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A fervent believer in the promise of human powered growth, Russ leads CMG in partnering with companies to help them become aligned, agile, customer-driven enterprises that unleash the potential of their organizations with sustainable improvements in focus, teams, culture, and process our clients.
Mark leads CMG in partnering with Telecom companies to help them increase customers and accelerate revenue. His 25+ years of experience in growth, strategy and execution includes B2C and B2B multi-channel acquisition programs, customer experiences that surprise and delight, pricing that optimizes customer value, and innovative product development.
Residential communications services – like traditional video, broadband, and voice – represent a dynamic cable segment that, while experiencing some decline in recent years, sustain meaningful revenue opportunities in a few particular areas.
In the last decade, many cable companies have launched home security and automation solutions. Comcast launched its initial Xfinity Home offering in 2012, achieving early success with a Wi-Fi-based, self-installable, and portable security solution. After declaring Xfinity Home the “4th RGU” and reporting robust growth from 2014 – 2018, the company announced only modest subscriber growth in 2019, then stopped reporting units altogether. Presumably, competing against the likes of Amazon (Alexa & Ring), Google (Nest portfolio), and Apple (iOS integration), the challenges Comcast faced were not easily solved by pervasive distribution augmented with multi-product discounts.
Despite any experience in flagging subscriber growth, home automation and security capabilities continue to be in high demand among consumers. In fact, over the last six years, smart home device sales have grown 107%, from $14.9 billion in 2017 to nearly $31 billion by the end of 2022. The lion’s share of that growth has come from increases in the Smart Appliance, Security, and Control & Connectivity categories. Through 2028, smart home device sales are expected to increase at a CAGR of 9.68%, while the category is projected to top out at $55 billion in total sales.
As appetites for home automation and security capabilities continue to grow, MSOs have the opportunity to continue leveraging customer relationships with broadband service bundles designed to leverage those existing revenue streams. Opportunities to integrate popular devices and capabilities into their Smart Home strategies will continue to be fruitful. This enables direct interaction and control within MSOs’ smart home platforms. It allows them to leverage OEM “pull” marketing investments while tapping into consumers’ desire for more simplified and straightforward experiences in bringing those capabilities online and managing them going forward.
While self-install strategies are largely being incorporated into new product development and marketing, a segment of the consumer population will continue to need or desire a professional, third-party installation option. Integrating more of a “white glove” professional installer capability is another tactic MSOs can utilize to deliver meaningful and straightforward solutions to targeted consumer buyers’ space segments.
Another solution that has gained traction across cable services operators is prepaid internet service, a relatively straightforward customer usage model perfected in the wireless industry 20 + years ago.
With prepaid internet, customers pay upfront for equipment – e.g., modems, routers, gateways – along with the first month’s service. Once prepaid internet customers have depleted those service fees, they can “refill” their service fees as needed, usually monthly or whatever other durations the provider has made available.
When executed well, prepaid service expands the addressable audience predominantly toward segments that prefer fewer financial commitments, more tightly manage their expenses, avoid contracts, or pay in cash. In addition, audience widening occurs with minimal revenue degradation.
For these segments, prepaid internet is so valuable that it can command premium rates relative to standard postpaid offers. So, as opposed to traditional market expansions, which can pressure market rates, adding a prepaid internet solution is likely to be accretive to broadband ARPUs. Prepaid internet carries additional benefits: risk mitigation for early life churn, non-pay disconnects and bad debt expense, back balances, and collections.
For providers, prepaid internet offers a unique ability to tap into broadband demand that traditional postpaid services cannot address. Opening areas and homes that were previously “closed” to sales and marketing activity unlocks incremental growth opportunities.
Companies like Comcast and Cox have retail prepaid internet products for sale from their own channels and with third-party retailers like Boost Mobile.
Carriers have adopted a self-install approach for prepaid internet to further manage costs. With this approach, customers purchase a Wi-Fi gateway and the first month of service, install and activate the service at home, and refill online or in a participating store. In our experience, prepaid internet complements programs like the federally subsidized Affordable Connectivity Plan (ACP) and provider-sponsored plans for qualifying customers, such as federal school lunch families.
Accelerated by the rise of streaming during the pandemic, cable video “cord-cutting” has precipitated a steep decline in the total number of pay TV households in the U.S. since 2013. By the end of 2023, only 60M households are expected to be paying for traditional cable video services, down 7% from 2022 and representing a decline of 36% since 2013.
As pay TV subscriptions have declined, demand for streaming video solutions from over-the-top (OTT) providers like Netflix, Hulu, YouTube, and Disney+ has increased. As of the end of 2022, roughly two-thirds of U.S. households indicated some utilization of a streaming video solution, with 37% identifying it as their only video entertainment option, up nearly 24% from 2021.
As alternatives to MSOs’ linear video model have driven video subscription attrition, it’s become increasingly important that those operators facilitate streaming access for their broadband users. Initially leveraging an OTT integration of streaming services on set-top boxes, MSOs have evolved offerings to provide video streaming devices – e.g., Amazon Fire Sticks, Apple TVs, Roku streaming devices – and as promotional streaming service bundling into monthly broadband access fees.
Thanks to the increasingly important tether that broadband internet access represents to American households, MSOs’ relevance within the video entertainment ecosystem has not declined with the erosion of video subscription services.
Instead, operators have become more indispensable as a result of their continued network investments which deliver ever-greater broadband speeds to the home. Investments in technologies such as Full Duplex DOCSIS (DOCSIS 4.0) promise to enhance network speed and further reduce latency, important for continued consumer experience improvements as data access & leverage continues to grow in importance. Additionally, ongoing investment in endpoint performance enhancements will enable broader access on consumer-grade devices, which is essential for maintaining relevance and sustaining subscriber growth as entertainment channels continue to diversify.
For 25 years, CMG has developed customized strategies for our clients to navigate the ever-evolving telecom landscape. Our vast experience dealing in prepaid service models and other residential offerings allows us to develop comprehensive strategies for clients launching new services or optimizing existing ones in the space. Contact CMG to learn more about how we can guide your business to secure and maintain market share across various residential offerings.
Visit the link below to read our Cable Industry Assessment and learn about other growth opportunities for telecom businesses