Video, after all, really just doesn’t matter.

Cable operators, who have spent the better part of the past two decades trying to stem the rapid loss of video customers have abandoned the chase, instead opting to retain higher margin broadband customers. And according to a report by influential media analyst Craig Moffett, principal and senior analyst at MoffettNathanson, it is about time.

Related: Moffett: Video Just Doesn’t Matter 

By focusing on broadband and pretty much letting video customers churn if they want to -- the days of calling your cable company, threatening to leave and getting a free month of HBO to stay are over -- cable operators have seen overall profit margins soar. Companies that had struggled to reach 30% margins while carrying a full load of video services are now approaching 50% overall margins. And Moffett says that is mainly because they are no longer fretting over losing video customers, or offering unprofitable promotions to get them to stay in the bundle.

Nowhere is this more evident than with Cable One, a pioneer among broadband-focused cable companies. Now called Sparklight to emphasize that switch, Cable One’s margins are the highest in the industry -- 47.8%. At Altice USA, which was formed after European telco Altice N.V. purchased Suddenlink and Cablevision Systems, margins have risen substantially from the 30% range before the purchase to more than 40%.

Related: Cable One's Approach Clicks with Investors

“Video subscriber losses are now part of the bull case. In conversation after conversation, investors talk of faster subscriber losses as a clear positive,” Moffett wrote.

Moffett isn't the first to say this. BTIG’s Rich Greenfield has for years touted the allure of over-the-top providers and encouraged cable operators to give up on traditional video distribution. 

Moffett and other analysts have hesitated to go all the way out on that limb in the past because of the belief that the bundle of video and data was a powerful tool against the competition. But now, with households getting younger and cord cutting becoming more prevalent, the notion of forcing customers to take a service they don’t want and that loses money for the provider, seems ludicrous.

The math has always been relatively simple. Customers that drop video service but continue to be broadband subscribers pay more for the standalone service -- meaning higher monthly revenue and profit margins for the operator -- and dropping video means lower costs to the operator for repair, maintenance and customer service. Video service traditionally requires more truck rolls and gets more complaints than broadband, Moffett wrote.

That should equal higher profits, but according to Moffett it hasn’t reached the scale where it shows up in financial reports. Until now.

“The change in tone among the major cable operators has been extraordinary,” Moffett wrote. “A year ago, Charter and Comcast were still largely wedded to defending video, even if it meant losing money. Both companies have now made it clear that they won’t continue to chase low value video customers.”

Moffett added that video churn, the main culprit of the cable “bear” case, has gone from feared, to accepted and most recently, to encouraged.

The analyst cautioned that cable isn’t abandoning video -- for operators like Comcast, video is as important as ever -- but more and more are becoming “increasingly comfortable letting video find its own level,” with older customers opting for fuller video packages and younger ones willing to pay more for a robust broadband service only.

Investors are beginning to see the light too, Moffett wrote.

“Just a few years ago, video subscriber losses were the foundation of the cable bear case,” Moffett wrote. “Gradually, that fear faded. Video subscriber losses became something that investors were willing to ignore. Now, it’s something investors are hoping for.”

That is beginning to translate into higher stock prices and multiples. While the sector has performed well this year -- cable distribution stocks were up about 40% in the first half -- it could get even better. Moffett argues that higher margins mean higher multiples and reaching the 50% margin level could bode very well for cable stocks.

Related: Investors Connect with Cable Broadband Strength 

Moffett estimated that at 40% margins, cable cash flow multiples would be about 9.6 times. At 45% margins, average multiples rise to about 10.3 times and at 50% margins, they grow to 10.8 times. Factor in the lower capital intensity associated with fewer video customers -- lower programming costs and fewer set-top boxes -- and multiples rise to 11.7% at a 50% margin.

Understandably, the picture is not as bright for programmers. While virtual MVPDs and other OTT players could theoretically absorb nearly all of the traditional video customer losses, Moffett adds that it is more likely that they capture a fraction of the declines.

“There’s simply no good way to spin the story for programmers like Comcast’s NBCU cable networks, or AT&T’s Turner networks,” Moffett wrote, adding that the complexity is probably why Comcast has underperformed its peers while outperforming the general market.

“But Charter and Altice USA are cleaner stories,” Moffett continued. “And their shares have performed markedly better, even after considering their higher leverage levels.”

While cable’s DOCSIS 3.1 platform looks to extend the life of HFC networks, an emerging technology called G.fast aims to perform a similar trick for DSL for the telcos as they look for ways to squeeze more speed out of their widely deployed copper-based networks.  

While interest in G.fast and its 1-Gig potential reached frothy levels last week at the Broadband World Forum in Amsterdam as chipmakers and network equipment suppliers trotted out their latest wares based on the technology, analysts agreed that the G.fast has the potential to pump more life into DSL, but also questioned whether it will be a big hit, let alone  a home run, for the telcos as they look for G.fast to turn copper into broadband gold.

But the potential for G.fast, which brings a new, speedy twist to the twisted pair, is indeed sizable, as telcos would certainly be eager to squeeze more speed out of their DSL lines and deliver services that can more closely compete with cable’s widely-deployed DOCSIS platform before having to take the plunge with pricey fiber-to-the-home upgrades.

But tying G.fast to any 1-Gig speed claims is somewhat of a misnomer,  as that represents  the aggregate data capacity (upstream plus downstream) it can achieve. And there’s another key caveat – G.fast, which requires a noise-cancellation technology called vectoring, requires very loop lengths (250 meters or less) for the platform to achieve a sizable data boost.

