122016 Turner_Goblin
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Cable,Broadband,India,Indonesia,Taiwan

Costs, ROI Lead Cable Broadband

Thanks to global economies of scale, it’s getting ever cheaper to roll out the latest fixed broadband technology, and with it the opportunity to drive consumption and revenue.

Local pay-TV and telco operators must still weigh up investment decisions however, based on what customers will use and pay for.

From left: Aravind Venugopal (moderator); Thomas Ee; Desmond Poon; VD Wadhwa; Jagdish Kumar

Indonesian provider LinkNet, which operates a HFC cable broadband network, unveiled a 1 Gbps offering in June this year alongside 4K content, a hybrid set-top box, and a revitalized OTT service combining 100 linear and 80 catch-up channels.

The company, which caters to the country’s richest consumers with bundled fixed broadband and pay-TV services, is also testing a fiber service in Jakarta.

Fiber is technically superior to cable, while deployment costs are now the same as HFC, down from a 50% premium two years ago, noted LinkNet’s chief technology officer Desmond Poon.

Investment decisions, however, are less clear cut, especially as almost all of LinkNet’s subs take both broadband and pay-TV.

Video delivery is more challenging through IPTV than cable for example, while existing HFC homes would also need to be rewired.

“In clear greenfield areas like a new city, the chances are we will do FTTH, but in existing brownfield areas, we will be more selective,” Poon said.

“I think we will stick to HFC in most of those areas,” he added. “It’s a lot easier and more cost efficient. But in areas where I can find 5,000 homes passed, I may do FTTH as well.”

LinkNet is looking to supplement its investment in infrastructure with more services, planning tests on home security and home automation in Q4.

It is also eyeing potential healthcare-based offerings, leveraging the hospital network owned by its parent, Lippo Group.

“The whole idea is to create more stickiness for our customers,” Poon said. “The more they get from you, the harder it is to leave you.”

Different dynamics

As broadband reshapes their business, pay-TV and telco platforms are devising new strategies around technology, partnerships and products, as fresh growth and revenue opportunities take shape.

In many markets, state-owned telcos tend to dominate the fixed broadband landscape, but often with legacy infrastructure, giving commercial companies an opportunity to leapfrog ahead with the latest tech.

Many operators are listed however, demanding a quarterly audit on investments and returns. At the same time, many customers buy on price, something they understand, rather than less clear advantages of even faster speeds.

“I don’t think cable is running out of juice,” remarked Thomas Ee, EVP of Taiwanese operator, Taiwan Broadband Communications.

“When you tell a consumer you are giving them 100 megabits, 200 megabits, 50 megabits, many probably have no idea what they are buying,” he added.

“They are probably buying from a price point of view. The evolution is driven by economics.”

Success hinges on meeting consumer needs, Ee added, advocating open set-top boxes that can carry third-party services – potentially cannibalizing an operator’s own offerings – as well as developing new revenue streams, from targeted advertising to home surveillance.

Pay-TV is a mature but profitable business in Taiwan, dominated by cable, where 50-65% Ebitda margins are the norm.

Expansion into broadband takes operators into a new competitive space, where they may have to lose some existing revenue to protect themselves in the future.

“As an industry, if you look at the West, Europe and Asia, we have not found the right way to say we are there,” Ee said.

“There are many parts to the ecosystem. We haven’t focused enough on what the customer is really looking for, and how can we deploy those services at a low enough cost to drive penetration,” he continued.

“We need to think of all those non-video businesses as we deploy new gateways to the homes.”

 

The audience for cable TV has largely plateaued in both Indonesia and Taiwan, prompting operators to explore new revenue streams for growth.

In India however, pay-TV remains the mainstay of the business, as an affordable proposition with headroom for plenty of future growth.

Cable broadband has promise in India, prompting some long-term investment, but only for more affluent customers at present.

The country’s four largest MSOs have around 1 million broadband customers between them.

Hathway, the country’s largest cable broadband provider, manages around 700,000 of these, out of 3.4 million broadband homes passed.

The company’s digital pay-TV base spans 11 million households, with another 1.3 million subs still watching on analog networks.

The company plans to invest at least Rs3 billion (US$47 million) more in broadband over the next year, targeting 4 million homes passed and 1 million subs.

The MSO, with a big footprint in major metros, was one of India’s first cable operators to start upgrading analog subs to digital, shifting the company from a B2B to a more consumer-oriented mindset.

That affects both its broadband and TV operations.

Hathway has hired outside marketing and telco talent to run its broadband business for example, which it fully controls, paying a right of way fee to LCOs within its network

At the same time, tech spends in areas such as subscriber management are reshaping the existing business, noted the cable company’s MD & CEO, Jagdish Kumar.

Hathway is putting down a foundation for future growth, Kumar explained, having already converted its direct subs to an Oracle-based prepaid billing system, and starting to do the same for its wholesale customers.

With most customer relationships managed indirectly through LCOs, cash collection takes up most of an MSO’s time.

“As we start building up and developing the hygiene factors of our business, which is getting the customer the right bill, giving the right choice, being able to collect cash, we now have to slowly evolve and graduate to more value-added service, more locally relevant content,” Kumar said.

Multiple boxes

Siti Cable – another emerging digital cable leader in India – has also brought in outside talent to manage the business, while investing in customer services and in-house channels to supplement its core cable offering.

The MSO is juggling the needs of different customer tiers, from integrated set-tops for tier one cities to more basic offerings in poorer parts of the country, which are still moving from analog to digital networks.

The company is part of the Essel Group, which also houses broadcast major Zee as well as DTH platform Dish.

“At the moment we are a vanilla cable company, providing a digital or analog signal,” noted Siti Cable’s CEO, VD Wadhwa.

“Going forward, we need to add on. It’s not a question of replacement, it has to be add on.”

Siti, which has been expanding its network though M&A, has 8.5 million digital TV customers and around 200,000 broadband subs (out of 1.4 million broadband homes passed).

The company is targeting 3-4 million broadband customers by 2020.

Unlike Hathway, Siti is rolling out broadband in conjunction with the LCOs in its network.

The company shares its technology with local cable networks, which also helps bring down call center and back-end costs.

Investment strategies are key, Wadhwa stressed.

While FTTH networks suit MDUs (multiple dwelling units) and SMEs, it costs Siti less 6,000 rupees to acquire a Docsis cable broadband customer, he noted, leading to payback in under three years.

It costs telcos up to 16,000 rupees to acquire a similar customer, he added.

“For small cities, if you want to deepen penetration in the country, the distributed CMTS model is better, far more cost-effective,” Wadhwa contended.

“You will get a much better return on your investment.”

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