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Cable Technology Feature Article

August 16, 2011

Broadband Becoming Cable's New Anchor Service

By Gary Kim, Contributing Editor

Time Warner (News - Alert) Cable CEO Glenn Britt says broadband access, not television, is becoming the cable operator's “anchor service.” That is a mirror of similar changes at fixed-line telco entities as well, where voice services are being slowly displaced by broadband access as the “lead” service in the portfolio. That isn't to say the transition is complete, only that it is underway. 

Cable TV service is still Time Warner Cable's biggest revenue generator, accounting for 56 percent of the company's $4.9 billion top line in the second quarter. But high-speed data revenue is growing more quickly, as the company continues to lose TV subscribers.

“Clearly the relative importance of the video business has declined over time,” Britt noted. “I think broadband clearly is becoming the anchor service.”As a result, virtually every executive, at every company in the telecom or video entertainment business, has to spend significant time thinking about ways to create new revenue streams.

Underlying those exercises and imperatives are changing revenue profiles in nearly every part of the business, ranging from the maturation of voice revenue products in both fixed and mobile domains, text messaging for mobile providers and video entertainment for cable TV providers. The maturation of broadband access services (in terms of subscribers) also means providers have to create new ways to sell value-added features and services.

What many observers forget is that telcos have made huge business model transitions before, are in the midst of making a second, and already are thinking about ways to complete a third transition.

The most-recent quarterly reports at Verizon and AT&T (News - Alert) now suggest how much progress those providers have made. One of the interesting observations one might make about AT&T's second quarter earnings results, despite its typical focus on the strategically-important wireless business segments, is a shift in wired network performance. 

Over the last year, consumer voice, which had contributed 23 percent of total revenue, in the latest quarter contributed just 20 percent of total AT&T revenue. 

Matters are similar at Verizon (News - Alert). Over the last year, Verizon wireline voice revenue has dropped from 17 percent of total revenue to 14 percent, as well. Wireless revenue grew to 63 percent of total revenue, up from 61 percent a year ago. FiOS (News - Alert) services, which includes some voice contribution, contributes 14 percent of total revenue, up from 13 percent a year ago. As is the case for AT&T, which gets about half its total revenue from wireless, Verizon now is mostly a “wireless” company that also gets significant revenue from fixed-line network services.

The point is that broadband access, and services that can be built on that access, are moving to the fore of fixed-line revenue strategies. Time Warner Cable’s latest statement simply reconfirms that fact.

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Gary Kim (News - Alert) is a contributing editor for TMCnet. To read more of Gary’s articles, please visit his columnist page.

Edited by Jennifer Russell