Battling Video Markets

The Northeast Is Hot (But Not Alone) For Pay-TV Competition

By Michael Hopkins

 

For those who want a front row seat to the intense competition that’s taking place in the video space, look no further than the Northeast.

As for specific locales, the best part of this competitive show is within the Long Island, New York, New Jersey and Connecticut areas.

While multiple video distributors serve these areas, the MSO that receives a lot of scrutiny these days is Cablevision.  The cable company’s footprint has been inundated by a series of launches for Verizon FiOS TV, giving the regional wired incumbent a competitive run for its money in some of its most lucrative markets.

But Cablevision is not alone in battling competitive threats old and new.  According to research from MediaBiz Competitive Intelligence, which has its data featured exclusively in this issue of The BRIDGE, a number of markets have seen telco video penetration approach 10 percent.  There are areas of the nation where satellite TV penetration is virtually neck and neck with basic cable.  Once dominant cable clusters are feeling the heat from telco and satellite platforms.

Also, high-def is making its presence known in the multiplatform business.

Yet it’s the upper Atlantic coast that’s witnessing a noticeable piece of the action.  Cablevision in particular is feeling the heat.

A Threat to Cablevision’s Strongholds

 

The Long Island communities of Massapequa Park and Hempstead were among the first New York state communities to grant a video franchise to Verizon and its FiOS TV service.  Since then, more than 140 New York municipalities have approved the video offering from the telco giant, including several communities in the Long Island area, a key spot for Cablevision.

In addition to those areas, the MSO faces a growing telco video threat in New Jersey and Connecticut.

Cablevision says about a third of the households in its service area are passed by FiOS TV.  According to Cablevision COO Tom Rutledge, at the end of September Verizon had built out fiber infrastructure covering about 1.45 million homes in the company’s footprint.  Of that total, Rutledge thinks Verizon has approval to offer video in about 1.3 million of those homes.

When throwing in all of Cablevision’s areas – from Long Island to New Jersey to Connecticut – the telco video threat is growing every day.  According to MediaBiz Competitive Intelligence, an estimated 58 percent of ZIP Codes containing Cablevision’s operations are also occupied by Verizon or AT&T.  In terms of telco video customer counts, AT&T’s U-verse is estimated to have nearly 15,000 subscribers in Cablevision’s area, while Verizon is projected to have a little more than 300,000 customers in the operator’s footprint, states the MediaBiz Competitive Intelligence data.

The telco video threat persisted as Cablevision reported a basic video subscriber loss of about 19,100 for the third quarter, taking that total to 3.112 million at the end of September.

As for other services, Cablevision reported a 58,000 increase in voice customers during the three-month period, bringing its phone customer count to 1.825 million.  Digital video customers jumped by 25,100 to 2.814 million in the third quarter, and high-speed internet subscribers jumped by 31,000 to 2.427 million, the MSO said.

While basic third quarter subscriber numbers were lacking, some observers of the video business have questioned whether FiOS has had any serious impact on Cablevision.  Maybe the cable operator isn’t all that vulnerable to the telco threat, some suggest.

“There is still no visible evidence of FiOS (impacting) Cablevision’s numbers more than three years after Verizon’s FiOS launch,” says Craig Moffett of Bernstein Research.  He points out that since the debut of the fiber-supported TV product, Cablevision’s video subscriber base has grown by 3.4 percent.

The analyst blames seasonality, including significant exposure to customer losses in the summer resort markets on the New Jersey shore and Eastern Long Island, for the third quarter basic customer decline.

The Top Pay Video Markets

 

The action occurring in Cablevision’s backyard only scratches the surface of the competitive battles taking shape in other markets across the United States.  There are cities that have significant cable penetration, there are growing telco video markets, and there are regions where satellite TV is king.

There also are cities with a virtual tie among multiplatform players.

According to estimates from MediaBiz Competitive Intelligence, two markets contain close shares of basic cable and DBS subscribers.  In the Dallas/Fort Worth area basic cable claims an estimated 48.5 percent market share, while satellite TV close with 40 percent.  In Atlanta, cable has an estimated 56.68 percent of the pay-TV market, while the small dish serves nearly 43 percent of pay-TV subscribers.

