Cable broadband speeds: time to take a breather

Mike Fries, President & CEO at Liberty Global, which owns the UPC cable networks, thinks it is time for the cable industry to take a breather in the race to increase broadband speeds. Speaking at Cable Congress last week, where there was a feeling that the cable industry has telcos on the run, he said it was not clear what the business case was for moving beyond 50Mbps at this stage.

“Europe is a very competitive market for broadband, with speeds rising and prices falling. 32Mbps is the sweet spot for us and we probably need to go to 50Mbps but what we struggle with is where to stop,” he explained. “Do we need 100Mbps? We understand the value of going from 6Mbps to 50Mbps and we know people will pay a little more for it. I think 50Mbps is probably a good place to take a breather and figure out the value of going beyond, up to 100Mbps.”

Fries pointed to the success cable is having in the battle with telcos for new broadband subscribers. For several years the cable companies at this conference have been bullish about their prospects thanks to sustained investment and DOCSIS 3.0, which telcos can only respond to with fibre. Now it is enjoying the fruits of that success, though there is a growing fear that regulators and politicians might start sympathising with telcos.

Right now, Fries noted, the EU regulators are happy with what cable has achieved for broadband. “There is an opportunity to take a breath here and ask what kind of products and services we can influence and deliver when we have 50-100Mbps. Prices are down, speeds are up and consumption levels are only going one way. Our average customer consumes 1Gb per day and it was 150Mb four years ago. We have put the telcos into a difficult position, as we should. The regulators love us but we need to think as an industry how we get a return on that increase in speed and consumption. There is an opportunity now to figure out where we go from here.”

The Swedish cable operator ComHem has pushed beyond 50Mbps but the company’s CEO Tomas Franzen made it clear that the company had to respond to the needs of a highly competitive broadband market in the country. He does not think ComHem can increase ARPU very much thanks to even higher speed broadband because of that competition. So the business justification, other than remaining attractive to consumers, is to exploit triple-play opportunities.

“We have to look at how we run the business on the cost side because it is really hard to provide value-added services on top of the broadband connection,” he said at the Brussels conference. “The whole strategy is to try to bundle and turn the customer into a triple-play customer. We use high broadband speeds as one of our key differentiating points for selling television and expect more revenue growth on TV, with on-demand and transactional services. So we are using broadband as a differentiator on price and speed in order to get the television business.”