Thursday, October 13, 2005

Digital Cable Booming in Canada - Not Good for VoIP

As much as I'm an advocate for VoIP, I think wireless is a bigger growth story, and as service providers of all stripes start morphing into each other, video will emerge as the biggest driver of revenues. The cynic in me sees voice going to zero, which is not what the RBOCs want to hear. IPTV is truly going to disrupt the video space, far more so than satellite ever will. But, we're not quite there yet, and for now, the adoption of digital TV is a better reality check on where consumers are willing to spend their infotainment dollars.

Today has been a good day for telco items in the Globe & Mail, there's a very nice feature on how digital cable is making solid gains. Citing the most current Statistics Canada data - 2004 - the article notes that cable subscribers outnumber satellite TV subs by about 3:1. That ratio has held steady since 2003, but year-over-year, satellite has posted better growth (5.4% vs. 0.4%), as it cuts into the cable pie.

In response to this incursion, our cablecos have been aggressively pushing digital TV, and adoption has been climbing steadily. In 2003, there were 1.4 million digital subs in Canada, and that base grew 34% in 2004 to 1.8 million. That's actually not far below the 2.3 million subscribers using satellite. If these growth patterns hold fairly steady, digital subs will surpass satellite subs this year. That's good news for the cablecos.

In 2003, digital accounted for about 18% of all cable subs. That level rose to 24% in 2004, and following this growth pattern, 32% of cable subs will be digital by the end of this year. That's a pretty strong penetration level, and satellite can't match the overall value proposition, especially when the world moves to interactive/integrated services. Of course, satellite will hold its own in remote areas that cable can't reach, but in the urban markets, it's easy to see why the telcos are looking to IPTV as their savior against cable.

It's a complicated game, and the technologies are still evolving, but in the big scheme of things, this is where the big money will be made. That's why there's much more focus here from both the cablecos and the ILECs than on VoIP. Our Tier 1 VoIP offerings have all had very rational pricing and modest rollout strategies, except for Videotron. And on that note, it's interesting to see how Videotron is now raising its prices on long distance in a bid to stem some of the losses from its bargain basement pricing - Mark Evans has a nice posting on this from earlier this week.

3 comments:

ipcom said...

Posted by: bitpad

Good post Jon,

One thing to keep in mind is that the growth in cable subscribers was actaually pretty slow in 2004. Keep in mind the number of grey market subs on US-based Sat. providers (DirecTV and Dish) Rogers has been complaining against.

2004 saw DTV move to a new security technology that disabled all the DirecTV pirate boxes. These people, waiting for the new cards to be cracked would move to month-to-month cable packages; rather than the contract-subsidized satellite installation packages (where installers would see the grey-market equipment). Remember ROGERS was targeting these customers in 2004 campaigns with switchover offers.

In 2005 Dish network has progressively been locking down its system against pirates. We should continue to see growth in cable subs with optional upgrades (Sports for DTV users, and International for Dish); until the new technologies get hacked.

Just something to keep in mind to understand the growth of cable during this timeline.

Ash

ipcom said...

Posted by: Jim Courtney

Driving adoption of digital is really all about content. Two items of recent experience:

1. Last Friday's Leafs game in Atlanta was the first regular season Leafs game televised solely on LeafsTV - available only to digital cable subscribers in Ontario. From a subsequent press report, this game was the first time that LeafsTV had an audience over 100,000 for any program. Apparently their normal viewership is under 1,000 and the best audience they had for pre-season games was about 50,000.

2. My neighbour's son made the Bruins lineup this year. But the only way to watch ALL his games is to subscribe to NHL Centre Ice - a premium digital cable service. When I came home from hospital last week to convaclesce the first thing I did was to subscribe to this service. Here is a case of "My TV" where individuals can customize their programming through selective digital services. (I am probably the only Toronto area viewer who watched Ottawa-Boston during the Leafs-Canadians game last Saturday.)

When extended cable first became available in 1984, it was TSN (and the popularity of the Blue Jays in those days) that drove subscriptions more than any other programming. I would predict that the adoption of sports programming by digital services is going to be the best proxy for following the growth of digital cable over the next few years.

(Now my wife is trying to deal with the fact that I can watch 10 NFL games concurrently early Sunday afternoons -- as an adjunct to the NHL Centre Ice purchase ).

ipcom said...

Posted by: tara

I just got digital cable, internet, and cell phone service for $45! I got it at www.electronicsconsumerguide.com
Is that the best price out there?