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 USA - Convergence - Triple Play & Quadruple Play
By early 2008 triple play services had started gathering momentum, largely driven by the rapid growth in cable VoIP, which adds the third limb of triple play to the cable companies' TV and broadband offering. This in turn has compelled the traditional telcos to increase the pace of their entry into the TV market. The telcos have been successfully lobbying for TV regulatory reform as part of this push and by late 2008 Verizon had secured nearly two million FiOS TV subscribers and AT&T's U-Verse TV had passed the one million subscriber mark. While most of the triple play services are still bundles rather than fully converged services, technological developments are increasingly allowing true convergence of triple play services on IP networks. The addition of wireless broadband services, such as via WiMAX networks, will usher in the growth of fully converged IP-based quadruple play services. In the meantime, quadruple play is also primarily in the form of bundles, either offered through alliances or through wireless group companies. This report provides an overview of key developments in the US triple play and quadruple play markets.
Last Update: 4 Feb 2009 Number of Pages: 11
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USA - Digital TV - Broadcasting & IPTV Market
Synopsis
Although the FTA networks, such as ABC, CBS, and NBC all offer digital and increasingly High Definition TV programming, for many years they have been losing audience share to the cable and satellite TV networks. The Big Three are expected to continue to lose market share to the DBS and cable providers as well as, incrementally, to the telcos' IPTV networks. The US now has one of the highest rates of pay-TV penetration in the world. By 2010 there were over 100 million pay-TV (or Multichannel Video Programming Distributors) subscribers in the US, amounting to over 85% of households. A significant trend in the digital TV market is the shift towards video-on-demand and other forms of online video viewing, a trend which will continue to strengthen along with the growth of broadband networks.
In the 1950s to 1970s three large privately-owned networks, ABC, CBS and NBC, claimed 90% of the US TV market with free broadcasts. The rapid spread of pay TV over cable in the 1980s broke the hegemony of the big three and by 2001 around 70% of US TV households subscribed to cable TV (CATV).
During the early 1990s Digital TV (DTV) was available via Digital Terrestrial Television (DTTV) through antenna, via digital cable and via digital satellite. In the late 1990s other delivery technologies became available, such as Digital Multimedia Broadcasting (DMB) using digital radio transmission to allow handheld devices such as mobile phones to receive TV signals, as well as network infrastructures that deliver TV over Internet Protocol (IPTV).
In particular, while the telecom sector fought the unbundling provisions of the 1996 Telecommunications Act, the CATV companies capitalised on this opportunity by digitalising their cable infrastructure, with the result that by 2006 approximately 99% of US households were passed by digital cable. By end-2009 around 87% (or just over 99 million) of US households subscribed to some form of Multichannel Video Programming Distributors (MVPD) service, predominantly cable (62% of households) and satellite TV (33% of households).
Initially, the introduction of DTV did not affect the competitive landscape in the USA with the national Free-to-Air (FTA) networks and content providers remaining as the dominant players. Acquisitions and mergers affected consumer choice more than new technologies. However, since 2000 digital technology has gradually brought about the convergence of telecommunications, broadcasting and content services, causing the market to substantially transform.
For instance, in 2000 the CATV companies launched broadband access services over their digital cable infrastructure and by end-2004 had captured around 60% of broadband subscribers. Another significant change took place in 2004/05, when the dominant cable companies began to build out digital voice telephony or Voice over Internet Protocol (VoIP) infrastructure across their footprints, enabling them to offer triple play communication services - voice, broadband Internet and DTV content - over the same cable pipeline into the home. This placed them as direct competitors to the telcos.
The powerful telcos, Verizon, SBC, BellSouth and Qwest, responded by entering the broadcasting market initially through partnerships with satellite Direct Broadcasting Service (DBS) broadcasters, bundling satellite TV with the telcos' voice and Digital Subscriber Line (DSL) broadband. The long-term telco strategy is to build fibre deep into their networks, enabling them to deliver DTV over their own broadband networks.
The telcos' IPTV strategy is one of two broad models involving the use of IP to deliver TV or video services. The other model is one involving video services offering content for download or streaming over PCs and other connected devices. Although by early 2010 subscriber numbers to these two emerging IPTV models were still modest, IPTV is expected to have a profound change on the face of TV delivery over the years to 2015.
