Posts Tagged ‘FiOS’

By The Numbers – Or Maybe Not

Several news stories crossed my desk this morning that are each worth closer scrutiny. The first one comes from Reuters and says that Dish Network’s quarterly revenue missed forecasts as more customers disconnected their satellite antennas.

Dish stated that they had lost 23,000 subscribers on a net basis for the quarter ending September 30. In the same time period a year earlier, the net loss was 12,000 subs, almost half as many. And apparently the company’s new $20/month streaming service, Sling TV, isn’t proving to be as popular as expected.

The combination of DirecTV with AT&T also puts Dish at a competitive advantage, since AT&T can offer bundles of service (including mobile telephone) at competitive prices. Satellite TV has always been at a disadvantage to cable and fiber optic services due to issues with reception during inclement weather and the inability of some home and apartment sites to “see” the satellites, ruling out installations.

In my neighborhood, several folks canceled service from Comcast in recent years and picked up Dish and DirecTV as a cost-saving measure, only to drop both when Verizon laid fiber optic cables for FiOS and offered some low-cost, triple-play bundles that Dish and DirecTV couldn’t beat. (Internet service via satellite isn’t exactly fast and reliable.)

Right now, Dish’s most valuable asset is the UHF frequency spectrum acquired in FCC auctions- but it looks like that spectrum may go back for re-auction next February. And the DirecTV / AT&T juggernaut may force Dish into a merger to stay alive – or perhaps an outright sale.

So things aren’t looking too good for pay TV service providers? Not according to TDG Research. In a story on the Multichannel News site, TDG claims that “the percentage of adult broadband users (ADUs) who were moderately or highly likely to cancel their pay TV service in the next six months dropped 20% since last year.”

TDG went on to say that the group of consumers saying they “definitely will cancel” their pay TV service in the next six months has been cut in half — down from 2.9% in early 2014 to 1.4% in early 2015.” They cite the fact that Comcast only lost 48,000 video subscribers in Q3 2015, as opposed to 81,000 in the same quarter a year ago.

The problem with opinion surveys vs. market trends is that opinions can change abruptly. After a series of mishaps with Comcast’s Xfinity platform earlier this year (and well-documented on this site), I was about ready to throw in the towel and switch over to FiOS myself! But after my original complaint was resolved (replacing the buried cable from the drop to my house) and I wound up with a new modem (802.11ac 2.4/5 GHz), plus much faster Internet speeds and new Xfinity set-top boxes, I decided to stay with the devil I know – for now.

So the TDG data may reflect consumer preferences right now, but what will actually happen remains to be seen when the next set of quarterly data becomes available in January or February of next year.

There’s no arguing with numbers, however. From the Digital Entertainment Group (DEG) comes a report that consumers spent more money on digital video downloads and video streaming through the first nine months of 2015 than on rentals and purchases of DVDs and Blu-ray discs.

According to a story on the TWICE Web site, consumers forked over almost $6.5 billion on downloaded and streamed videos. The “digital” category includes subscription streaming and video-on-demand (VOD), plus digital downloads such as movies to tablets and smartphones. (Like I do when I fly cross-country).

In contrast, the dollar amount spent on rentals and purchases of optical disc media amounted to $6.3 billion – close, but still in 2nd place. From January through September, revenue from downloads and streaming rose by almost 16% Y-Y, while revenue from DVD/BD purchases declined by 14% and disc rentals dropped 7.1%.

Within the streaming/downloads category, the lion’s share of revenue (3.65B, or 57%) went to subscription streaming, while digital downloads captured 21% or $1.34B. The rest went to subscription video-on-demand ($1.41B, or 22%).

What’s interesting is that in 2014, the DEG states that “consumers spent more on physical media, about $6.93 billion, compared with $7.53 billion spent on digital downloads and streaming.” Overall, that means that in 2014, consumers whipped out their credit cards to the tune of $14.46B, or about $1.2B per month. Through September of 2015, that number is $12.74B total, or $1.42B per month – an increase of about 15%.

So there you have it. Cord-cutting (or “dish dumping”) is on the rise. Or maybe it isn’t, if we are to believe the preferences of consumers. Or maybe it’s the HDMI cable we’re cutting, preferring to stream and download videos as opposed to playing them back from optical discs.