As would be expected, suppliers and chipmakers are bullish on the prospects of G.fast, even before the standard is fully baked. Most of the heavy lifting on the standards front was complete by last December, giving chipmakers enough confidence to move ahead with product designs, knowing that any small ticket changes can be handled in software.

“We still see a ton of value that we can unlock in the copper plant with advanced DSL technologies.” Jim McKeon, Broadcom’s senior director, product marketing, Broadband Carrier Access, said. Broadcom is a big enough believer in the technology that it has developed and introduced G.fast-based silicon for home-side gateway and network-facing equipment  (please look further below for a snapshot of last week’s G.fast action).  He expects Broadcom’s products to be ready for full production by the first half of 2015.

McKeon said Broadcom’s approach is backwards compatible with VDSL, allowing telcos to perform incremental upgrades. “Introducing G.fast will be a very straightforward exercise,” he said, predicting that there will be significant field trials underway next year alongside some small deployments before rollouts kick into high gear in 2016. “There’s a surprising amount of urgency coming out of the telcos for G.fast.”

And that interest has been global, he said, noting that there are about 400 million lines of DSL installed. “We’re still seeing a lot of potential in wireline broadband. We wouldn’t be investing in it if we didn’t see that,” McKeon said.

G.fast: Big Potential, Big Questions

Analysts who track the broadband access market and are keeping tabs on G.fast aren’t ready to call it a home run.  But they understand the value proposition.

“G.fast is going to have legs, but the question is how long are those legs going to be,” Teresa Mastrangelo, founder of marketing analysis and consulting firm Broadbandtrends, said. “The telcos are excited about the potential for G.fast and the speed that it can provide.”

Jeff Heynen, principal analyst, broadband access and pay TV, at Infonetics, expects to issue his first G.fast forecast early next year, but said the total addressable market for the technology won’t be a straightforward exercise.

 While telcos that are doing vectoring now, such as KPN of the Netherlands, Swisscom, BT, Belgacom, Deutsche Telekom, A1 Telekom Austria,  and even AT&T and CenturyLink Communications, are among the candidates for G.fast, “I don’t think it’s a one-to-one relationship,” he said.

 “Will G.fast be massively adopted? I’m still not sure,” Heynen said.

Both analysts also wonder if some telcos will decide that it makes more financial sense to just pull fiber all the way to the premises once they start looking at the short loop lengths required by G.fast.

Mastrangelo said operators will need loop lengths in the range of 25 meters to 40 meters to get the biggest bang out of G.fast, but notes that the initial trials are using more realistic loop lengths that enable speeds in the vicinity of 100 Megabits per second to 200 Mbps.

And she expects that wide deployments of  G.fast will require some significant network engineering, which could steer telcos toward more surgical deployments in area where they are feeling the most competitive heat, perhaps look at driving deployment on a demand-based preregistration model, such as the one Google Fiber uses for FTTP.

G.fast’s Big Week

Last week’s Broadband World Forum in Amsterdam produced a wave of G.fast activity. Here’s a snapshot:

-Alcatel-Lucent unveiled a G.fast optical network terminal that will launch in the first quarter of 2015 following 12 trials with operators, including A1 Telekom Austria, BT and Orange.

-Adtran said it has G.fast trials underway with unnamed service providers in Europe, North America and Asia Pacific.

-The Broadband Forum announced its G.fast certification program, and identified the University of New Hampshire InterOperability Laboratory as the first testing lab for that effort. UNH-IOL expects to begin initial G.fast product testing in the first half of 2015, and to announce its first wave of certifications next fall.

-Broadcom added G.fast capabilities to its BCM63138 gateway system-on-chip, and a new family of G.fast-facing chipsets for DSL central offices – the BCM65200 DSP and BCM65900 analog front end.

-Sckipio Technologies demonstrated a “commercial” G.fast chipset (the DP3016-EVM DPU) with built-in vectoring connecting at rates of up to 700 Mbps on 16 ports simultaneously.  Sckipio partners Lantiq, VTech, XAVi, and Zinwell were among those that showed off gateways and bridges that used the new silicon.

Technology leadership, perception, and competition are the top drivers for offering Gigabit broadband services, according to a new survey of 88 service operators conducted by research firm Broadbandtrends.

On a scale of 1 (not important) to 5 (very important), technology leadership and perception tallied a 4.55 in the survey, followed by competitive environment (4.40), customer acquisition (4.18), customer retention (4.02), revenue generation (3.98), and operating expenses (3.67).

Broadbandtrends also found that more than half of respondents are currently offering 1-Gig broadband services to businesses and institutions, while 34% are offering them to residential customers.

Cloud-based backup and support for Ultra HD/4K video showed the most promise for emerging Gigabit broadband services, according to the survey, which also found that GPON is the favored technology for residential 1-Gig service, while P2P Gigabit Ethernet is the favored tech for businesses and institutions. Cable operators such as Cox Communications are starting off 1-Gig residential deployments using FTTH technologies, but will look to expand those offerings across their HFC infrastructures using DOCSIS 3.1, when the technology is ready for primetime.

Broadbandtrends said the survey also found that Calix is perceived as the top FTTH vendor, followed by Cisco Systems and Adtran. The survey also features operating ratings (using five criteria) for other FTTH vendors, including Alcatel-Lucent, Dasan, ECI, FiberHome, Genexis, Huawei, Iskratel, Keymile, Packetfront, Zhone and ZTE.

Broadbandtrends said the survey, conducted in September, includes results from all major regions and service provider categories spanning ILECs, CLECs, municipalities, utilities, wireless operator sand overbuilds.