Video downloading continued to grow significantly during 2009 and is expected to rapidly increase its role in the overall video market during 2011-15. Rapid growth in revenues will also be driven by an increase in the amount of premium content available online and the increased penetration and speeds of broadband deployment.
Another broadband access technology which is poised to make an impact on the digital TV market is WiMAX wireless broadband. Specifically, in May 2008 Sprint Nextel and Clearwire announced that they were pooling their WiMAX assets to create a new independent company which would take the Clearwire brand name. In October Sprint-Nextel and Intel officially launched their long-awaited ‘Clear' WiMAX network in Baltimore, Maryland.
Table 1 - Broadcasting coverage, subscribers, annual change and penetration - 2009
SectorHomes/subscribers (million)Annual changeTV householdpenetration
Total TV households 114.9+1.4%-
Homes passed by cable1 126.0+1.4%110%
Homes passed by HDTV100.0n/a87%
Basic cable subscribers 62.1-4.0%54%
Digital cable subscribers42.6+11.2%37%
Satellite DBS subscribers 32.7+5.5%28%
(Source: BuddeComm based on NCTA and other industry data as at December 2009)
Note: 1Homes passed by cable do not take into account the estimates of overlap due to overbuilders.
Following a last-minute postponement in February 2009, the mandatory analogue switch-off finally occurred on 12 June 2009, taking the transition to DTV close to completion.
Despite the free-to-air networks all offering the benefits of digital TV, such as improved picture resolution and sound, interactive services, subscription programming and HDTV amongst others, nevertheless the number of free-to-air only households continues to shrink as pay-TV penetration, at over 87%, reaches some of the highest levels globally. The cable companies still retain the largest share of pay-TV subscribers, although satellite has been slowly gaining ground. However, more recently the telcos have started becoming notable participants in this market with their extensive fibre network deployments and IPTV strategies.
Nevertheless, one change that is likely to be of some concern to players in the pay TV market is the emerging trend amongst pay TV subscribers to ‘cut the cord'. Specifically, many customers are cancelling their cable and satellite subscriptions and are instead accessing their favourite TV shows via alternative, online video platforms, such as Hulu, iTunes, Netflix, and Xbox. A report released by the Convergence Consulting Group in April 2010, for instance, found that in 2009 alone an estimated 600,000 people had cancelled their cable or satellite subscriptions in favour of online viewing options. Whilst this number is relatively small the trend is expected to grow, with 1.6 million viewers forecast to have ‘cut the cord' be the end of 2011.
Since 1975 the number of cable subscribers has grown steadily, from around 10 million subscribers to approximately 62 million in 2009. This growth has positioned cable as the dominant force in the pay-TV market, also ideally positioning it to deploy triple play services. However, for nearly a decade the number of basic cable subscribers has been slowly declining, from a high of 67 million in 2001. Indeed, cable's share of the pay-TV market has declined from nearly 80% in 2000 to around 62% in 2009. The loss in market share has been largely due to aggressive competition from the satellite TV (DBS) providers and more recently due to the deployment by Verizon and AT&T of a video service.
During 2008 and early 2009 the major satellite providers, DirecTV and the DISH Network, continued to make gains at cable's expense. Thus DBS's share of the pay-TV market has increased from under 20% in 2000 to around 33% in 2009. DBS growth is partly attributable to price-competitiveness, the increase in local-into-local broadcast stations, service enhancements such as multiple room viewing solutions and HDTV as well as improved marketing.
With IP networks allowing the convergence of voice, video and data services, significant challenges loom for DBS as well as for cable, as telcos deploy extensive fibre networks and move towards triple play, quadruple play and broader digital media bundles. For example, between 2005 and 2010 Verizon has been aggressively rolling out its Fibre-to-the-Home (FttH) network and acquiring franchise licences in order to deploy its FiOS TV service across its footprint. By early 2010 Verizon had approximately 2.9 million TV subscribers out of the 15.5 million households to which the service was available for sale.
