TelcoTV Could Capture Significant Market Share Given Appropriate Positioning

Diffusion:Suggests that Given Even Minor Cost Savings, TelcoTV Services Could Capture 25% Market Share in the First Two Years New TelcoTV services could take as much as 25% of PayTV subscribers in markets in which such services are introduced, just in the first few years. There are a sufficient number of ambivalent or dissatisfied cable and DBS subscribers that a competitive offering with even slight cost advantages could be disruptive to the market balance.

Some 84% of US households now subscribe to some form of PayTV service, be it cable or satellite. However, 15% of these subscribers are dissatisfied with the quality of their current PayTV service, and 22% are likely to switch from their current service to a TelcoTV service given some level of cost discount.

The US PayTV market has evolved to a level of maturity where penetration is stable and growth is contingent upon increasing per-subscriber revenue. There seems to be tacit consent among cable and DBS operators that current average prices are sustainable, as are price increases for basic services. This is a perfect environment for a new player, in this case TelcoTV, to enter the fray.

As US telcos construct responses to cable's 'triple-play' threat, they have realized that the lynch-pin service is video - it is by far the most sticky and churn-resistant service of the bundle, a reality of which US telcos are more than aware. The extent to which consumers are willing to embrace TelcoTV has to date remained uncertain - thus the rationale for TDG's report, Receptivity to TelcoTV among PayTV Subscribers - Primary Research & Analysis Publ 20060606