Home Cable Providers Combine Voice, Video, Data

Transcription

1 Research Brief Home Cable Providers Combine Voice, Video, Data Abstract: Cable service providers are looking to the three-way combination of video, voice, and data to increase revenue. Will this new format mean the end of competition in the home broadband space? By Venecia K. Liu Recommendations For service bureaus, MSOs need solutions that can provide a complete view of the consumer. Billing and customer support need to be fully integrated to provide a holistic view and to enable cross-service discounting. Challenges for cable service providers exist for new business models and new revenue-generating plans. Vendors should outline tangible and realistic near-term revenue strategies and models with minimal up-front investment. The prominence of professional services firms necessitates secure, scalable solutions. A consolidated view of the consumer, as well as a consolidated pipeline to the home, increases risk of damage in security attacks. Publication Date:October 10, 2002

2 2 Home Cable Providers Combine Voice, Video, Data Capital Expenditures Cable service providers have spent more than $53 billion in infrastructure upgrades in the past few years. Multiple systems operators (MSOs) seek to increase revenue by offering voice, data and video services. With accumulated infrastructure debt, cable service providers now focus on improving, acquiring, and increasing average revenue per user (ARPU) by examining strategies and resources around their billing and customer care systems. Many top cable service providers in the United States outsource their billing and customer support needs to service bureau vendors such as, DST Innovis, and CSG Systems. Cable Trends The three-way combination of voice, video and data has been implemented in some European countries and is slowly being evaluated for the North American marketplace. Rogers Cable in Canada has been testing this triple service. AT&T Broadband and Cox Communications saw a reduction in the subscriber churn rate when they launched their cable telephony service. Internet Protocol- (IP) based cable telephony will soon be deployed, and it is expected to erode revenue streams from incumbent telephone operators. DSL providers are examining technology solutions, such as video over DSL, to contend in the triple-service competition. However, cable provides the fattest content pipe to the home on a scalable economic platform. MSOs hope consumers will be more loyal if MSOs are able to provide multiple telecom services. In addition, loyalty programs and discounting programs can be implemented in the triple-service action. For this to be realized, billing and customer care service bureaus must provide innovative services and flexible pricing. Players in the Big League The cable industry has been seeking innovative solutions from formidable players for some time. Clamoring for eliminating the complexities of managing various relationships, cable service providers have typically looked to their service bureau vendors for enhancements to their business models. Table 1 identifies the top MSOs and their respective customer care and billing vendors.

3 3 Table 1 Top U.S. Cable Providers and their CCB Vendors Number of Basic Subscribers U.S. System Operator CCB Vendor 16,090,000 AT&T Broadband CSG Systems 12,751,000 Time Warner Cable CSG Systems DST Innovis 7,608,800 Comcast Cable Communications DST Innovis 6,350,900 Charter Communications CSG Systems DST Innovis 6,193,300 Cox Communications 5,292,000 Adelphia Communications DST Innovis, CSG Systems 2,830,800 Cablevision Systems DST Innovis 919,300 Insight Communications 779,000 Mediacom LLC. CSG Systems 734,900 CableOne DST Innovis Source: Gartner Dataquest, (October 2002) ICOMS is ' end-to-end billing and customer care product for convergent voice, video and data services. With ICOMS, service providers have the flexibility and control to sharpen their competitive edge, expand market penetration, increase revenue, and improve profitability. The ICOMS solution can scale easily and quickly to support the rapidly growing number of subscribers and services and provides operators with flexible, convergent statement options. CSG Systems CSG Systems provides services to 265 customers in 40 countries, which represents both the CSG North American cable business and the Kenan customer base. CSG Systems acquired the Kenan billing and customer care product from Lucent in January CSG Systems is a traditional mainframe-based service bureau. Products are used to set up customer accounts, process orders, manage invoices, and perform marketing analysis. CSG supports convergence and Web-enabled self-care and electronic bill presentment and payment (EBPP), as well as help operators identify customers at highest risk of churning. CSG ProfitNow! provides MSOs with the tools necessary to keep those customers and, in addition, sell additional services to customers based on predictive profiling. DST Innovis DST Innovis has more than 30 years experience in customer care and billing solutions to the telecommunications industry in more than 30 countries. DST Innovis offers Web-based solutions for customer access, service activation by sales personnel and repair servicing for technicians.

4 4 Home Cable Providers Combine Voice, Video, Data Gartner Dataquest Perspective Under the umbrella of DST Systems, DST Innovis is one of only a handful of service providers with the ability to offer a comprehensive solution with billing, customer relationship management and workflow, output services, and decision-support services. It offers pre and post sales analysis, workflow analysis, procedural analysis and specialized audits. Professional Services With the entire telecommunications industry in a financial bind, professional services firms are increasing the focus and direction in the cable and new-media space. Professional services firms in the cable space include CGEY, KPMG, Wipro Technologies, Jacobs Rimmel among several others. Liberate is an infrastructure software player enabling interactive television. Liberate recently merged with Sigma Systems, an operations support system (OSS) broadband company. Liberate plans to increase revenue from its professional services group. Forthepromiseoftripleservicetowinthegameintheconsumer broadband space, several factors must come into play. Customer care and billing (CCB) vendor solutions need to accommodate current and future marketing programs and services. CCB vendors need to provide innovative solutions that can address solutions to maintain contracts with the MSOs. CCB service bureaus can no longer remain complacent with long contract cycles without providing innovative consulting services. Second, consumer adoption must exist. Therefore, cable service providers need to instigate that demand. This entails thoroughly planned and coherently executed business models and marketing programs targeted on content, not technology. Programs and services need to be directed to the consumer in bundled contents of interest. The third factor is cost. The price points for the three-way combination in the United States has yet to be determined. Some advocates say an aggregate bill will lead to sticker shock when the consumer is told exactly how much he spends on all telecom services. One method for reducing consumer cost is to investigate revenue-sharing opportunities with content providers. The fourth factor is technology. Cost is closely tied to technology and equipment. Proven technology remains expensive until to the level of mass adoption. Initial upfront investment costs to the cable service providers need to be further examined for the deployment of technology to the households, and the calculation of realistic breakeven points and return on investment (ROI). With these factors in place, and if cable service providers can manage the initial costs without sliding into bankruptcy, then cable operators with the three-way combination can gain the competitive advantage necessary to win the broadband race.

5 5 Gartner Dataquest recommends the following for IT services firms: For service bureaus, MSOs need solutions that can provide a complete view of the consumer. Billing and customer support needs to be fully integrated to provide the holistic view and to enable cross-service discounting and promotions. Challenges for cable service providers exist for new business models and new revenue-generating schemes. Outline tangible and realistic near-term revenue strategies and models with minimal upfront costly investments are imperative. The prominence of professional services firms necessitates secure scalable solutions. A consolidated view of the consumer as well as a consolidated pipe to the home sets a greater risk of damage in security attacks. Key Issue What are the opportunities for IT vendors in the industry sub-segments?

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