January 10, 2008

Cable’s Top 10 Causes of Insomnia in ’08

CableFAX executive editor Michael Grebb took time out from the nonstop assault of the Consumer Electronics Show to put together his list of the most important issues cable operators have to contend with this year.

By Michael Grebb

1. FCC. Need I say more? FCC chairman Kevin Martin is on a Cable Holy War of some sort—although we’re not sure what religion he’s defending. Regulationism? In any event, cable’s strategy of waiting out Martin over the next year in hopes that a new president will replace him with someone else has its pros and cons. The pros are that alliances with sympathetic FCC commissioners make keeping Martin in a box relatively doable over the next year. The cons are that the next FCC chairman could be even worse for cable. Hey, it could happen, though I have to admit it seems unlikely.

Who is Kevin Martin and why is he saying those terrible things about cable?

2. Competition. No one can dispute that Verizon’s success rolling out FiOS—along with the looming threat of AT&T’s U-verse—creates a serious problem for cable: The loss of basic subs. That’s likely to continue in ’08 as cable operators try to catch up with some of the features FiOS and U-verse have heaped upon the marketplace with their greenfield, spend-till-we-drop infrastructures. Things aren’t much better on the DBS side, with Dish Network and DirecTV continuing to apply pressure on cable in the HD space. The two-pronged attack is a big ’08 challenge for cable, which on one hand must keep ramping up broadband speeds and improving VOD and other TV navigation features but on the other must keep adding more capacity-draining HD to the mix to compete with both satellite and telco offerings. Tough stuff, but cable’s up to the challenge.

3. The Digital Transition. Not much to say here. Cable has to step up—even though the transition is really more the responsibility of the broadcast industry. But let’s not harp on that. In Washington, policy makers expect cable to do its part, working with broadcasters and consumer electronics companies to ensure a smooth transition. As we approach that fateful February ’09 deadline, it won’t get any easier to educate consumers and play nice with those other industries.

4. The Capacity Crunch. Have you noticed that cable is running at capacity? No? Do you live on another planet? The consumer demand for faster broadband speeds and more HD channels isn’t going away—especially as more video on the Internet fuels broadband demand and the digital transition pushes more of them to buy big-screen HDTV sets. The good news is that ’08 should mark the first year that switched digital video starts its march into the cable mainstream. Not a moment too soon.

5. Cable’s Busy Calendar. Everyone knows about the NCTA board’s effort to scale back the number of cable-related events that executives feel obliged to attend during the course of the year. It’s an understandable goal that recognizes the corporate drain of all this travel. But the potential pitfalls of going too far are obvious: At a time of increasing competition, an uncertain economy and unprecedented technological change, do we really want cable’s top execs holed up in their offices bouncing ideas off of their internal echo chambers? Might it make sense to stay engaged with outside voices and stay abreast of the latest developments? My advice: If you choose not to travel much in ’08, then make sure you subscribe to CableFAX.

6. Wall Street. Has cable ever been hated this much on Wall Street? Well, the truth is that cable has gone through these periods of financial negativity before (most recently following the 1992 Cable Act’s passage and subsequent years of FCC regulation). But cable’s implosion over the last few months—at least in terms of stock price—has been unique in its speed and breadth. After all, Wall Street was singing cable’s praises less than a year ago. What happened? Verizon happened, that’s what. Those basic sub losses have spooked the Street. Cable has got to turn that trend around in ’08, and do it while also growing other areas of its business. And as it spends, spends, spends to keep up with the Joneses, cable operators are doing so in one of the worst credit crunches we’ve seen in years. Good thing it’s a high cash-flow business!

7. Diversity. America is changing. And with a more diverse customer base comes the need to hire a more diverse workforce. Cable understands this and has made strides at just about every level. But, as always, much work remains to be done. Anyone who attended the last NAMIC conference knows that many minority cable execs feel as if they still face certain workplace hurdles that their white counterparts don’t. Reasonable people can disagree about the state of diversity in cable, but the important thing is to keep those lines of communication open in ’08.

8. Commercial Services. Did you think I was going to say “wireless”? Well, mobility is certainly sexier than commercial services, but when you look across the cable spectrum in ’08, it seems clear that commercial services markets are a more immediate opportunity for top-line growth. Better yet, stealing commercial customers from the telcos hurts their numbers just as they’re stealing cable’s basic subs. Sometimes life has its little bonuses.

9. The On-Demand Consumer. Customers are simply not willing to live by cable’s rules anymore. They want content when they want it. They want content where they want it. Hell, they even want content the way they want to create it. And they want to share all of it with their friends. Yet we live with the legacy of licensing deals and copyright concerns that pre-date all of this consumer liberation. Over the next year, cable will need to work with countless other industries to make sure that it stays in touch with this big consumer trend. Cable can’t drop the ball. Others will pick it up. Very quickly.

10. Customer Service. All of these new technologies and consumption trends are great, but the heated competitive environment means cable can’t rest on the customer-service gains it has made in recent years. Customers are used to all of that improved customer service now. They want more. And cable has to deliver it in ’08. That means CSRs who are knowledgeable and can answer any question—no matter how technical or obscure. It means giving your best customers freebies and random thank-you gifts. If I spend $250 a month on the triple play, why shouldn’t I be treated as a VIP? Thinking about the next generation of customer service will be a big challenge for cable this year. Period.