TORONTO – Canadian cable companies can look forward to adding millions of voice customers says a report out today from Convergence Consulting Group.
According to the company’s oft-cited and comprehensive Battle for the North American Couch Potato: Bundling, Internet, TV, Telephone report, by year-end 2007 Canadian cable companies will have 16% of residential telephone subscribers (or 2.1 million – of which 70% will be VOIP). By the end of 2009, MSOs will have 27% (3.8 million). This is up from the end of this year, where the report says cable will have 6.5% or the telco market, or 850,000 customers, of which 350,000 are VOIP.
On the other hand, the report forecasts telcos taking 4% of TV subs by year-end 2007 and 9% by YE2009 (up from 1% YE2005). Telco TV subs YE2005: 128,000; YE2006: 235,000; YE2007: 425,000; YE2008: 695,000; YE2009: 1 million.
“Canadian cablecos have on average 45% of their TV customers taking Internet with them, whereas the telcos have on average 23% of their residential telephone customers taking DSL with them,” says the report’s author Convergence Consulting president Brahm Eiley.
So, cable adding a significant amount of telephone customers in a short time, “is highly achievable given the high overlap, bundled price and convenience,” says the report.
Cable VOIP with its multiple features and unlimited long distance currently has the price edge against the telcos traditional phone offers, and is typically the key price differentiator in the cable versus telco triple play bundle.
Telcos (Bell has been the most aggressive with its new VOIP offers, SaskTel has cut LD, etc.) have started to answer back with new offers and price changes. “We expect this to only intensify with both telcos as well as cablecos altering their plans/prices going forward. For 2005 Bell and Telus will see significant residential local line loss for the first time, we forecast 7% and 5% respectively,” says the report.
MTS and SaskTel are holding their own with their Telco TV offers (due to their early entrance and pricing strategy) and are spending further on their networks to offer HD. Aliant and Bell are also getting into the Telco TV game. Telus has delayed entrance due to its strike.
The report was also cautious about Bell’s expenditure plans and whether it’s enough. “We are uncertain as to whether Bell’s (like BellSouth and SBC) current capex commitment to network upgrades will be enough to satisfy the capacity needs of offering multiple HD streams.
On the DTH side, ExpressVu sub additions have seen an up-tick in 2005 (gains were quite moderate 2002-2004) due to lower set-top box prices, reduction of piracy, reformulation of packages/prices and promos, says the study.
“We are not forecasting as rosy a 2006 for ExpressVu as we believe Bell will start its IPTV push in the second half of 2006 and put more onus on gaining Telco TV subs than satellite subs. Star Choice sub additions continue to be poor. In contrast to the U.S., Canadian satellite sub gains have tended to be quite moderate due to TV prices roughly being at parity with cable and a less aggressive approach to supplementing DVR boxes,” writes Eiley.
Cable gained basic TV subscribers in 2004, the first time in years, and basic looks to be flat for 2005 and just slightly negative for 2006. The report expects basic losses 2007-2008 due to Telco TV. “Digital cable subscriber additions will continue to accelerate (digital cable subs will outnumber satellite before YE2005),” says the report.
“We forecast cable will have 75% (7.8 million) of TV subs YE2005, 73% (7.78 million) YE2006, and 71% (7.72 million) YE2007
“Satellite we forecast at 24% (2.5 million) YE2005, 25% (2.62 million) YE2006, and 26% (2.7 million) YE2007. We forecast TV subscriber revenues growing 8% in 2005 to $6 billion.”
When it comes to on demand viewing, VOD/SVOD revenues in 2004 were $60 million, climbing to $120 million in 2005, $220 million in ’06, and $370 million in ’07.
PVR customers will climb to 350,000 at the end of this year, increasing to 670,000 in ’06, and 1.15 million by the end of 2007.
HD customers will hit 400,000 at the end of this year, 750,000 next year and 1.35 million by the end of ’07.
“Cable continues to maintain its market share lead in residential broadband subscribers (55% cable to 44% telco) due in part to cable’s speed for the price advantage (cable’s discount triple and quadruple play is also helping). We expect that cable will continue its strategy of raising speeds. We forecast cable will add slightly more residential broadband subscribers than telco 2006-2007,” says the report in its Internet section.
“By YE2007 we forecast cable will have 4.39 million and telco 3.69 million of residential high-speed Internet subscribers from 3.54 million and 2.9 million respectively YE2005,” writes Eiley.
“By YE2005, we forecast dial-up will represent 25% of households online. We forecast residential broadband subscriber revenue growing 20% to $2.58 billion for 2005.”
For more, including a sample report, go to www.convergenceonline.com.
– Greg O’Brien
