When Silicon Valley met cable 30 years ago, did they know it would change the pay TV industry forever? When Hybrid Networks introduced the first cable modem — sending upstream data using the dial-up phone lines all of us had back then — was it clear that the aftershocks would continue for decades?

Thirty years after Hybrid’s innovation, faster and more robust broadband service has completely altered cable business models. A parade of new streaming services is competing for eyeballs that once were dependent on cable bundles for video entertainment, total U.S. pay TV subscribers have plunged by 17% in the past six years alone and MoffettNathanson has said another 40% are at risk to cut the cord over the next five years.

While operators such as Comcast and Charter Communications have introduced video streaming packages that shift emphasis from traditional pay TV to streaming packages, others are going even further. “Broadband first” strategies pioneered by operators such as Sparklight, the former Cable One — which has grown broadband-only subscribers to 70% of its customer base and fueled record average revenue per user (ARPU) and margins — are the new templates for 2020 and beyond.

An Ambitious Shift

Rather than try to retain video subscribers, operators increasingly are choosing to tackle the business and operational impacts of cord-cutting head on. Cable One’s success with its Sparklight rebranding shows what can happen when engineering, marketing, customer care and other functional areas are pivoted from video to focus wholeheartedly on the new broadband reality.

Here’s why this matters: For small to midsize operators that lack the diversified revenue streams of their larger brethren, the impact of cord-cutting can be particularly harsh. The loss of monthly recurring income from set-top box rentals and video packages is amplified by the increased strain on resources that video streaming creates. The OpenVault Broadband Industry Report (OVBI) has noted that cord-cutters’ broadband consumption is now beyond 500 Gigabytes per month.

For operators taking the plunge, it’s important to remember just how ambitious a transformation broadband first is. Operators need to create business models that address revenue concerns, create marketing packages that manage subscriber expectations, arm customer care to support subscribers’ issues — and, most of all, ensure that their networks are up to the task at hand. Among the considerations:

• Engineering: When operators weigh broadband-first strategies, there are multiple variables that need to be considered: As both average usage and the number of broadband subscribers grows, the draw on network resources is exponential. Networks need to be able to support multiple streams per household, 4K video and — in the not-too-distant future — 8K. And while average usage can be a useful guideline, what matters most is the network’s ability to support consumption that primarily takes place during a few peak hours. Ensuring that the network can deliver a satisfactory experience to all subscribers at all times is paramount.

• Marketing: Subscribers who proactively cut the cord have historically recognized that they are sacrificing the quality and reliability of operators’ managed video networks. As an operator offering, there is an implication that broadband first will carry higher subscriber quality of experience expectations. In addition to ensuring that their networks are capable of supporting significantly higher usage, operators need to gear marketing efforts toward educating consumers on the difference between broadband first and traditional video, as well as the importance of subscribers aligning their packages to provide the bandwidth necessary to support quality video. If infrastructure quality is uneven, marketers also should be careful to offer and promote broadband-first only where it can be supported by the network.

• Customer Care: In a broadband-first environment, customer care takes on heightened levels of importance. First, support teams are the primary points of contact when subscribers discontinue video packages and are best positioned to help customers understand the relationship between broadband speeds and video streaming quality – particularly in high-use households. It’s incumbent on operators to make sure they capitalize on that moment of contact to right-size customers; shifts to usage-based billing plans are proven to reduce consumption and can increase ARPU by more than 14% within the first year of deployment. Second, because unmanaged video delivery to connected devices, often through the in-home WiFi network, creates more opportunity for quality issues, support teams need to be ready to support higher volumes of and more complex problems.

Visibility into network conditions, customer packages and behavior, and wired and wireless device topologies within the home all are essential to helping teams resolve problems quickly, efficiently and accurately, preventing unnecessary truck rolls and increasing subscriber satisfaction.

More Speed, More Usage

In the same way that it was hard to envision 30 years ago the change the cable modem would effect, so too is it impossible to see where the industry is headed in the decades ahead. What we do know is that every increase in speed — we’re talking about you, 10G — is accompanied by a corresponding, predictable increase in consumption. And that as change continues to disrupt cable paradigms in this pivotal year, more and more operators will be positioning themselves for the future by following Cable One and numerous other providers into the “Broadband First” club.

