Welcome! I’m hoping this blog provides the opportunity to reflect on historical influences in our business, allows you to reflect on drivers for change, and perhaps adjust your business model to remain competitive. I’ve tried to keep this relatively light, with links that provide access to whitepapers and datasheets that might help you with your next business challenge.
I invite comments, personal anecdotes, and questions. I look forward to responding.
Beat them? Or join them?
While in my previous blog it may appear that I’ve painted a picture of doom and gloom for the living room TV, I don’t believe this is the case. While it was a bit of a slow start, Telco and Cable providers have responded with IP-driven services. By recognizing how handheld small screens affect human behaviour, most of the large operators have begun offering a service that allows content to be viewed on both large and small screens. With these new services, tools have been developed to compete with the advanced offerings by over-the-top competitors. Many lessons have been learned and IPTV is now a reality for many smaller operators.
Economics of QAM video
Back to a historic perspective. There have been many tools to maximize the value of the 6 Mhz chunks of spectrum available. Digital video has allowed the set-up of a system where 10 to 12 channels could be put on the same spectrum space as a single SD channel. Literally increasing the value of that QAM by 12. A compelling case to drop analog video. While many marketing departments have been hesitant to stop offering an analog service, the economics present the business case that there really is no choice. What we have found is that the customer, who we had assumed would drop a service if they had to use 2 remote controls, ended up adapting. So yes, we can influence human behaviour and keep these customers. Lesson learned.
Other tools have been introduced to maximize the value of that 6 Mhz chunk of spectrum. The DTA had created a cheap alternative to more expensive set-tops, allowing a better business case to replace analog QAMs with digital. Switching to digital video allowed for a much larger number of programs to be offered on the same 6 Mhz, based on statistical viewership of long-tail content. MPEG-4 encoding has allowed for greater efficacies and even more channels on a single QAM. All these tools in the toolbelt have allowed the cable company to maximize the value of QAM video.
ARPU vs Video QAM value
Time for a math exercise. ARPU is defined as the average revenue per user. If the size of a service group is equal to data services, then it should be relatively easy to take a simplistic view and determine what a QAM is worth. Service group size being equal is not often the case but as Cable companies move towards IPTV there is usually a trend with service group splits to equalize the number of subscribers on every group.
For the sake of argument, let’s assume the user is looking for a basic service. At a glance, I’ve seen basic video services at $40 per month. The most basic of data packages for the same cable company I used as a reference was $90 per month. With service groups being equal, the data QAM brings in over twice the ARPU that the video QAM uses. While this model is oversimplified, one could contest that IPTV could supply the same revenue for VOD and advertising that that comparison is null.
Higher modulations used for today’s advanced implementations of DOCSIS should also yield greater channel capacity versus traditional video QAMs.
By Gord Mummery
Director of Canadian National Accounts
With over 25 years of experience in the telecommunications industry, Gord has worked with companies across North America, Europe and Asia to deliver industry-leading video and data solutions. Based in Toronto, Ontario, if you can’t find Gord in a customer headend or boardroom working to solve the next challenge, you just might catch him fishing in a tournament.