If you go back a decade or more, you’d find that television was the killer app for residential services and the cable companies, with their low cost to pass a prospective customer base, was in the driver’s seat. Well, things are changing. Linear TV, the RF stuff the cable company infrastructure was designed to deliver, is falling from grace, and what seems to be emerging is a convergence on IP broadband as the baseline service for everyone. You might get it over fiber, CATV, even millimeter wave, but you’re likely to be seeing broadband IP as the thing you get. TV in streaming form is carried on it like everything else.
Light Reading ran an article quoting the NCTA CTO on the “convergence” movement in broadband, but the article is more about where this shift is leading than about the shift itself. Cable companies, it notes, are moving increasingly into things like mobile services and are likely to be pushing things like security and even AI. All that’s true, but it’s also subordinate to one basic cable truth (the one I opened with) and to one broad industry truth.
With the competition from streaming services and the inherent advantage these services have because of competition, including things like unlimited DVR and a huge library of material, linear cable TV has struggled increasingly. Not only that, linear RF takes up a lot of space on a cable and threatens the cable operators’ ability to compete with telco fiber in the higher-bandwidth ranges, particularly uplink capacity. Like anything else, CATV cable is a finite resource, and with the advent of FWA, it faces a technology option that has high customer bandwidth and a low pass cost, lower often than cable.
In some areas, the cable companies have abandoned CATV in favor of FTTH, and in general they take fiber deeper, meaning they’ve begun to reduce the number of customers on a cable span. This, of course, adds to the pass cost. Overall, trends in TV and competition from new technologies in the access space are combining to make a cable provider look way more like a telco than ever before. In that sense, the NCTA CTO is right; we do have unprecedented convergence, and that’s probably a bad thing.
It’s made all the worse by the fact that cable is converging on a space with declining profitability. Telcos have been struggling for a decade to stem the decline in profit per bit. Today, all the Tier One and almost all the Tier Two telcos I interact with tell me that profit per bit is a “critical” problem for them. Today, that’s true of only roughly three-quarters of the cable companies, but that’s up significantly from a decade ago (when less than a third said it was a problem).
Mobile services have been a big focus, as the article suggests, largely because mobile is more profitable than wireline and because telcos have been using mobile bundling to improve consumer and even business penetration. Cable companies have been reluctant to jump into widespread mobile infrastructure investment and spectrum auctions, and so have been more likely to enter into MVNO deals. That gives them decent bundles but at a lower margin than telcos who own the infrastructure the deals are based on. As a result, cable companies have been trying to figure out ways of getting their own mobile services. Public WiFi deals are one strategy; since most users consume far more mobile bandwidth while in some location where they can sit a while, WiFi is a decent approach. Google’s Fi wireless service, which is also an MVNO offering, has a public WiFi dimension now.
It’s possible that things like CBRS spectrum-sharing will be helpful, but shared spectrum is less valuable in dense areas where more are likely to want to share it. There’s also, inevitably, talk about network slicing and even 6G, but from what cable planners are telling me, the problem is that telcos who would expose those assets at a wholesale level aren’t eager to price them aggressively given that they’d be used to compete with the same telcos’ retail offerings.
Higher-level services are a possible target too, and cable companies tell me that they have fewer regulatory risks with respect to offering them than telcos do. For example, I’m hearing that cable company penetration of security services for home and business broadband is more than double that of competing telcos. That’s a big difference, and not only for technology reasons. The elements of a cable security service are no different from the elements of the same sort of service from a telco, so the success difference has to be attributed to better marketing. In particular, to more savvy consumeristic marketing.
One higher-level opportunity is IoT, but there’s nothing in the article that suggests that cable companies in general are looking at IoT from more than a connection perspective, similar to the stance that telcos have taken (and largely failed to capitalize on). However, cable company success in security leads to at least a hope that they might do better with IoT services. Whether than can be profitable is another matter; one planner told me that they believe that a form of “secure smart home” service is under consideration, and that it would use a separate WiFi connection for in-home devices and a secure path to the home’s control site(s) on the Internet. The goal would be to address the publicized risk of an IoT device hack being used as an entree into a home.
I’m not hearing anything from the cable companies on the edge computing front, at least not anything serious. Some planners tell me that the topic has come up, but that unlike the telcos the cable companies don’t see a big opportunity there, and absent a mobile infrastructure commitment they don’t even have a compelling desire to partner with cloud providers.
AI and 6G are what I’d call “glamour issues”, things that CTOs and their planners like to talk about but that don’t really represent any current commitments on the deployment side. Watchful waiting is prudent in both areas; AI for its potential impact on operations efficiency and 6G for how standards there might impact (positively or negatively) the cable landscape.
The NCTA CTO is right in saying that there’s a convergence in broadband, and if one of his goals was to raise awareness of new risks for the cable operators, he was right to do that too. Cable companies have largely converged on telcos in a financial sense, though Comcast has a better middle-term outlook than either Verizon or AT&T. It’s pretty clear that the same market pressures are operating on both telco and cable sectors, which means that the issues of profit per bit are likely to be heard more often for cable companies too. If mobile services are an essential competitive play for cable companies, then they face some major new costs too. But the big risk now is clearly the shift from TV-focused home services to broadband-focused. If “cable TV” isn’t valued any longer, then cable has a lot of thinking to do.
