According to the Wall Street Journal, Time Warner Cable, the second-largest cable operator in the US, is considering promoting a singe-play offer more, with just broadband. This would target subscribers who have a TV subscription over satellite (Dish or DirecTV). While the company admits that some customers will always go with satellite, it also underlines that broadband (connectivity) is a more important product for an operator.
The single-play offer will also appeal to customers who rely on over-the-top services and are ready to end their contracts for managed TV or telephony services. This results in a shift from traditional income sources to broadband income. At first glance this may seem like a negative development, and TWC is welcomed for providing a good service still for these customers. The company is not resorting to blocking, cutting off, smart pricing and other unfriendly measures in order to cling to its existing revenues and business model. The negative effect is that TWC sells fewer services per customer (single plays instead of triple plays), but in addition to customer satisfaction there's more to this. Subscribers with a single play are likely heavy broadband users. If they want to access all their services over the top, they need a solid broadband connection and one can assume they will migrate to a more expensive internet plan. TWC can also profit by working with OTT providers. Telefonica and France Telecom give a good example with their cooperations with respectively Jajah (VoIP) and Deezer (streaming music), while TWC's rival Comcast has just announced a partnership with Skype. This adds value for the customer (see our commentary ‘Net neutrality offers operators more opportunities than threats'), and the operator gets to share in revenues with the OTT provider.
The success of a single play implies not only that OTT is a serious way to compete (setting aside the fact that subscribers can still get TV over satellite), but also that the potential for triple-play is possibly limited. While the penetration of triple-play is only increasing thanks to the convenience and discount compared to buying services separately, the question is when will the saturation point be reached. At Time Warner Cable, triple-play penetration is at around 25 percent, at Ziggo it's at around 37 percent, and at Virgin Media UK it's already risen to 63 percent. A saturation point is difficult to predict, but the fact is penetration is growing very slowly at Virgin now, suggesting around two-thirds is about as far as it goes. And with the success of OTT, the saturation point likely may be much lower in the coming years.
