Mariner Navigates HD Upgrades

Q&A With CEO Curtis Howe

by George Winslow -- Multichannel News, 2/2/2010 10:57:22 AM

MCN: What sort of costs might those problems create for telcos compared to satellite and cable?

CH: There are really two ways to measure the kind of issues I've been describing. You can look at it through eye of network management or engineering. They describe the problem in terms of the mean time to repair network outages and the duration of those outages. We can help them by reducing mean time to repair, reducing frequency of outages and severity of outages.

The other lens is the lens of the chief financial officer. If you look at these problems through his or her eyes, you see those problems are driving repair cost and customer dissatisfaction.

We've calibrated those costs from a number of different systems that we've worked with in North America and we think we have one of the best analysis and data bases around in terms of the frequency of customer problems, the cost of addressing those problems and finally, if you are unsuccessful in resolving them, the cost of churn.

Based on that analysis, we find that IPTV operators on average are spending about two to three times as much in repair and the cost of replacing lost customers as a result of churn as best in class cable. Obviously, this is a real problem. We only know of one IPTV operator in North America that claims to be break even on an EBITDA basis.

 

MCN: Do these higher costs relate to the fact that the telcos are relatively inexperienced with video or does the problem have to do with the complexity of IPTV networks?

CH: I would say a great deal is related to the complexity of these networks.

If you just take home networks, we have seen problems caused by everything from elevators to treadmills to doorbells. If you are trying to find a problem like that remotely it is very difficult because they will often be transient problems. They appear for a while and then they disappear. Or they appear but only on certain channels or only on high definition channels.

And, when a consumer complains about them, they won't be giving you a proper technical description of the problem. That makes it very difficult for telcos that try to decode those complaints and look for patterns. It becomes a case of garbage in, garbage out. If the customer gives you a very ambiguous picture, then you get a very ambiguous analysis of what causes the problem.

 

MCN: How important has HD become for telcos?

CH: All the telcos we have worked with want to get there. The question is, how and at what price tag? We've seen operators who have implemented HD and enjoyed a more than 20% improvement in their penetration within 12 months of making the upgrade. We've worked with a few midsized operators in that transition [who have] also seen that HD has been very critical in terms of reducing churn.

Cable and satellite have really set a high bar here for the rollout of HD and for the telcos, HD is now table stakes. You need to get at least 25% to 30% market share to have a reasonable hope of a payback on IPTV and we don't believe you can get there without high definition any more.

And we think this is a sweet spot for us as a company. We have a lot of experience using our tools to help operators make that transition and we have customers who say that we've shaved four months off the transition.

 

MCN: How important is it for telcos to be able to enhance the HD experience with newer features like whole-home digital video recorders or interactivity?

CH: We are finding that the whole-home DVR is one of the things that the operators see as a big benefit of moving to Microsoft Mediaroom.

Beyond that, we think that the whole justification for doing IP video is about the potential of interactive services. We've seen that interactive services can be a surprising impact on churn, with as much as three-fourths of a percentage point improvement in churn associated with adding interactive services on top of broadcast and VOD.