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The uber-bundle looks to win the battle for the North American couch potato
10/13/2003

A TRIPLE PLAY OF voice, digital video and Internet is the goal of most telecom, satellite and cable companies across North America, says a comprehensive report by the Convergence Consulting Group, Toronto.

Digital television penetration is still growing on both sides of the border, high speed Internet and the voice applications which can be built off of it still has much room for growth Stateside, and has proven very popular in Canada. PVR, VOD and SVOD is gaining major traction in the States but Canadian companies have not been as aggressive.

Its wide-ranging findings include, on the TV side:
* By the end of 2003, approximately 27% of Canadian homes will have digital TV, and by the end of 2005 that number should climb to 35%. TV revenue (what consumers pay for cable, satellite, telco, or fixed wireless TV) should reach C$5.4 billion by year end 2003 - over 12% revenue growth. U.S. consumer TV revenue should reach US$55 billion.

* Price increases by ExpressVu and Star Choice have hurt their subscriber growth. Over the last 12 months both players have raised prices by approximately $6 per month. Why? to move towards becoming free cash flow positive in 2004-'05. The price increases have allowed cablecos such as Cogeco and Rogers to raise their prices while getting good digital TV account growth and reduce basic cable TV subscriber losses. Nonetheless, the report says that satellite will continue to maintain more digital households than cable at least until the end of 2005.

* It estimates that North American cable VOD/SVOD revenue at approximately $30 million by year end 2003; growing to $160 million by year end 2005. By the end of the year half of cable TV subs will be able to access VOD, by the end of 2004 that should climb to approximately 75%. In the U.S., where things are more advanced, cablecos such as Comcast are seeing 50% more revenue from PPV/VOD users than just PPV users, and the report estimates that Time Warner should have approximately one million SVOD customers paying on average of US$7/month by year end.

* Leading satellite players such as EchoStar are giving away PVR boxes for free (Time Warner Cable is also offering free upgrades in certain markets for a PVR box) whereas in Canada PVR is just taking off and box prices from Bell (and soon Rogers) are high. The U.S. should have approximately 3.2 million PVRs in use by year-end 2003 (and approximately 6.3 million at the end of 2004), whereas Canada's numbers will be far smaller with approximately 170,000 by year-end 2004 (90,000 year-end 2003). "That being said we believe that PVRs will only have a small impact on growing subscribers for both cable and satellite," says the report's authors.

* It also states that MTS and SaskTel's television ventures will not make any strong market impact until 2005 and that their prices must come down further as neither are much less expensive than Shaw.

* EastLink stands out in that it has such high digital TV penetration rates thanks to the fact that between 2001-2002 they sold digital set-top boxes for $49. The report says that EastLink will hit approximately 35% digital TV penetration by year end 2003.

For more on this comprehensive, 255-page report, go to www.convergenceonline.com.


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