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Cable Technology Feature Article

April 07, 2009

Video Substitution? Still More Fear than Evidence

By Gary Kim, Contributing Editor

For all the apparent talk of video substitution, and the obvious cable concern about it, you'd be hard pressed to find any cable executive who can point to something tangible in that area.
"Our business strategy is not dependent on a single business cycle," says Tom Rutledge, Cablevision COO, referring to the multiple services cable now offers, where in the past it has relied solely on entertainment video.
That isn't to say cable is immune to the hazards any incumbent faces in a competitive market. Cable operators have been losing basic video customers to satellite and now telcos for some years, and the market is virtually saturated. Under those conditions, one would expect pressure in the multi-channel video entertainment segment, even as voice and high-speed Internet access continue to show growth.
"We're seeing different impacts on different business segments and in different parts of the country," says Glenn Britt, Time Warner Cable CEO. That is what you'd expect from a cable operator exposed to Verizon's FiOS (News - Alert) in some communities and to AT&T's U-verse in others, but neither in some regions.
Some other operators no longer are benefitting from rapid population growth, but "broadband is really the lead dog in terms of what people hold onto," says BendBroadband CEO Amy Tykeson.
That's a bit of a paradox. Every service provider executive claims to want to avoid becoming a "dumb pipe" or "bit pipe" provider. But broadband, the ultimate bit pipe, clearly is emerging as the foundation service for both wired and wireless networks.
"Most of our customers would rather keep their Internet than their TV," if they had to choose just one service to keep, says William Mullins, Windstream (News - Alert) engineer. That is a foundational change of some import. Perhaps nobody should desire to be "only" a bit pipe, but there's no question all future growth hinges on what can be done around the access pipe.

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

Edited by Jessica Kostek