Tuesday, 12 March 2013

Key messages for the cable industry.

I was at the annual cable industry conference last week, Cable Congress in London. For those who don't know it, it's quite a small event, but it is attended by many CxO from the cable industry in Europe, so it's a good barometer of how the industry wishes to portray itself. I was struck by how bullish the industry is feeling. I hadn't heard such optimism and swagger since the days of the last telco bubble. These were the key messages from the conference:

1. Cable has a strong future even if it stays still: Analyst numbers released during the conference show good growth, and show that more customers are taking bundles. Furthermore, in many EU markets, it shows growth potential in converting analogue to digital, and further penetrating broadband. In other words, many EU markets can achieve good growth by maintaining current operating strategies.

2. Simplicity: The value proposition to customers needs to be articulated in a very simple way: faster broadband speed, free WiFi on the underground, easy to find favourite shows at any time. Not a menu card of broadband speeds and download caps, nor paid-for WiFi bundles, nor carrying full range of direct-to-consumer "over-the-top" services. Furthermore, the propositions need to be communicated through a conversation with customers, using methods that ways customers like: post and response on Facebook, IM chats, informative Twitter feeds. 

Finally, the same approach of simplicity as used in business-to-consumer, should be applied to business-to-business offerings too, as business increase their internal use of social media.

3. Complete connectivity: WiFi is becoming an important connectivity technology for cable customers, so cable needs to offer wireless connectivity alongside its wireline in order to stay relevant. Cable needs to move from triple-play to quad-play. 

Direct competition with mobile operators is likely in the future, once 4G prices reduce. There are also opportunities to partner with mobile because cable has already deployed the infrastructure, e.g. backhaul services (national high-capacity fibre), enabling small cell infrastructure (national coverage of cable street cabinets), as well as white-labelling WiFi access (domestically-deployed dual SSID cable-modems).

4. Improving utilisation and monetisation of bandwidth: Two points here: More bandwidth can be provided to customers, at acceptable price points, than customers can use. Cable must deploy value-added-services that increase utilisation, or risk customers using over-the-top services that disintermediate cable from the value chain. OTT TV is the first and most common, but will be followed by Connected Home OTT services. 

The second part is that a few content services take up the majority of bandwidth. This is an opportunity to monetise bandwidth more, following the example of broadcast carriage deals. However, such strategies need to be wary of net neutrality legislation.

5. Customer service challenges: Cable is reaching further into the customer home at the same time as home IT becomes more complex, at the same time as customers have higher expectations of service from their experiences in other industries. The challenges are therefore: customer support needs to become more sophisticated to support complex service offerings; customer support needs to support third party complex service offerings; each customer touch point needs to increase the customer’s perception of value of the service offering. 

The fourth challenge is that customers are unwilling to pay extra for best-in-class service. Cable companies cannot price it into the products, as companies such as Apple can, therefore the final challenge is how cable can fund this transformation in customer service.

To put the sentiment into perspective, it's helpful to look at Liberty Global's recent acquisition of Virgin Media. This is the largest cable acquisition in terms of value of customer base, size of debt to finance the acquisition, and market capitalisation of target company, since the telco bubble. So the cable industry clearly feels that the good times are back, even as the rest of the country disagrees.

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