Thursday, May 28, 2015

Cable TV Leads in Consumer Markets; How Long Before it Leads in Business Market?

Regulatory structures are hard to change, especially when they have been in place for a long time, even when markets have changed.

Consider the amount of time, money and effort devoted to all manner of rules applied only to some legacy telephone companies presumed to the carriers of last resort, with obligations to “serve everyone,” even when most contestants are not required to do so.

More shocking is when the actual leading providers in markets are unregulated, when the less dominant providers are so regulated.

And we soon will face an anomaly: the supposed “leaders” of the consumer communications market will clearly have lost their leadership, yet still be highly regulated, while the new leaders, continuing to grow faster, are lightly regulated and bear no “carrier of last resort” obligations.

Should the Charter Communications bid to acquire Time Warner Cable pass regulatory muster, and some of us would bet it will, more light will be shed on the relative roles of cable TV and telephone companies in the fixed network high speed access market, and also of market power generally.

The perhaps surprising result would be that In the fixed network Internet access segment, Comcast would be number one, Charter number two, AT&T third.

Think about that: the two largest legacy telcos would rank no better than third and fourth in the core service provided by the fixed network.

Verizon would rank fourth. CenturyLink would rank fifth, Cablevision Systems sixth and Frontier Communications seventh.

In the top five spots, cable TV companies would be number one and two providers, with even the largest U.S. telcos ranking third, fourth and fifth.

That would make cable TV operators the leaders for consumer services, though telcos would continue to lead in enterprise and business services.

Keep in mind, however, that business services are the big growth leaders for cable TV companies.

One way of illustrating the potential value of Comcast’s entry into the mobile business can be gleaned from looking at current revenue contributors, with their growth rates.

Of total 2014 Comcast revenue of $68.8 billion, $44.1 billion, or 64 percent, was generated by the cable communications business. Operating cash flow contribution from the cable communications segment was about six percent.

The consumer part of the cable communications business (triple play services) is growing primarily because of high speed access.

Video revenue for 2014 was up about one percent. Voice revenue was static at about 0.4 percent growth. High speed access was where the gains primarily were made, with growth of 9.5 percent.

Business services contribute about nine percent of cable communications segment volume, at about $4 billion in 2014.

But business services grew at a 22 percent rate in 2014. In fact, it might be correct to say the newest product segments in the cable communications segment (business services in general, and mid-market services in particular) have the highest growth rates.

Comcast estimates it has reached about 25 percent penetration of the small business addressable market, but only about five percent of the addressable mid-market opportunity, according to Neil Smit Comcast Cable president and CEO.

The point is that, having taken the lead in consumer services, cable TV operators are preparing to take the lead in the small and mid-sized business segment. And some might argue it is only a matter of time and experience before cable TV operators build on their success in the smaller business segment to move up to enterprise services.


No comments:

Does Technology Cause Growth, or Does Growth Cause Technology Adoption?

A Deloitte survey of 1,300 enterprise information technology executives across 69 countries and 22 industry sectors finds, as do most such s...