600," ASC president and COO G Saankaranarayana confirmed.
Asianet invested ` 20 Crore in broadband last year.
Asianet plans to deliver TV over broadband too, that consumers can use when they are outside their homes. An anytime, anywhere TV app will is being created. "We will initially offer 20 free-to-air [FTA] channels. Later on, we may have some pay model. We are providing this service to customers who have taken a bundled service with broadband. The aim is to offer content on all devices including TV, smartphones and laptops," Sankaranarayana added.
Odisha-based Ortel Communications, had planned its Cable TV network to be broadband ready, from day 1 when it commenced operations almost 2 decades ago. Ortel has 58,519 broadband subscribers. "Broadband ARPUs are much higher than that of cable TV, and we see a great future in this. The whole idea of owning our last mile is to build the network up to a standard to provide broadband. We already have a head start with 11% of our subscribers being broadband," said Ortel Communications CEO Bibhu Prasad Rath.
CABLE = BROADBAND
The next 2 to 3 years will see a huge shift of resources and focus of the Cable TV industry from delivery of TV channels to delivery of broadband, for its primary revenues. With continually rising demands from Pay TV broadcasters, and consumer refusal to pay more for TV content, Pay channel delivery has already become a distant second to broadband delivery.
DTH which has zero intrinsic capability to deliver broadband, may in the long term corner more that 50% of TV home in India, over the next 5 years. However the battle for revenues will then be fought between Cable TV companies, and Cable TV networks. However, unless telephone companies lay separate fibre to deliver broadband to the home, Cable TV remains the more capable solution for low cost, high speed internet delivery, via Cable modems. n