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Cable companies need to provide compelling video experience along with broadband: Moody’s

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MUMBAI: A new report by Moody’s Investors Service claims that value propositions for cable providers are changing as broadband becomes even more necessary than TV. The report titled ‘Couch potatoes are switching screens as high-speed data cable subscribers overtake video’ states that most companies in the US are well positioned to reap the benefits and manage the risks of transition.

"Cable providers' largely upgraded networks and high-speed capabilities can make them the first call for consumers seeking fast internet connection. But if cable companies want to sell their video product as well, the onus is on them to provide a compelling video experience at an attractive price,” says Moody’s Investors Service vice president senior analyst Karen Berckmann.

High speed data subscriber numbers will overtake video subscribers for Moody’s- rated cable companies in the next year, she adds. Fewer video customers means lower programming costs that are paid on a per subscriber basis and servicing the video product tends to be the most challenging and costly part of the business, so margins could benefit from the mix shift.

However, the report also warns that a magnifying customer base for video also has risks. Companies that have declining number of video subscribers lose economies of scale when it comes to technicians and customer service, driving up costs per customer. At the same time the brand may be affected if it gives up on video in favour of broadband.

The report states, “Companies with significant overlap with Verizon's FiOS and AT&T's uVerse, such as Cablevision Systems and Time Warner Cable, will need to invest in a competitive video product to survive while those with a less intense competitive footprint will find it easier to thrive as primarily broadband companies. An operator that loses a customer to FiOS or uVerse is likely to lose that customer entirely, whereas one losing a customer to Dish Network or DirecTV could still maintain a broadband relationship.”

Moody’s says that Comcast is one company that is both large as well as diverse enough to invest in video as well as showing that it can sustain its video position. Cox Communications and Cablevision could struggle to grow while Grande Communications Networks and RCN Telecommunciations Services have shown that cable ops can build sustainable business on video penetration of about 20 per cent. For smaller operators, partnering with Tivo would be ideal for the next couple of years.

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