The Solon European Cable Survey continues to be an accurate barometer of the sector, a combination of the knowledge of its Munich-based compliers and the contributions of the 17 cable operators that participated.
Solon finds cable in a good state, despite the current financial woes, with operators able to take advantage of the technical prowess afforded them by industry leading broadband speeds often in excess of 50 Mbps. Through the move to EuroDOCSIS 3.0, cable has managed to leave what Solon describes as the “ruinous price competition with DSL”. Participating cable operators project revenues to grow by 6.6% annually 2008 – 2012, while EBITDA gains 8.6% per annum.
Furthermore, the successful upselling to higher speeds has resulted in an increase in broadband ARPU higher than that anticipated by respondents to Solon’s 2007 study. The figures represent the first over-performance in internet ARPU development since the survey began in 2004.
Western Europe is ahead of Central and Eastern Europe in terms of broadband speeds. By 2012, it is anticipated that the average speed in Western Europe will be 60 Mbps, but CEE will lag behind on 30 Mbps.
A new, but perhaps predictable, trend has been a shift in strategy towards interactive surveys, particularly catch-up TV and transactional on demand services. However, some cable operators running on older networks have found they are unable to offer these services because of the lack of a back channel. This contributes towards Capex levels of 25% of revenues as they look to keep up with the telcos.
Operators fear two negative effects from the economic situation. The first is a greater amount of spindown as customers show a greater propensity to move away from more expensive packages. The second is pure price pressure on one side while coping with the effects of downgrading subscribers. However, the recession does not bring just bad news for operators. Some are expecting an increase in broadband subscriptions as customers that have recently been made unemployed look to replicate the broadband speeds that they previously enjoyed at work. Operators also see an opportunity in entry packages as users look to cut back on more expensive activities.
Operators are doing the same in the current economic climate. Cost savings ranked 3.9 out of 5 importance points as the key lever in addressing the downturn. This was followed by less network expansion (3.2), less upgrade constructions (2.9), personnel restructuring ( 2.8) and financial restructuring (2.6).
Solon says that stepping back from network upgrades is not yet on the agenda, but warns that it may yet factor as cable’s private equity owners look to balance the budgets.
The downside for broadband offers is that markets are now maturing, competition coming from sometimes publicly funded fibre activities. Telcos, which may no longer be the first choice for fixed broadband, are introducing mobile broadband services, with operators in Austria, Sweden and Ireland coming under pressure during 2008.
However, in 2009 the picture has cleared as operators suspend their often-costly market entry campaigns. A total of 50% of all cable operators have now introduced their own mobile strategy, with another 35% planning to do so. The reasoning is entirely defensive, as no operator expects such a strategy will actually increase revenues.
As ever, competition looms on the horizon. IPTV operators are slowly gaining ground and DTT is extending its influence, but satellite remains the biggest threat, particularly in Central and Eastern Europe. Over half (57%) of operators expect their TV subscriber base will be smaller in 2012 than it is today, with the remainder expecting there to be limited growth of no more than 1.5%.
To counter balance this, operators are planning to introduce more services. A change in strategy has meant that rather than introducing more and more digital channels – lesser performing stations are finding their carriage deals are no longer being automatically renewed – attention and capacity is instead going the way of on demand services.
Before 2009, only a fifth of all European operators had launched VOD offers, though by the end of 2010 the share is expected to reach 90%. The same is true for catch-up TV. Currently only 15% of operators allow for such an option, but the figure can be expected to increase to 70%.
As services are built up operators are beginning to focus on the customer experience, with a reprioritisation of customer services that puts it in the top three strategic issues listed by operators for 2009/10.
Despite disappointment from cablenets over the lack of available HD content, HD set-top boxes are anticipated as being the standard by 2010. Some 70% of basic boxes are leased to customers at a cost of €2-5 per month; others are fully subsidising the cost of the box. For advanced set-top boxes the rental model is not prevalent, the number of subscribers renting at an average of €9.90 is equivalent to the number of boxes sold. Once again, IPTV comes into the equation with the possibility that free set-tops in the sector might force cable into costly Capex.
VOD Service Take-up 2010
Economic Downturn/Expected Impact on Cable Operators
Cable vs. incumbent-marketed bandwidth: Cable in the lead
Leave a Reply