Analyst tells cable: Mobile a real threat to operators future broadband revenues

By Jim O'Neill on Feb 29 2016 at 10:00 AM
Analyst tells cable: Mobile a real threat to operators future broadband revenues

Consumers are spending an increasing amount of time watching online video on their mobile devices. In fact, in Ooyala’s upcoming Global Video Index for Q4 2015, more than 46% of video views in the quarter were on mobile devices; and that’s not even including laptop computers, which, arguably, can be classified as mobile devices, especially when it comes to video consumption.

Nonetheless, data prices and bandwidth still limit the usefulness of mobile broadband, but both are improving: Carriers across the board are offering bigger data packages at lower per-gig rates, and faster, more robust 4G networks are making bandwidth less of an issue as LTE has become nearly ubiquitous in the U.S.

BTIG analyst Walter Piecyk, in a blog post Friday, said he believes telcos are nearing the point where they begin to replace fixed broadband from cable companies, especially as operators require triple-play and quad-play bundles that include land lines and pay TV to get the best price for broadband, which typically nearly doubles when subscribed to outside the package.

"We believe telcos will feel increased pressure to identify new services to bolster revenue growth as early OTT offerings stumble and as a result of the diminishing marginal impact of customer migrations to higher wireless data buckets," Piecyk said. "We are still bullish on the opportunity for wireless operators to monetize data growth but Q4 was not encouraging as most companies reported lower than expected ARPU."

Piecyk warned that operators who currently aren’t worried that consumers could be lured to mobile-only service need to realize that typical data consumption by a wired household is just 22 GB a month, and notes that AT&T already has one third of its customers paying for 15 GB as part of their mobile service, an “increasingly compelling alternative to wired broadband."

With bills for cable, broadband, wireless and landline phone service all on the rise, consumers could easily be tempted by cheaper alternatives.

“Switching service providers, when an option, can reduce a bill but the elimination of services is be a more meaningful solution,” he said.

A Pew Research Center study recently found that 59% of consumers without broadband cited price as a major factor holding them back. But, likely of more impact is the finding that 65% said their smartphone did “everything online you need to do.

LTE speeds also are poised to increase as operators aggregate larger spectrum blocks; that aggregation also will improve coverage and capacity.

Piecyk acknowledges that 20 GBs, or, even 30 GBs of shared wireless data may not be enough for all households. Nonetheless, he says, for a “material segment” of the 90-million strong broadband subscriber market in the U.S., it could prove to be a very viable alternative.

He forecasts that up to 23 million users could move to wireless broadband, a revenue stream exceeding $15 billion annually.

Stay tuned.

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