Ops Say: Stress VOD, Not PVRs

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While cable operators are seeing a huge demand from subscribers for digital video recorders, some executives at the Cable & Telecommunications Association for Marketing Digital & Broadband Conference here last week stressed that the industry should focus more on video-on-demand programming.

"The more content we bring on-demand, the more trouble these [satellite] guys will be in," Comcast Corp. executive vice president of business development Stephen Silva said during Thursday's closing panel, pointing out the inability of DBS companies to offer VOD.

The session was the finale for CTAM Digital, as the marketing group said it would "fold" future conferences into its annual Summit.

Although CTAM said last week's gathering drew 1,318 attendees — up from 1,168 a year ago in New Orleans — CEO Char Beales said it made more sense to fold sessions on products such as VOD, high-speed data and telephony into the CTAM Summit as these services have become mainstream.

"Our marketing challenge is to convince 600 people to move over to the Summit," Beales said, noting that half of CTAM Digital attendees typically don't attend that conference, which this year is being held in Boston from July 18 to 21.

CTAM will also host its annual research conference on May 18 and it will launch two new events this year — a customer-service confab in November, and a collaborative marketing gathering that will likely be held in September.

Silva predicted last Thursday that there would be "tens of thousands of hours" of on-demand content available on cable systems in coming years.

Those offerings help prevent subscribers from jumping to DirecTV Inc. or EchoStar Communications Corp., executives said.

CHURN BUSTING

Insight Communications Co. has seen a 60% reduction in digital churn for customers that use on-demand services, compared to subscribers who don't view such content, senior vice president of marketing and programming Pamela Euler Halling told attendees last week.

Comcast is also looking to revamp the interfaces it uses to offer VOD content to subscribers under a joint venture the MSO recently formed with interactive program guide distributor Gemstar-TV Guide International Inc.

Rather than force subscribers to surf through separate channels for on-demand content, such as HBO On Demand and Showtime On Demand, Silva said Comcast wants to package content from multiple programmers in categories such as action.

Comcast would find a way to aggregate content on a single screen without hurting the brands of individual networks, he added.

Internet telephony was also a hot topic at last week's confab, with some executives noting that as more operators move toward launching telephony, the nuances of bundling products takes on greater complexity.

Comcast vice president of business development Tom Nagel said the MSO will launch VoIP in several markets this year, with unlimited domestic long-distance and local calling, full features and battery backup.

VOIP DISCOUNT: 15%

Bundle pricing, which ties in video and data products, could be 15% less than what competitors charge, Nagel suggested.

The operator's research found that 68% of subscribers were interested in caller ID through the TV.

"We want to create products that go across TV and telephony," Nagel said. Eventually, chat and video functions could be tied between voice and video platforms.

In addition to caller ID via the TV, Comcast found that 83% of its subscribers were interested in call waiting, 65% in anonymous call rejection, 59% in voice mail, 49% in call forwarding, 46% in enhanced voice mail and 43% in three-way calling. Comcast is likely to have most of those features at launch, Nagel said.

Overall, Comcast found that 70% of subscribers were interested in Internet phone, even at the same price point they currently pay. The MSO also found that while 82% of subscribers wanted one bill, the majority still wanted a choice of whether to get one, or more bills.

Nagel also said retail would be important for telephony. "I do think we need to go retail fairly quickly with video and data products. We really want to get to retail next year."

DEMAND FOR PHONE

By the end of the first quarter, Time Warner Cable said it will have completed launch of its digital phone product in six divisions. Thus far, the MSO has seen solid trend lines in terms of customer interest and cost reduction, senior vice president Gerry Campbell told attendees. "[Capital expense] is dropping on this and the customer demands it."

In Time Warner's Portland, Maine, system, the MSO counts 13,000 subscribers, or 10% of all passed homes.

Some 30% of cable-modem subscribers are taking phone service, less than one year after launch. Customer satisfaction is 84%, Campbell said, and 90% of homes port their current local phone number over to Time Warner's service.

Costs are $300 per home and dropping, Campbell said. "The quicker you join us the better it will be for the industry," he said.

Cable's telephony pioneers — notably Cox — have demonstrated "it's not necessary to provide deep discounts," he added. Quality service and convenience, combined with pricing, make for an attractive package.

Three-product bundle churn is 50% lower than single-product churn, said Scott Hightower, vice president of data and voice product development at Cox.

Overall, Cox's video churn rate stands at 2.6%, senior vice president of marketing Joe Rooney said.

Two-product churn is 2.2% per month and three-product churn is 1.5% a month.

In San Diego alone, 50% of subscribers purchase bundled services, with 20% taking all three products. That figure should hit 25% by year-end, said Bill Geppert, Cox vice president and regional manager.

"The phone piece really solidifies the package in the customer's eyes," said Geppert.

Also at the conference last week:

At last Thursday's closing session, Time Warner Cable chief operating officer Mike LaJoie said the MSO would deploy high-definition DVRs "real soon."

nCUBE Corp. cut a deal with Adelphia Communications Corp., noting that it completed VOD server integration work and deployment for Adelphia's Los Angeles franchise in five weeks time.

Mediacom Communications Corp. executive vice president of operations John Pascarelli said his MSO is gearing up to deploy Internet telephony, using multiple vendors. Mediacom previously has said voice-over-IP would roll out in the second half of the year.

Comcast's Silva downplayed the threat posed by companies such as Vonage Holdings Corp., which use the public Internet to offer VoIP to cable-modem and digital subscriber line customers, bypassing deals with local operators.

"I don't think we should overreact to these people and their delusional business models," Silva said.

Charter Communications Inc. chief operating officer Maggie Bellville said her MSO has seen significant demand for HDTV set-tops — and that it doesn't have enough of them. "If our friends at Motorola hadn't run out of boxes, we'd probably be better off," she said.

And Advance/Newhouse Communications vice president of strategic initiatives Arthur Orduna said his MSO counts 68,000 DVR households on five Bright House Networks systems, with a take rate of 1,400 per month.

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