Uncommon Wisdom

Oct 11 2007   8:58PM GMT

Cable/Telco Competition Rests on ARPU

Tom Nolle Tom Nolle Profile: Tom Nolle

Business Week and S&P are now publishing reasonable analysis of the cable/telco competition. The recent work concedes that cable will likely take some market share from the telcos in voice services, but that telcos will take share in both data and video services. As we’ve said many times, it’s better to be stealing customers with high ARPU than those with lower ARPU, and wireline voice services are clearly not going to be profitable for long, as Skype and Vonage show. Another problem for the cable operators is that the competition with satellite and telco video will likely force them to increase capex and reduce pricing. The current cable voice popularity is driven in part by bundle pricing that the cable companies had hoped to raise at the end of the contract, but it seems likely that such a move will not only increase churn but also create media awareness of the relatively high cable voice cost. Finally, fixed-mobile convergence is now arriving with bundled wireline/wireless services from AT&T and Verizon, and it’s likely that both companies will soon introduce active convergence at the feature level. This will force the cable companies into either partnership (which is what Sprint hopes) or capitalization of their own mobile services. Either way, their ROI will suffer.

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