Similarly, in late 2007 AT&T started rapidly deploying fibre into its network using a combination of Fibre-to-the-Curb (FttC), Fibre-to-the-Node (FttN) and FttH, on which it launched its U-Verse Video IPTV service. By late 2008, AT&T's U-verse fibre network had been deployed in 80 major markets across 16 states, with the number of U-Verse TV subscribers increasing 400% year-over-year to pass the one million mark at end-2008. By early 2010 there were over 2 million subscribers from the nearly 23 million households and other dwellings passed by the service.
Given the rate of deployment and uptake of the telcos' video service, by the end of 2010 Verizon and AT&T are expected to be notable competitors in the digital TV sector and increasingly in broader IP-based digital media markets.
Table 2 - Market shares of MSO, DBS and Telco video segments - 2005 - 2010
Provider class200520062007200820092010 (e)
Cable72%70%68%65%62%59%
Satellite28%30%31%32%33%33%
Telco IPTV-%-%2%3%5%8%
(Source: BuddeComm based on industry data)
Table 3 - Market shares of major MSO, DBS and telco video providers - 2005; 2007; 2009
MVPD provider200520072009
Comcast22%25%25%
DirecTV16%17%19%
DISH12%14%15%
Time Warner12%14%13%
Cox7%6%5%
Charter6%6%5%
Cablevision3%3%3%
Verizon FiOS TVn/a1%3%
Bright House2%2%2%
AT&T Inc.n/an/a2%
Suddenlink Communications1%1%1%
Mediacom2%1%1%
Top 12 MVPD market share90%92%94%
(Source: BuddeComm based on FCC data for 2005 and on Kagan Research and company data for 2007 and 2009.)
In addition to the mandatory analogue switch-off date, another major impetus to the transition to DTV was HDTV. HDTV contains up to six times more data than conventional TV signals and at least twice the picture resolution. In addition to movie theatre picture quality, it delivers Dolby Digital 5.1 surround sound.
The seven national commercial TV networks all carry some HDTV programming, typically their most popular programming. For instance, major events shown in HD include the Academy Awards, the Super Bowl, and the Masters Golf Tournaments.
The cable Multiple System Operators (MSOs) began broadcasting HDTV in 2002. By early 2010, over 100 million homes were passed by cable delivering HDTV services, with an increasing number of networks producing HD programming. Satellite TV delivers HDTV nationally from a number of movie networks and from the national FTA broadcasters.
The number of cable, satellite and IPTV subscribers that were actually utilising HDTV services with HDTV-enabled TV sets, was estimated to be around six million at the end of 2007, less than 10% of households. However, by end-2008 this figure had more than doubled, as forecast, to a penetration rate of around 23.3%. By early 2010, an estimated 70% of Americans subscribed to some form of HDTV service. As more households obtain HD-capable TV sets and more consumers are exposed to the HD viewing experience, HD is likely to become a standard service offering in the coming decade in the same way colour television did five decades ago.
At end-2009 DVR penetration in the USA was estimated at close to 40%, up from just 12% two years prior. Growth has been driven by the inclusion of DVRs into STBs. Accordingly, the majority are cable-provided DVRs (nearly 20 million) followed by DBS subscriber DVRs (around 14 million). Less than 2 million are stand-alone DVRs with the DVR pioneer, TiVo, now a comparatively small player. Nationwide DVR growth rate is forecast to remain strong for the next few years, with approximately 50 million US households forecast to have DVRs by 2011. The next major shift on the horizon is DVR-networks, which would not require a box. There are, however, several copyright issues to work through before this service becomes a reality.
In addition to the ability to record programs, it is believed that many people buy DVRs because the devices enable them to skip through advertising, and advertisers don't wish to pay for viewers who don't watch their spots. In August 2008 it was estimated that approximately 85% of DVR users were skipping through at least three quarters of all advertising.
