TORONTO – By the end of 2006 Canadian cable companies will have 12% (1.57 million) of residential telephone subscribers in Canada and 27% by year-end 2009 (3.35 million), says a new report released today.
This is up from 6% at the end of ’05 (835,000), says the latest installment of The Convergence Consulting Group’s "Battle for the North American Couch Potato: Bundling, Internet, TV, Telephone."
While the inroads traditional cable companies are making in voice are strong, the report doesn’t have a similar forecast when it comes to the traditional ILEC’s push into video. Telcos will have 2% (220,000) of TV subs by the end of this year 2006 and 9% (1.1 million) by the end of ’09 (up from 1% YE2005, 134,000).
Overall Canadian Telco residential telephone lines loss for 2005 was approximately 4%. "We forecast 7% for 2006," says the report.
On average, Canadian cable companies have 45% of their TV customers also taking Internet from them, whereas the telcos have 24% of their residential telephone customers taking DSL with them, on average. Hence, cable adding a significant amount of telephone customers in a short time is highly achievable given the high overlap, bundled price and convenience (note Videotron and Shaw sub numbers).
"Cable VOIP with its multiple features and unlimited LD (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 bundle battle," says the report. "Telcos have answered back: Bell has been the most aggressive with its new VOIP offers and LD price cuts, SaskTel and MTS have also cut LD. We expect this battle to only intensify with alterings of plans/prices (we are not expecting radical cuts in the short run) going forward."
Due to their early entrance and pricing strategy, MTS and SaskTel have been holding their own with their DSL TV products and are spending further on their networks to offer high definition and faster broadband, notes the study. Aliant and Telus have both recently entered the TV game and Bell, like AT&T, has changed the timing of its IPTV entrance. "We are uncertain as to whether Aliant, Bell and Telus’ current capex commitments to network upgrades will be enough to satisfy the capacity needs of offering multiple HD streams and higher broadband speeds," cautions the report.
Bell ExpressVu and Star Choice subscriber additions were stronger in 2005 than 2004 due to lower set-top box prices, reduction of piracy, reformulation of packages/prices and promos (including less expensive deals on PVR and HD boxes). "We are not forecasting as robust a 2006 and onwards for ExpressVu and Star Choice given more Telcos pushing into the TV space (including Bell itself) as well as – in ExpressVu’s case – a move towards less discount pricing (DVR and HD deals have already been reduced, bundling has been eliminated, etc)," says the report.
Cable gained basic TV subscribers in 2004 for the first time in years, and 2005 basic TV sub gains were even stronger. The Convergence release also forecasts basic gains in 2006 and predicts small basic cable losses from 2007 to 2010 due to telco TV. Digital cable subscriber additions continue to accelerate (digital cable subs exceeded satellite at YE 2005). Cable’s triple play is helping raise/sustain both TV and Internet subscriber gains, says the research.
TV revenue grew 8% to $5.9 billion in 2005, and we forecast $6.4 billion (8% growth) for 2006.
Video on demand/SVOD revenue for 2005 was $60 million and will reach $100 million for 2006. HD subs stood at 430,000 at the end of 2005 and will reach 800,000 by the end of the year, says the report. PVR subs are growing too and will go from 340,000 at the end of ’05 to 640,000 by the end of ’06.
"Cable continues to maintain its market share lead in residential broadband subscribers (cable has 55% and telco 44%, YE2005 [3.6 million cable and 2.8 million telco]) due in part to cable’s speed, in almost all cases, for the price advantage. We expect that cable will continue its strategy of raising speeds," says the release.
Cable added over 100,000 more residential broadband subscribers than the telcos in 2005, and the research forecasts that cable will continue to add more subs than the telcos per year for the rest of the decade.
Residential Internet access revenue was over $3 billion in 2005and the research says that over $3.5 billion will be the total for 2006. Sixty-five percent of Canadian households were connected to the Internet at YE2005, and over 75% had broadband.
For more on the report, go to www.convergenceonline.com.