As for cable, its strongholds can be found in big cities.

In the New York market, which along with Cablevision contains Time Warner Cable and Comcast, the wired video incumbent’s basic service has an estimated 77.7 percent share of the business.  Satellite TV controls almost 17 percent.  Telco video claims an estimated 5.27 percent of the New York market pay-TV pie, states the MediaBiz numbers.

Joining New York as a top cable market is Comcast home Philadelphia, which reports an estimated 78.73 percent of the pay-TV market.  Boston, another Comcast market, has a 79.2 percent pay-TV market share.

When looking at smaller markets, Honolulu (a Time Warner Cable stronghold) boasts an estimated 91.54 percent of the pay-TV market.  Cable in the Springfield/Holyoke area in Massachusetts has an 84 percent share of the pay-TV market, according to MediaBiz Competitive Intelligence.

Satellite TV’s strength can be found in the heart of the country.  The Springfield, Mo., market reports an estimated 58.9 percent market share for DBS services DIRECTV and DISH Network, compared to 41 percent for basic cable.  The Tyler/Longview area in Texas also has the small dish topping cable with a 54.6 percent stake in the market’s pay-TV business, states MediaBiz estimates.

In fact, the top 19 markets for satellite TV have bigger DBS market shares than the local cable company.  The other key DMAs for DBS include Burlington, Vt., Paducah, Ky., and Traverse City, Mich.

As for telco video, the growing television platform has built notable strengths in the Dallas/Fort Worth, Washington, D.C., and Tampa/St. Petersburg markets.  The Dallas and Washington areas each boast telco video market share above 11 percent, while telco video has a 10 percent share of the video business in the Tampa area, states MediaBiz estimates.

The Dallas/Fort Worth area is home to FiOS TV’s first launch, which occurred in the suburb of Keller in September 2005.  AT&T also can be found in the Texas market.

Given the strong telco video presence in the Washington area, the competition between video services in the nation’s capital could heat up dramatically in the coming years.  Verizon has approached local officials about rolling out FiOS TV in the District.  The company is seeking a 15-year franchise that would get its fiber infrastructure into the Northwest and Southeast quadrants of the city within three years and remaining parts of the District within six years.

Other growing telco video markets worth watching in the months, quarters and years to come include New York City and Philadelphia, cities where Verizon is rolling out or planning to offer its FiOS TV.

HD Big Part of Competitive Scene

 

A key tool in the competitive arsenal of video providers is high-def.  Cable companies, satellite TV providers and telco video platforms are launching dozens of HD feeds every week.  (And in a shameless plug for MediaBiz, the specifics of these launches are detailed every week in the HD Launch Report, which can be found every Wednesday in SkyREPORT and The Morning BRIDGE.  MediaBiz also has the latest HD channel data – on a local, ZIP Code basis – at WhereIsHD.com.)

It probably comes as no surprise that DIRECTV, known for the national advertising blitz promoting its HD slate, has the largest number of high-def feeds available to consumers, with 119 channels delivered by its satellite platform, states the MediaBiz HD data.  Those counts include multiple feeds for NFL Sunday Ticket.  (Note that the HD number for DBS does not contain local HD broadcast feeds.)

The second-place HD program provider is FiOS TV, which on average offers 100 high-def feeds throughout its lineups.  The FiOS operation in Trenton, N.J., offers 112 HD feeds, according to the MediaBiz data.

AT&T U-verse on average offers 53 high-def channels throughout its lineups.  The IPTV platform’s service in Los Angeles delivers 82 HD feeds.

As for cable operators, some of Cablevision’s operations deliver as many as 69 HD feeds.  Also in the New York area, Time Warner Cable’s Flushing system has 83 high-def channels.

It should be noted that he Cablevision/Time Warner HD offerings in the New York area can be traced back to the intense competition (especially from telco video services) in the market.

In general, Time Warner Cable offers – on average – 35 HD selections throughout its lineups, according to the MediaBiz data.

