TORONTO – By the end of this year, cablecos are expected to have 12% of residential telephone subscribers in Canada, while telcos will have 2% of TV subs, a report by The Convergence Consulting Group predicts.
Showing how the competitors are going after their untraditional business, the report forecasts that cablecos will have 1.56 million phone subscribers at year end 2006, up from 835,000 subs at the end of 2005. By 2009, they’ll have a healthy 27% of the residential market, or 3.3 million subscribers, the consultants predict.
The telephone companies will make inroads in television distribution, ending with 200,000 subs by the end of fiscal 2006, up from 134,000 subs at the end of last year, which represented 1% of the market, the report states. By the end of 2009, telcos will have an estimated 1 million subs, or 9% of the Canadian TV market.
Telcos had residential phone line losses for 2005 of approximately 4%, with 8% forecast for this year.
The cablecos seem more successful at bundling. An average of 50% of cable TV subscribers also get their Internet from the cableco, whereas only 30% on average of residential customers to traditional phone companies take their DSL service from the same company, the report states. “Hence cable adding a significant amount of telephone customers in a short time is highly achievable given the high overlap, bundled price and convenience,” according to the study, Battle for the North American Couch Potato: Bundling, Internet, TV, Telephone Report.
Leading the battle is cable VoIP, luring customers with multiple features and unlimited long distance to gain a price edge over telcos, the consultants point out. “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,” says the report’s author Convergence Consulting president Brahm Eiley.
Because MTS and SaskTel were early entrants to the TV game, they’ve been “holding their own” with TelcoTV and are spending more money on their infrastructure to offer high definition and faster broadband, the report notes. While Aliant and Telus have recently launched TV offerings, the consultants aren’t sure whether their network upgrades will create enough capacity to offer multiple HD streams and higher broadband speeds in the long run.
The telco march into TV land could hurt the DTH business, Eiley notes. “We are not forecasting as robust a 2006 and onwards for ExpressVu and StarChoice 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 promotions and bundling has been eliminated).”
The consultants are forecasting gains to the number of basic cable subscribers in 2006, following strong gains in 2005 and 2004. But starting in 2007, and heading into at least 2009, there will be losses, albeit small, to cable subs because of TelcoTV, Eiley states. Things are rosier on the digital side, where subscribers continue to accelerate. At year end 2005, digital cable subs exceeded those to satellite, the report states. “Cable’s triple play is helping raise/sustain both TV and Internet subscriber gains.”
Revenues for TV distribution grew 8% to $5.9 billion in 2005, and the report forecasts 9% growth, to $6.45 billion, in 2006. By year end 2006, there will be some 830,000 HD subs, 640,000 subs of PVR, and VOD/SVOD revenue of $190 million.
In the broadband business, cable has 55% of the residential market share vs. 44% for telcos. By year end 2006, there will be an estimated 4.1 million residential cable subs and 3.3 million telco subs “due in part to cable’s speed, in almost all cases, for the price advantage,” Eiley writes. “Cable added over 100,000 more residential broadband subscribers than the telcos in 2005, and we forecast that cable will continue to add more residential subs than the telcos per annum for the rest of the decade (we project cable will add 80,000 more subs than telco in 2006).”
Revenues from residential broadband reached almost $2.6 billion in 2005 and could grow to over $3 billion in 2006, the report predicts. By the end of this year, more than 70% will be online, and more than 82% of them will have broadband.
For an executive summary of the report, see www.convergenceonline.com.
– Laurel Hyatt
