Promotional Pricing Adds Uncertainty to Cable, Telco Revenue Gains

By offering reduced triple play pricing, cable operators are successfully softening subscriber gains made by satellite and telco video competitors. What is not clear is what might happen when those offers expire and consumers start paying the list prices.

IHS Screen Digest, for example, expects that the third and fourth quarters of 2012 will likely see the resumption of cable video subscriber declines as promotional pricing comes to an end for new customers.

At the same time, IHS Screen Digest expects that cable operators will continue to make significant gains in broadband subscribers, and to a lesser extent, voice subscribers.

The same observation about what happens when promotional pricing ends might also be made about cable gains in broadband access as well, as there are some signs firms such as Comcast are offering new subscribers free service for six months, while telcos such as CenturyLink are offering “half price for six months” offers.

On the other hand, there is a general perception that cable access services remain in stronger demand than telco digital subscriber line services. AT&T U-verse, for example, only recorded a net gain of 103,000 customers in its first quarter of 2012.

Verizon, for its part, added 193,000 new FiOS subs and a loss of 89,000 DSL subscribers, vision2mobile reports.

In the first quarter of 2012, Comcast added 439,000 high-speed Internet customers while Time Warner Cable picked up 214,000 residential broadband subscribers.

One might argue that cable operator promotional pricing has more impact in the video area than in the broadband and voice areas, though, in part because broadband and voice are growth areas for cable operators, while video is a declining product.

By 2016, IHS Screen Digest expects that the cable subscriber market share will have shrunk by 6.9 percent from 2011, with satellite making gains of 3.6 percent and telco video share growing 42.5 percent.

But cable will grow broadband subscribers by 18.6 percent, and voice subscribers by 19.7 percent, IHS Screen Digest says.

Total combined revenue from video, broadband and voice will therefore grow by 11.5 percent during the same period, from $81.3 billion to $92.8 billion. IHS Screen Digest argues. That continued trend of revenue growth also is what virtually all observers expect for telcos as well, at least those such as AT&T and Verizon that can rely on robust wireless revenue gains.