One statistic I wish the DEG would delve deeper into concerns the installed base of Blu-ray players – almost 80 million households own one now, according to DEG. But how often are they used for playing movies, as opposed to streaming movies and TV shows from Netflix, Hulu, Amazon Prime, and other services? We just don’t know.

 

Trends: Ignore Them At Your Peril

On August 15, Leichtman Research Group of Durham, NH released its quarterly revenue and subscription numbers for U.S. cable TV providers. And there was a surprise to be found in the calculations.

For the first time ever, the number of broadband service subscribers for major cable TV service providers exceeded (barely) the number of cable TV channel subscribers. This happened during the 2nd quarter of 2014 and represents a milestone for pay TV services. (And yours truly predicted it would happen a year earlier, in a DD posted a few years back. Oh well, close enough for government work…)

The actual differential favoring broadband subscriptions was small, amounting to about 5,000 more broadband customers. The actual totals for cable TV systems (not including Wide Open West, an overbuilder) were 49,915,000 for broadband, and 49,910,000 for cable channel service. What’s more interesting is that thirteen largest pay TV providers in the US (about 95% of the market) lost about 300,000 net video subscribers in 2Q 2014, compared to a loss of about 350,000 video subscribers in 2Q 2013.

To offset that decline, the 17 largest pay TV providers added about 385,000 broadband customers during the same time period. Cable TV companies control the lion’s share of broadband service revenue and have a 59% market share vs. AT&T’s U-Verse and Verizon’s FiOS services. The latter companies stayed essentially flat in new subscribers as an almost equal number of customers dropped DSL service (627,000) compared to those who signed up for faster broadband (636,000).

For all cable and telcos that Leichtman surveyed, the total number of broadband subscribers was about 85 million. Of that total, industry giant Comcast claimed 21.27 million and #2 service provider Time Warner Cable accounted for 11.97 million. Among cable TV companies, those numbers represent 42% and 23% market shares, respectively. (Keep that in mind as you ponder the consequences of a potential Comcast – Time Warner merger.)

Now for some additional perspective: Netflix recently broke the 50 million worldwide subscriber mark, with 36 million of those subscribers located in the United States. That’s larger than any cable TV or telco subscriber base. In fact, it’s more than Comcast and Time Warner combined, and is indicative of the meteoric growth Netflix has experienced since it commenced a streaming service in 2007.

Combined with the shift toward consumption of digital media online vs. renting or buying optical discs (as outlined in my last Display Daily), it’s clear that broadband is becoming the more desirable service for many households. I’d also venture an educated guess that customers who subscribe only to broadband services tend to skew much younger (Millennials) while traditional cable TV channel subscribers skew older (Baby Boomers).

While AT&T and Verizon have a smaller share of the pie, it’s still a large enough slice to motivate Comcast, Time warner et al to keep increasing their broadband speeds and not lose any competitive edge. I am a Comcast subscriber and while writing this article, checked my download speeds using CNET’s Internet Speed Test. The result? 20 Mb/s downstream at 5 PM, which is a considerable boost from what I had three years ago. Could the fact that Verizon ran optical fiber through my front yard a few years ago have anything to do with it?

What does all of this mean, long term? First off, the preference for faster broadband vs. a pile of pay TV channels that most people never watch will continue to re-shape the business model for cable TV companies. (The median number of channels watched in pay TV households currently stands at 17.) Continued price increases and increasing reliance on wireless (and not wired) phone service will prompt more customers to drop so-called “triple play” offerings and just go with broadband (and probably use services like Ooma for VoIP calling).

Secondly, the sheer size of Netflix and its expanding category of both rental movies and original series provide even more impetus for disgruntled pay TV subscribers to dump costly channel packages and stream everything from the Big Red Father. Both House of Cards and Orange Is The New Black are wildly popular – there’s no reason to assume Netflix won’t hit a few more home runs. (And their success is prompting HBO to finally discuss publicly a subscription streaming service independent of cable TV delivery.)

Finally; it may take more time than I prognosticated several years ago, but cable TV companies and telcos will slowly and inevitably morph into something that looks more like your local electric company, providing metered high-speed broadband connections and letting customers decide what they want to watch, and when. The DVR may even pay the ultimate price and fall by the wayside in favor of streaming from cloud servers as this comes to pass.

