Cable executives will be thrilled to read a report released last week by ABI Research, "Cable Television Infrastructure: Headend, Plant, Spectrum, Backhaul, STB, and Revenue Analysis." The report, which presumably is even longer than its title, focuses on the broadening of the industry's revenue streams. The release says operators are successfully migrating from a reliance on video delivery to a mix of voice telephony, broadband data services, small and medium business (SMB) and cellular backhaul and advertising.
This can be seen more as a culmination than a trend. The cable industry's goal for the past decade was to build its video offerings (with video-on-demand, for instance) and to branch into the types of services identified by ABI. The thing to watch is not whether this is the industry's strategy -- it clearly is -- but how well it is executing.
According to ABI, it seems that the industry is doing rather well. The researchers say cable operators worldwide will generate $170 billion in video revenue this year. The four ancillary businesses the firm identified will add $92 billion to the kitty. In other words, cable operators' non-video business already is more than half as large (54 percent) as the video endeavors with which they still are most closely associated.
ABI says that by 2012, non-video services will lead with $279 billion, compared to $268 billion for video revenues. It's difficult to say which is most interesting: the fact that non-video revenues will surpass pass video, or the increase in overall revenues by more than 100 percent -- from $262 billion to $547 billion in half a decade. We are a bit skeptical of the latter prognostication, but agree that the increase will be steep.
ABI isn't alone in noting the success of cable's strategy. This spring, Insight Research released a report that predicted cable will cause a loss of 1.5 million small business phone lines by the incumbent local exchange carriers (ILECs) by end of this year and almost 10 million during the next five years. Insight sees this as an extension of the battle over residential markets. The release notes that the 20 largest cable operators have the potential to reach 6.5 million out of the 7 million SMBs in the United States.
Of course, the move into commercial voice, video and data services can't be done without significantly upgrading the industry's infrastructure. This is a part of a long-term, well thought-out strategy. The earlier element was characterized by the move to hybrid fiber-coaxial cable (HFC) topologies. More recently, as discussed in this story at Cable360.net, operators have begun deploying Ethernet services. The story suggests that the Optimum Lightpath's MEF 14 performance certification by the Metro Ethernet Forum was no isolated achievement. The aggressive Ethernet rollout by the company, a division of Cablevision, is one of several by cable operators.
This piece at xchange online also tackles the spade work by cable operators. The writer focuses on what Cox, Comcast and Charter are doing to seamlessly expand their services more fully into the commercial realm. The main focuses are upgrades to Cox's Connecticut and Rhode Island networks and business process changes at Comcast and Charter.
Vendors obviously see the handwriting on the wall, and the first character they notice is a dollar sign. For instance, on July 16, Camiant, Acme Packet, ARRIS, BroadSoft, pureIntegration and Sigma Systems introduced a platform that will enable cable operators to quickly offer Session Initiation Protocol (SIP)-based commercial services.
It's long been known that cable operators covet the SMB and even the enterprise sectors. Whether recent activities are the culmination of more than a decade of technical and business planning or another false start will be seen in the next few years. The smart money says it's not ephemeral, and cable's influence in the business market will continue to expand.