Recession Makes Cable Cautious on Outlays, Vendors Say
U.S. cable operators dealing with the recession have been cautious in setting spending goals for 2009 and aren’t embarking on ambitious new projects, said executives at equipment and software vendors we spoke with. Stepped-up competition from AT&T and Verizon’s pay-TV products, and continued satellite rivalry with DirecTV and Dish Networks, means cable continues to expand HD and VoD and continues early rollouts of super-fast Internet offerings, they said. Demand for HD shows and on-demand films helped cable maintain revenue by expanding the products’ availability, said executives at Concurrent, Harmonic and Motorola.
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Capital expenditures among all cable, satellite and telco companies will be nearly unchanged in 2009 from last year, with some paring capex and others boosting it slightly, said Buddy Snow, Motorola senior director of solutions marketing. “There’s lots of talk on the vendor side and the operator side on the economic climate -- there’s no doubt it’s challenging,” he said. “As opposed to spending cash on aggressive, high-risk initiatives it’s ‘how can we spend out cash'” to keep current pay-TV subscribers as some companies are “in retrenching mode,” added Snow. That means holding onto existing customers and ensuring average revenue per subscriber doesn’t slip, he said. “There really has been some kind of a hiatus of the opportunities we were expecting, some might have been put on hold,” said David Price, vice president of business development and marketing at Harmonic. “We expect most of them to emerge once confidence returns.”
Charter’s intent to seek Chapter 11 protection by April 1 (CD Feb 13 p11) doesn’t change the outlook for cable operator spending overall or at that company, said cable industry and vendor officials. Since Charter is especially debt-laden among cable operators, its circumstances aren’t “indicative” of the state of the industry, said Bert Offers, a Concurrent vice president of sales. “We actually don’t see any decrease in the projects we have ongoing with them,” he added. “It’s business as usual from what we've been told.”
An industry official confirmed that Charter’s spending plans aren’t affected by the coming bankruptcy. CSG Systems, which sends bills to customers and helps companies interact with them, said Thursday it expanded its arrangement with Charter and will serve all of its broadband, phone and video customers, up from 60 percent currently. Both companies declined to comment on the coming bankruptcy, though a Charter spokeswoman noted it has said operations will continue as normal. Officials at other cable operators declined to comment on how the bankruptcy may affect them.
Charter is among cable companies expanding the areas where super-fast broadband using DOCSIS 3.0 specifications is available (CD Jan 30 p11), a trend vendors expect to continue among large cable companies throughout 2009. Motorola shipped some DOCSIS 3.0 modems and cable modem termination systems last year, and “we expect 2009 to be a bigger” year, said Snow, calling it a “big” area of focus. “They have to have a competitive offer” against fast broadband products sold by AT&T’s U-verse and Verizon’s FiOS, he added. “The channel bonding on the upstream and downstream is the only way to get there” for cable operators to use capacity of several channels to boost download speeds to up to 160 Mbps.
The economic stimulus bill signed into law Feb. 17 by President Obama includes money for broadband and likely will lead to more DOCSIS 3.0 deployments, said Price. Cable operators’ “budgets really have all been frozen for the initial [several] weeks of the year,” but that may change, he said. “The sentiment clearly is driven by the competitive edge of U-Verse and FiOS, both of which have taken subscribers from existing cable companies,” added Price. “The sentiment of the cable companies is to fight back using DOCSIS 3.0-driven data for them to stop the bleeding of subscribers.” Charter is “certainly seeing that the demand for broadband services is unabated,” Chief Marketing Officer Ted Schremp said Jan. 30. “Is it a mass market product in January of 2009? No. Will it be over the next couple of years? Who knows?”
Telco competition also is spurring cable operators to add VoD and HD capacity, vendors said. Operators are adding VoD titles and network capacity to handle more on-demand streams, said Price. Concurrent is seeing an increase in the number of streams as more subscribers use on-demand, said Offers. “People are staying home more watching movies, renting movies, rather than going out to movies,” which is more expensive, he said. “As the number of HD channels expands, and HD video on demand is becoming more prevalent, they're seeing ‘hey, I can watch these shows on demand.'”