Concern over the disruptive potential of DVRs has prompted some major advertising companies to announce that they will negotiate advertising deals based only on live ratings. Executives have expressed concern not only about the disruptive capabilities of DVRs to the advertising mix, but to new non-traditional offline and online technologies, which could fragment the industry. These include:
Commuters who use PDAs, cell phones and BlackBerrys to get their news instead of reading newspapers;
The use of mobiles, satellite radio and Internet radio to receive radio broadcasts;
Blogs, podcasts and web-enabled cell phones.An American Advertising Federation survey showed that ad industry leaders are cognisant of the transformation of the industry from traditional media, namely TV, radio and print, towards Internet-based online media, and are thus changing their advertising mix towards the latter platform. Thus it seems likely that rather than adversely affect the advertising market, the changing nature of TV viewing brought about by DVRs, IPTV and other developing technologies will force the advertising industry to adapt to these new models.
This suggestion was lent some support by a study released in May 2010 by Duke University which found that, contrary to widely held assumptions, the use of DVRs is having no negative impact on the TV advertising market. Furthermore, the study found that not as many viewers were fast-forwarding through commercials as was generally assumed.
The study, which was conducted over a three year period and which compared the spending behaviour in households with and without a DVR, found that there was no difference between households in patterns of purchasing of advertised products across 50 categories. The lack of impact was attributed to several factors, including the fact that around 95% of Americans still watch live television. Furthermore, even though some viewers may fast-forward through as much as 70% of commercials, they are still obliged to watch the commercials in order to determine when to resume play, albeit in fast motion, and are thus still being exposed to the advertisements.
The report is expected to be welcome news to manufacturers and advertising companies who have held grave fears about the future of TV advertising in recent years in the face of the increased popularity of both DVRs, IPTV and other developing technologies.
Last Update: 26 May 2010 Number of Pages: 19
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USA - Intelligent Energy Technology - Smart Grids
Synopsis
As the imperative to address global warming has become a matter of social, political and economic urgency, utilities are rapidly developing smart grids as part of the need to improve the efficiency of energy production and use. In the background of a deepening recession, there is a growing consensus within the US that clean energy is a platform for rebuilding the American economy and that smart grids are critical to a sustainable energy future. An integral aspect of smarts grid are smart meters, with the proportion of US homes equipped with smart meters estimated to rise from 6% to 40% over the next five years. As broadband over power line networks are able to support the upgrade to smart grid systems, the development of smart grids is now the key driver behind the development of BPL. Significantly, in October 2009 the Obama economic stimulus package awarded $3.4 billion for smart grid developments. This report provides an overview of smart grid and BPL developments in the USA.
Last Update: 17 Nov 2009 Number of Pages: 13
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USA - Major Telcos - Statistics & Analysis
The US telecommunications sector witnessed further significant consolidation between 2005 and 2007, first with Verizon's acquisition of MCI, then SBC Corporation's acquisition of AT&T Corp, rebranded AT&T Inc, and finally AT&T's acquisition of BellSouth. The mergers are largely a strategic response to the increased competition from new technologies which are eroding traditional fixed-line telephone revenues. Competition from wireless voice and data (SMS) providers such as Sprint Nextel continues to intensify as wireless usage grows. More recently, VoIP has become a significant competitor, being offered by the cable MSOs as well as by pureplay providers such as Vonage and Skype. The telcos are responding not only by merging, but by focusing on their DSL offering while picking up the pace of their fibre optic deployments, in order to themselves offer a triple play bundle of video, broadband and voice services. This report provides an overview of the major US telecommunication companies, focusing on the three major fixed-line operators AT&T, Verizon and Qwest.
Last Update: 4 Feb 2009 Number of Pages: 12
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USA - Mobile Market - Analysis, Statistics and Forecasts
Synopsis
US mobile subscriber numbers increased to approximately 285 million by early 2010. Mobile penetration, on a per capita basis, is expected to exceed 95% by early 2011. Increases in data ARPU largely offset the ongoing decline in ARPU for voice services. Indeed, mobile data revenues increased by around 30% during 2009, and are expected to continue to grow at very high rates between 2010-2015. Mobile broadband was underpinned by the deployment of 3G networks during 2009, while the imminent deployment of nationwide 4G networks will be an even greater stimulus of growth in mobile broadband. This report provides analysis, key statistics and forecasts of the US mobile market.
Last Update: 28 May 2010 Number of Pages: 16
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