Cable TV

US cable consumers look for control in convergence era

NEW YORK: In India, the Communications Convergence Bill is still to be introduced in Parliament. In the US, however, the cable industry is readying itself for content and distribution convergence.

A survey conducted by Deloitte & Touche also shows that while customers want more control over programming options, opinion is split down the line over relaxation of Federal Communications Commission (FCC) ownership restrictions.

Cable industry executives and stakeholders expect a dramatic increase in the number of partnerships and mergers between multiple system operators (MSOs) and content providers, as well as MSOs and telephony companies over the next three years. The survey was conducted by the Tri-State Technology, Media, and Telecommunications (TMT) practice at Deloitte & Touche LLP, one of the US' leading professional services firms.

The survey also revealed that consumer-defined customised bundles of channels will find greater acceptance by cable customers as opposed to other pricing options, including on-demand channel purchases, specific programme purchases, and operator-defined bundles.

The survey was conducted in February along with a panel discussion hosted by the firm and the Columbia School of Business titled, "The Future of Multichannel Television." Panel participants included CTO Scientific-Atlanta Bob McIntyre. The US cable television industry has reached a crossroad stage. It is being driven by two forces which are convergence of distribution and content and consumer choice made possible by broadband and digital technology. The future course of the industry will be determined by which of these two forces dominates the report notes.

In addition to industry convergence, the survey also gauged the effect of issues such as pending FCC media ownership rules, the balance of power between content providers and distributors, and the potential importance of interactive TV programming and content on the cable industry over the next three years.

Key findings:

-- 46 per cent of respondents anticipate convergence of some form would be extremely or very likely to occur between MSOs and content providers, as compared to 35 per cent for MSOs and telephony operators, 19 per cent among content providers and software creators and five per cent between content providers and telephony.

-- As mentioned earlier consumers are more interested in pricing models that put control of purchasing and selecting channels and services in their hands. 73 per cent of respondents believe that consumers would be extremely, or very interested in consumer-controlled customisable bundles of channels, as compared to 60 per cent interested in on-demand channel purchases, 59 per cent for specific-programme purchases, and 47 per cent for operator-defined bundles.

-- There is no clarity regarding the extent to which the FCC is expected to relax ownership restrictions is still up for debate. 40 per cent of those surveyed believed there would be a major relaxation of restrictions, while 32 per cent expect moderate relaxation, and 28 per cent see little or no restriction relaxation.

-- Respondents disagree on whether the balance of power will shift over the next three years towards content providers (46 per cent) or distributors (41 per cent)

In the event of the FCC lifting certain media ownership restrictions, telecommunications partner for the TMT practice Craig Wigginton said "cable industry companies seeking to grow through acquisition or partnerships, or be acquired themselves, need to be thorough in their valuations, due diligence and overall planning to ensure that transactions produce the shareholder value they expect."

Survey respondents classified themselves as content providers (32 per cent), software providers (six per cent), telecommunications operators (three per cent), network technicians (two per cent), MSOs (two per cent), and "Other" (55 per cent.). Those in the "Other" category included financial analysts, industry analysts, and academics.

Survey Methodology: Interviews were conducted with 129 cable stakeholders, defined as executives, operators, programmers, financial analysts, industry analysts, and academics. Participants were given handheld devices and asked to input their responses to a series of questions that were presented to them as a group on a large screen onstage. Responses were gathered and tabulated using Option Finder, an instant audience response technology.

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