Cable / Telecom News

New wireless entrants drag ARPU lower on way to 22% market share; bundle battles to escalate: Report


TORONTO – By the end of 2014, new wireless entrants will capture 22% of the Canadian wireless market, says a study from Toronto’s Convergence Consulting.

And the effect of the newcomers is already being felt – and will continue to be. Despite wireless data’s 36% revenue growth in 2009, total wireless service ARPU declined, says the report. New wireless entrants will increasingly put pressure on both data & voice prices (the US has already seen major impact in this regard) leading to lower ARPU (at least over the next three years), regional (West, Quebec, Atlantic) bundle battles, a shift in wireless market share and an increase in wireless substitution.

As well, more and more Canadians will be cutting their phone cord altogether. “We estimate wireless-only Canadian households at 8% YE2009 and forecast 19% YE2012. In 2009, just 28% of the telcos’ residential wireline telephone loss was due to wireless substitution,” reads the report. “We forecast this will climb to 52% in 2011. 2009 Telcos residential wireline telephone line loss was 7%; we forecast 8% for 2010, and 9% for 2011 & 2012.”

(FYI YE = year end)

Despite the shift to wireless, Convergence’s report (part of its ongoing “Battle for the North American Couch Potato” studies, this one about bundling TV, telephone, internet and wireless) says cable telephony offerings will continue to do well. Cable represented 28% of residential wireline telephone subs at the end of 2009, up from 24% a year prior. That’ll rise to 32% by the end of this year. “Cable’s high overlap of TV and broadband subs, bundled price and convenience have been key to its telephone sub additions (and will be key to Shaw, Videotron and EastLink’s wireless sub additions),” reads the report.

And Convergence has found scant evidence, so far, of cable cord cutting, despite much talk in the media and on numerous web boards where consumers are threatening to end their cable subscription in favour of what they can find off air and the Internet.

“2009 saw the largest amount of TV subscribers added in Canada since 2005. Though we have modeled minor US TV subscriber cord cutting statistics, our analysis shows it is challenging to claim anything statistically relevant for Canada; we expect to uncover minor evidence of Canadian TV cord cutting in 2011- 2012,” says the report.

But thanks to terrestrial TV competition from telcos (Telus TV, Bell TV, MTS, SaskTel and Bell Aliant, among others), Canadian cable’s days of adding basic subs won’t continue beyond 2012.

“We forecast that cable will drop from 71% of the 2009 TV sub market to 67% YE2012, while telcos will grow to 11%, from 4% at YE2009. We also forecast that satellite (we have quantified Bell Telco TV-Satellite cannibalization) will also decline from 25% to 22.5%,” says the report.

The BDU market has been a robust one and that will continue, says Convergence, with the help of the growth in popularity of PVRs and VOD. “2009 TV access revenue was $7.94 billion,” it notes, and that “we forecast 7.5% revenue growth in 2010. At YE2009, 20% of TV subs had PVR and 30% had HD; we forecast PVR at 35% and HD at 56% respectively YE2012. 2009 Cable/Telco VOD revenue grew 23%.”

As for broadband, the speed lead will remain with cable, says the report. While telcos are spending money to upgrade networks so that they can offer TV farther and wider and better, the investment is also set to improve their broadband offerings.

“Cable added four times the residential broadband subs as the telcos in 2009,” says the report, “up from 2.5 times as many in 2008. Cable represented 59% of the residential broadband sub market YE2009; we forecast 60% in 2011. Telcos ongoing residential telephone line loss creates a declining base to gain or retain broadband subs,” reads the report, which also noted cable’s rollout of DOCSIS 3.0 will certainly help cable add more speed conscious consumers.

At the end of ’09, Canadian residential broadband access revenue was $4.23 billion and the Convergence report predicts 8% revenue growth in 2010. Residential Internet penetration was 74%.

For more on this report, including its U.S. statistics, go to www.convergenceonline.com.