The No. 2 satellite TV platform, DISH Network, delivers 83 high-def feeds.  That’s good enough for third place among all pay-TV providers delivering HD to customers. (Again, note that the HD number for DBS does not contain local HD broadcast feeds.)•

Telco Video Strongholds

 

Broadband, VoIP Keep Growing (Yet Also Slowing) for Cable

 

Could cable’s quarter-to-quarter streak of robust internet and phone customer additions be coming to an end?

Don’t count on it.  But it’s not going to get any easier for the cable business to pick up subscribers for its high-speed data and VoIP services.

According to numbers from MediaBiz Competitive Intelligence, subscriber growth rates for internet and phone offerings from cable operators slowed during the second and third quarters, when compared to the first quarter.

Industry-wide, cable high-speed data numbers achieved 3.57 percent growth in the first quarter.  That slowed down to an estimated 2.02 percent in the second quarter and 2.57 percent in the third quarter, states MediaBiz data.

On the cable phone side, VoIP services grew at a 10.2 percent rate in the first quarter.  According to MediaBiz, that industry-wide rate fell to 8.17 percent in the second quarter and 7.15 percent in the third quarter.

Of course, the second quarter (and according to some industry observers a growing part of the third quarter) is a mixed three-month period for cable.  Thanks to college students heading home or the family preparing for a long vacation, there are a lot of disconnects during the late spring and early summer months.

Some of the movement, however, is notable.

Charter’s VoIP growth rate stood at an estimated 13.14 percent at the close of the first quarter.  That growth rate fell to 8.34 percent in the second quarter and 8.4 percent in the third quarter, according to MediaBiz figures.  MediaBiz also found that Comcast’s phone service growth rate was an estimated 10.61 percent in the first quarter, yet declined to 8.56 percent in the third quarter.

On the broadband side, Cable One saw its cable modem numbers decline from an estimated 4.55 percent growth rate in the first quarter to 1.33 percent in the second quarter and 2.03 percent in the third quarter, states the MediaBiz data.  Time Warner Cable’s high-speed growth rate in the first quarter was nearly 4 percent.  That fell to 2.63 percent in the third quarter, according to MediaBiz.

Nonetheless, industry observers suggest that going forward cable could keep witnessing phone and broadband gains.

Cable added 1.081 million VoIP subscribers in the third quarter, down from the 1.14 million added in the second quarter and 1.3 million netted in first quarter 2008.

Those may be declining trends for cable, but it’s better than the results for the competition.  During the third quarter, phone companies lost 1.8 million primary lines, close to the 1.7 million lost in the second quarter but more than the 1.1 million decline experienced in third quarter 2007.

Also, cable’s prospects could improve before the end of the year.

In a note released in November, Wall Street firm Collins Stewart said that in the fourth quarter it expects telcos to lose slightly less lines when compared to their third quarter performance while cable operators should add slightly more phone subscribers than they did during the same period.  That could translate to cable garnering a 21 percent share of the fixed line residential phone market at the close of the year, predicts the company.

On the broadband side, major cable operators added 850,000 subscribers during the third quarter.  Telcos added 360,000 broadband customers.

As a result of the cable modem success in the third quarter, the wired industry increased its overall share of the broadband market from 54.7 percent in the second quarter to about 55 percent at the close of the third quarter.  Collins Stewart says it expects that trend to continue through the fourth quarter.•

MultiMAX

Fear of Snow?

 

Might as well fear that, too!

America – the greatest, richest nation on earth – is acting a bit paranoid these days.

The sky’s falling!

Really!

Well, maybe not the sky … but the financial markets have sure crumbled … and turned into strange yoyos.  The fallout is driven by fear coupled with the disappearance of trust.  The “value” of everything has faded and shrunk …

Will the fear dissipate on January 20th?

Let’s hope so.

Meanwhile, I’m wondering how long it will be before Steve Brill of Verified Identity Pass – the purveyor of the “Clear” brand airport security enabler of less, but still a lot of, hassle – takes before he files suit against the “Clear” brand from cable operators and Clearwire?  Brill, famously, founded Court TV (now trutv!?!), ran part of Primedia into the ground and plays softball, sort of.

Also, Scott Sassa has joined Hearst as head of the Entertainment unit replacing – after a four and half year search – the actually impossible to replace Ray Joslin.