European cable operators are dealing
with many of the same competitive issues as their U.S.
counterparts — and plan to fight back in much the same
manner as their brethren across the pond, by offering
next-generation video services and beefing up business-to-
London-based research group Solon Management Consultants,
in association with the Cable & Telecommunications
Association for Marketing (CTAM) Europe, surveyed
cable operators serving about 25 million customers and
representing more than 50 million revenue-generating
units in 11 European countries. Called the Solon Survey
of European Cable Communications, it was the fifth such
survey Solon has conducted for CTAM Europe.
According to Solon, European cable companies expect
overall revenue to rise more than 5% annually
through 2014, a marginal slowdown from their expectations
in Solon’s last survey in 2009.
SHIFTING REVENUE MIX
The big news is that the mix of where that revenue is coming
from is changing.
In the U.S., video revenue is expected to one day fall below
50% of total sales, but in Europe that’s already happening
— and it’s expected to continue. Solon estimates
that video as a percentage of overall revenue will dip to
about 39% by 2014 from 47% in 2011 in those companies
surveyed. At the same time, Internet services will account
for 25% of total sales (up from 23% in 2011), while mobile
services will double to 6% (from 3% in 2011) and business
and wholesale will increase to 12% (from 9% in 2011).
On the commercial-services front, while most operators
have built up operations to attract business customers, it
continues to be a nascent-but-growing segment. Some of
the operators surveyed claimed that business
services already accounted for more
than 30% of their total revenue, Solon
said, illustrating the untapped potential.
“Cable operators have so many growth
options — it is up to them to make the
most out of it,” Solon managing director
Christian Teichmann said in a statement.
According to Solon, like the U.S. cable market, the
European market is maturing as basic-TV customers
decline. While there has been growth in premium pay
TV services (like movie
channels and digital video
are increasingly looking toward
such services as multiscreen,
TV Everywhere and
next-generation set-top boxes
to combat the slowdown
in video customer growth.
In addition, cable operators
highlighted the importance
of turning over-the-top
video from a threat into an
opportunity, Solon noted.
Pivotal Research Group
principal and media & communications
analyst Jeff Wlodarczak
said Europe is ripe
for growth on the video side,
especially with advanced
products like digital video
penetration in some
of the biggest markets in Europe
is about one-fifth that
of the U.S.
DVR penetration for Germany’s
largest cable operator,
Kabel Deutschland, is
about 7%. In the U.S., Time
Warner Cable has about 40%
“Over time, it’s reasonable
to assume that is going to be a big driver,” Wlodarczak
Internet-protocol TV and over-the-top video also are
becoming a increasing threat in Europe. Solon estimates
that the companies surveyed blame IPTV for more than
half their churn.
With aggressively-advertised, low-priced offerings,
more convenience and superior content, that trend is likely
to continue. Solon said operators expect churn related
to over-the-top video platforms
to double until 2014.
Like some U.S. operators, European
cablers are finding it’s
better to embrace over-the-top
video than to fight it. According
to the survey, some European
operators plan to launch their
own OTT offerings, but most
plan to integrate OTT or similar
features into their own products.
European operators are finding
the bundle to be a powerful tool
in attracting and keeping customers.
Already, cable operators
in Europe have substantially reduced
the number of one-product
customers in their subscriber
bases — from an average of 66% in
2009 to 45% in 2011. At the same
time, customers taking the voice,
video and Internet triple play have
more than doubled from an average
12% in 2009 to 27% in 2011.
That trend is expected to continue,
according to Solon.
In 2010, the average cable customer
took 2.1 services from their
cable operator. That is expected
to reach 2.7 products by 2014, according
to the research group.
Conditions also should bode
well for broadband service. Despite
several earlier years of
declining ARPUs, MSOs have
been able to reverse that trend
by offering higher speeds. The
operators surveyed forecast average
Internet ARPU of 20 Euros
($25.26) per month, about half
what their U.S. counterparts
Still, the need for speed will
continue. The average marketed
bandwidth speed is expected to
more than double through 2014,
with nearly half of cable broadband
subscribers taking offers of
50 Mbps or higher.
PIPE’S THE THING
European cable operators have
a lot of headroom — Wlodarczak
estimated that Liberty
Global, the largest cable operator
in Europe, prices its German
broadband product about 30%
below its largest telco competitor,
“The hope of hopes in European
cable is the same hope
that you have in the U.S. — that
the data pipe is so much better
than the alternative that eventually
people are almost forced to
go to cable,” Wlodarczak said. “I
think, inevitably, we’re going to