Even the biggest fires start with a tiny spark, and most people don’t even notice trends until they are well under way. Ignore them at your peril…

FiOS is coming! (Yawn…)

They’re here!

The big orange spools of fiber optic jackets. The rows of white utility trucks. The polycarbonate junction boxes sitting every few feet along the curb. The spray-painted lines and alien glyphs all over my lawn, and my neighbor’s lawns.

Yes, FiOS has finally made it to our neighborhood. After nearly six years of waiting, Verizon has hired an army of subcontractors to run fiber optic cables under our lawns and breach the once-impenetrable Comcast wall.

This is FiOS! This is Big! (Well, the spools certainly are!)

Thing is, some of my neighbors are kinda blase about the whole thing. And I am, too.

Here’s why: Verizon first wired up nearby Doylestown Borough in 2003-2004, back when most people had separate telephone and cable TV hookups and broadband access was starting to pick up steam. Repeated calls to Verizon about the availability of FiOS in our township brought the same results – “We’re negotiating with your township over the franchise fees.” Seems that, unlike every other township around Doylestown, our supervisors insisted that Verizon pay the same franchise fees that Comcast had, back in the day.

This, even though Verizon had successfully negotiated discounted franchise deals with most other townships in central Bucks County.

Finally, after years of haggling, our supervisors reached an accommodation with Verizon, who had already announced they would not build out their national FiOS infrastructure any further, due to the high labor/materials costs and challenging ROI environment. Fortunately, we already had the required fiber optic ‘drops’ sitting in a Verizon service cabinet at the corner of our development from six years ago.

A few things have changed along the way since 2004. First off, Comcast’s broadband speeds have picked up considerably, and their service is quite reliable. Secondly, I, along with some of my neighbors, dropped Verizon landline telephone service and consolidated everything into the ‘triple play’ option (broadband, phone, and cable TV). And the quality of phone service is much, much better than what I had with Verizon. (Other neighbors opted to install DirecTV dishes and forego any kind of cable connection.)

I’ve also got a CableCARD-enabled TiVo HD that I use constantly to time-shift programs, and it works very well. Not only that, there are numerous ‘in the clear’ digital TV channels present on my system that can be accessed by conventional TV sets without extra set-top boxes.

I saved myself about $40 a month with the consolidation. And have gotten pretty used to the high level of service. So maybe it’s understandable that I’m not in any hurry to change over to a new provider, even if their Internet speeds are supposedly faster (something that was definitely true back in 2004, but maybe not now).

And it doesn’t help when a Verizon contractor shows up at my door, asking me if he can disconnect my cable TV wiring so he can trace the underground line back to the house. Hell, no! Not while I’m reviewing artwork for a client project!

The wires are definitely here…unless they’re somewhere else.

And that’s another thing to consider. When you call Comcast for a service problem (something I haven’t had to do in over a year), a Comcast-trained service person shows up in a Comcast truck.

When you call Verizon, you may get a Verizon tech. Or, you may get a subcontractor, particularly if you have wiring issues.  There are numerous ‘installation disaster’ stories of subcontractors puncturing gas lines and shorting out electrical lines while installing FiOS connections in the central Bucks County area. That alone gives me pause about the whole ‘switch to FiOS’ thing.

Now, don’t get me wrong. I’m not a particularly big fan of Comcast, who seems to raise their rates at the drop of a hat.  And I wonder what Comcast’s pending acquisition of NBC Universal will mean for future monthly rates and access to content.

The fact that I could switch to FiOS at any time may be useful to me to get a better rate from Comcast, or hold the line on future rate increases.

But to be honest, the service I get right right now is very good. And it’s reliable. And I can troubleshoot most of it myself with my own test equipment. And I know a lot of the service and engineering folks at Big C. So I guess I’ll stick with Comcast for a while longer, while those Verizon contractors continue to tear up everyone’s lawns and finish pulling fiber to all the houses in the ‘hood. Then we’ll see how it’s working out for any of my neighbors who decide to make the switch.

Maybe it’s simply a case of dealing with the devil you know, versus the one you don’t know?