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.

In today’s data-driven world, hardly a day goes by without new predictions of dramatic increases in streaming video consumption and Internet of Things device proliferation. Whether it’s eMarketer’s prediction of 2.38 billion viewers of video streams or Gartner’s forecast of more than 20 billion IoT devices by 2020, it is clear that a sea change is occurring that will have significant impact on the cable telecommunications networks that deliver the majority of broadband services.

To manage the increased strain on their networks, cable-system operators require granular visibility into subscriber usage that can help them understand the location and cause of broadband bottlenecks. But while tools that identify areas of congestion and high-bandwidth users can proactively solve operational issues, operators are finding that they can also be utilized to generate business results by helping operators reduce expenses and create incremental revenue opportunities.

‘Power Users’ on the Rise
OpenVault data analysis shows that year-over-year usage was up 31.3% in second-quarter 2018 and that the number of “power users” — those using more than 1 Terabyte of data per month — doubled during the same span. As traffic and individual usage increase, the results can be slowdowns in network speeds and an increase in the number of users who are bumping up against the limits of their contracted plans.

Ultimately, this can cause customer complaints that unnecessarily consume operator resources, including call center personnel and even truck rolls, and can lead in the long term to dissatisfied customers defecting to other broadband providers.

When operators gain greater visibility into broadband usage, they proactively are able not only to manage the traffic concerns, but they also have an opportunity to implement business strategies that can modify customer behavior, including a reduction of usage or alignment of customers’ broadband plans with actual consumption. For example, operators could implement usage-based broadband policies or could target high-bandwidth consumers as candidates for upgrades to levels that would deliver satisfactory performance.

Two datasets released this year showed that consumption by non-usage-based broadband households is 12.2% higher than those with usage-based broadband packages, and that non-usage-based broadband households consume 15% more upstream bandwidth than usage-based broadband customers. Thus, the implementation of usage based broadband pricing with data consumption limits can improve overall customer experiences by reducing network congestion, while also opening the door to additional revenue.

On an individual level, operators can leverage visibility into specific user behavior to create incremental revenue opportunities, including not only usage-based billing but also analytics-driven alignment of customer usage with the appropriate broadband package and zero-rating policies. It has been proven that companies that use highly accurate and broad sets of data to replace blind sales calls with intelligent leads are able to identify prime upgrade candidates and drive incremental broadband ARPU by $2 to $3 per household based on a subscriber upgrade rate of 15-20%.

Zero-Rating as Differentiator
Under increasing consideration as well by operators as both operational and business tools are “zero-rating” policies that exempt some OTT video services from monthly usage-based data policies. Zero-rating-specific streaming services can help operators differentiate their services beyond just pricing and speed tiers, especially as wireless providers develop and launch 5G services. The likelihood of broad adoption of this practice has increased as a potential differentiator in the market, resulting in faster subscriber growth and improved retention.

Ultimately, in this fiercely competitive marketplace where data is growing at exponential rates, operators must look for new ways to
meet demand, retain subscribers, differentiate their services and drive profit. For the pioneers who embracing comprehensive approaches to data analytics, the ability to adjust broadband service delivery to meet changing market needs is enabling them not only to deliver high quality service, but also to ensure customer satisfaction and bottom-line success. )

Mark Trudeau is founder and CEO of OpenVault.