Small Cable’s Future is in Broadband, Young Executives Say
SAN FRANCISCO -- The future of small cable operators is in providing broadband access to customers, young executives at family-owned companies told the National Cable and TV Cooperative’s annual conference Monday. “We still provide the cable TV product, but our main focus in the business is now broadband and moving that forward for the future,” said Kyle South, general manager of West Alabama TV Cable. As that happens, cable operators need to make sure the Internet doesn’t begin to mimic the cable-TV programming marketplace, said Levi Maaia, vice president of Full Channel TV, which operates in Rhode Island. “The primary issue I'm concerned with moving forward is the cable TV model” of cable operators paying programmers for the right to distribute their programming “being imposed on the Internet,” he said. “It concerns me that programmers could come into the Internet and drive up our cost of delivering affordable Internet access,” he said. They spoke on panel of younger executives poised to take the reigns of family-owned operations.
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Building out infrastructure to support customer’s online video needs is critical, Maaia said. The fact that products such as Netflix are reaching consumers through cable modems is good for small operators, he said. “It only makes our Internet product stronger,” he said. “While it might pull some eyeballs off our TV product, it puts them on our Internet product,” he said.
But the increase in demand can put pressure on cable costs, said Mark Walter, senior vice president of Service Electric Cablevision, where Netflix makes up 35 percent of the peak bandwidth consumption. “We started doing caps on peak bandwidth from 5 p.m. to 1 a.m.,” he said. Outside that range, customers can do whatever they want … and if we can allow them to do more bandwidth-intensive applications outside of the peak time, it doesn’t hurt our cost structure,” he said. Some cable operators have been picking up new broadband customers as competing ISPs in their markets begin instituting bandwidth caps, said South. “Right now it’s kind of shoving people our way,” because the company hasn’t instituted any caps yet,” he said. “In the end we may have to offer the same type of product."
Figuring out the best way to sustain growth -- either organically through offering new products such as TV Everywhere or home security, or through acquisitions is the main challenge independent cable operators face, Walter said. “You have to be consistently growing your business … and the challenge is really choosing the options with the most reward with potentially the least amount of risk,” he said.
Satellite TV operators remain a threat, though independent cable operators have a leg up with their bundle of telecommunications services, the executives said. “There’s not new tactics we need to deploy, it’s just a matter of continuing to drive the bundle into the home,” Walter said. “Until satellite technology is able to offer those services in a competitive way, DirecTV and Dish remain a threat but not as much of a threat as other landline-based competitors and potentially some cellular-based competitors,” Maaia said.