ZoneTV, a company focused on bringing “digital first” programming to homes through pay TV partners, said it has closed a $4.1 million “seed” round led by Best  Funds.

ZoneTV, formerly known as ES3, recently hired former AT&T exec Jeff Weber as, CEO.

The company initially focused on the TV apps market and is now looking to connect with millennial audiences by blending traditional pay TV and OTT service to drive new advertising and subscription revenue-sharing opportunities. Its partners include AT&T, Telefonica, MTS, Hawaiian Telecom, Telus, Frontier Communications, Bell, and CenturyLink.

“ZoneTV is quietly growing into a dominant player in their field,” said Alan Chettiar, VP of investments at Best Funds, said in a statement. “We believe they are poised to become the essential partner for cable companies looking to lead in the changing entertainment content delivery landscape.  We have followed them for a number of years and we are excited to take this next step with Jeff and the team.” 

“This investment by Best Funds positions us for a strong finish to 2015,” Weber added. “Our future is exciting as we are leaders in this new category of bringing digital content to Pay TV, have a strong management team in place with a proven track record, a new office location in Silicon Beach to sharpen our focus on digital media, and a strong history of working effectively with leading Pay TV operators to reach millions of homes.”

WCM Capital acted as corporate finance advisor to ZoneTV and arranged the financing with Best.

It really is a technical marvel. In mere seconds, electromagnetic radiation zaps all the moisture out of last night’s leftovers, making what was the remnants of a memorable dining experience at least somewhat edible. Beyond my only means of what some would call cooking, the microwave has become a microcosm for how we as citizens of the Internet approach the world – in short bursts of time.

Video in its long form — movie content, serialized television dramas and half-hour network comedies — have become the bedrock of attracting the digital consumer who wants to catch up on their favorite entertainment on any number of devices, and often, when away from home.

Within the video market, the revolutionary opportunity is to find an innovative way to monetize short-form video content. Ask any 18-year-old – they don’t watch serialized TV, they watch short-form video on YouTube or Vimeo created by personalities to which they subscribe. The ability to partner and/or bring this content into a digital service provider (DSP) ecosystem, along with packaging this short-form content with higher margin offerings, may be the next big shift in content consumption.

Just like the amenities provided by digital service providers has evolved (HD, DVR, TV Everywhere), so too has what the consumer views as “television.”  Gone are the days of warming ourselves by the glow of the living room TV — today’s digital content consumer is just as likely to be sitting in that same living room bingeing their favorite series, or scrolling through their Vine feed watching original content from creators they determine.

Should digital service providers see the popularity of short-form content as a threat? Debatable. Should those same DSPs see this collection of long and short-form video content and avid consumption as an opportunity? Absolutely. The tales of the demise of the cord (cord-cutting) have been greatly exaggerated. Consumers still  and, if done properly, will always look to their digital service provider based on the trust engendered within that relationship. What has changed however is what those consumers expect to find when looking. It is not television or Internet service they seek in a vacuum – it is content, regardless of delivery mechanism, or its length.

So how do digital service providers capitalize on this microwave content consumption society without drifting from their core business? Easy – give them exactly what they want, content.

Droves of digital service providers already empower an on-demand view across devices for consumers. Start there. Those pure-play, other-the-top providers like Netflix and Hulu -- they are not the enemy (contrary to popular belief); they can be a strategic path to revenue.

We see examples across geographies and service tiers of DSPs bringing these content providers (and creators in many instances) into their ecosystem, and that is the key – in their ecosystem. Consumers interact with these services regardless; why not keep them within one singular ecosystem?

This strategy provides consumers that content they crave, all the while building stickiness with the digital service provider brand. What about content from non-traditional means like YouTube, Vine, and Vimeo? Where do the pipes that provide this new source of content come from? That is right, the digital service provider.

For DSPs, the ever shrinking attention span and evolving consumption habits of this new generation of consumers are not an obstacle, they are a gift. The long-term winners of monetizing short-form video will be those who make it easy for consumers to find the content they want, make it viewable on any device, anywhere, and allow for it to be paid for in the manner the customer wants.

In short, many of the necessary tools to monetize this microwave generation reside right there in the tool belt of the DSP. Building a successful short-form strategy starts with key pieces of what already works for long-form – offer compelling content that’s easy to browse, buy and consume. 

Brice Clinton is a Senior Engineer for CSG International and an adjunct professor at Northwestern University