The European cable industry reported that it was up 6% in revenues terms from a year ago to reach €18.8 billion and said that the drift to digital, vital if the industry is going to meet deadlines to switch off analog in 2012, is still strong, with 17.4% more TV homes taking digital cable instead of analog across Europe, and digital TV revenues up 23.3% to €5.74 billion, now making up 58% of total TV revenues within cable.
These figures come from numbers compiled by IHS Screen Digest on behalf of Cable Europe, which organized the Cable Congress in Lucerne Switzerland this week. Broadband revenue is up 4% and telephony up 9% in revenues, but both were up 11% in connection numbers, with Broadband now reaching 23 million homes, up from 20.1 million and VoIP telephony over cable now reaching 18 million, up from 16 million.
But among all these figures Faultline pointed out that surely the drop in the number of total cable homes, or total TV homes, must be worrying. Manuel Kohnstamm, president of Cable Europe came back with a snappy answer, ‘When cable first set up in Europe it was taking 70% and 80% of pay TV homes. As new technologies have launched it was bound to settle down a little and this is not a big deal, and as analog cable shifts to digital there will be a few more desertions, but this year it has just been 200,000 homes.’ He then cited IHS Screen Digest at over 61.1 million homes this time last year and 60.9 million today.
This is a little disingenuous, who’s going to say they’re wrong? Well as usual at Faultline we’re prepared to. In Germany last year up until to the third quarter, in the Rethink-TV database for Europe, we can see that some 375,000 cable homes were lost, while at Numericable alone in France, 200,000 more went. In Holland across Ziggo and UPC, there was a fall of 140,000 cable TV homes. Another 80,000 went across Romania and even where the Cable Congress was held in Switzerland, UPC lost 17,000 cable homes. That little lot adds up to over 800,000 of losses, and we can’t accept that the smaller, tough to count, cable companies added enough to replace this, or that the stronger cable territories, usually areas of high growth for other forms of pay TV like Central Europe, added enough to make up the difference either. We just flat don’t choose to believe it because publicly available figures show it’s likely to be wrong.
There will be some reason for this, perhaps homes which are new to taking only broadband, but which don’t take pay TV from cable companies, allows Screen Digest to say that less companies have actually left the fold, but the truth is that the current rate of cable desertions are far from being ‘no big deal,’ and we think Cable Europe has to be a bit more up front about that, and not constantly paint a nice face on an industry which we know is tough.
To its credit, the roll out of DOCSIS 3.0 has really shaken up the European cable industry, to the point where it says that it can deliver speeds faster than Korea. Cable Europe will issue details in a release in a couple of weeks, which says that 50% of homes in Europe are within reach of a digital cable network in the European Union offering 10 Mbps or better. It goes further and says that with current build out plans this will shift to 51% of EU homes in reach of 30 Mbps or better by 2013 and by 2020, a target date set by the European Commission for universally available broadband, it says cable will reach 55% of EU homes with over 30 Mbps.
Kohnstamm also revealed that following on from Kabel Deutschland’s highly publicized trials with a 1 Gbps DOCSIS 3.0 line, that a local experiment at Cablecom, now owned by Liberty Global’s UPC, has beaten 1.4 Gbps. This opens up SoHo and business to business markets, claims Kohnstamm. This was achieved in what Peter Percosan, managing director of Cable Europe Labs, described as ‘a real world test,’ on an existing network with an existing Cable Modem Termination System. ‘We had to use a combination of 64 QAM and 256QAM and a lot more than the 24 DOCSIS Channels that were used by KDB to produce the 1 Gbps result,’ but he reckons that these types of speed are achievable with quality assurances for the enterprise world.
Funnily enough throughout the Cable Congress discussions, whether or not Enterprise was an important target was a moot point, with speakers on both sides ‘ Mike Fries said it was a business, but not a core business for Liberty Global because the Telcos would price cut hard to keep it, while KDG felt it was worth pursuing.
DOCSIS 3.0 however does need new cable modems and so far between 5% and 7% of homes in Europe have it installed, and the sweet spot is paying for 25 Mbps to 35 Mbps. Screen Digest says that this will rise to 23% within 5 years.
A discussion on Cord cutting brought an immediately dismissive attitude from the combined Cable Europe team, saying that it was a much bigger problem in the US where ARPUs are so high, over $100 in some instances, and there has been more progress in getting film and TV rights for OTT services. There is no Netflix said Percosan and it is hard for cable to do their own OTT services because most rights were restricted to the carrier method, in Europe. He also pointed out that in Europe there were many free to air broadcasters offering OTT and somehow thought this would prevent people from cutting the cord.
Faultline doesn’t buy any of this resistance. How can it be that free to air broadcasters retain the same ‘full’ broadcast rights which include internet delivery and pay TV has somehow slipped up and dropped internet rights over in Europe. It certainly hasn’t stopped the US cable operators releasing TV Everywhere products which include the same content as their cable networks, but Percosan insisted this was the case, and that they would all have to go back to their content suppliers for OTT rights.
Well obviously in the US, the cable industry is stronger and perhaps this process was fast-tracked, but we can’t see Netflix and Amazon having much trouble negotiating those rights, and it makes it especially easy if the Pay TV operators have no legal objection to it because they don’t own these rights. Netflix has said it will soon launch in another international territory and it is likely to be in Europe, while Amazon has bought Europe’s biggest Netflix imitator in LoveFiLM and could soon move to take over German and French equivalents. And anyway, if the BBC, and the strong French and German broadcasters are offering free to air OTT through things like the iPlayer and its associated YouView set top, then surely that’s all the more reason to cancel your pay TV service. Cord cutting is coming, even if Cable Europe doesn’t like the idea.