Cable Operators and Telcos: From one-trick ponies to triple-play

Due to the telecommunications infrastructure being the first widely deployed infrastructure, and because people came to realize the advantages of telephone communications, it became a must-have rather than a luxury service. The uniqueness of the telephone infrastructure became an immense problem for the industry later on. The same goes for the cable operators, which had one unique proposition: selling TV channel packages. These so-called legacy system operators had no choice but to upgrade their systems.

When cable infrastructures were first built, subscribers could only get one service: TV channels. There were no additional services available through these cable systems and thus the attractiveness of cable was quite limited. That all changed in the late 1990s when cable operators started upgrading their systems and providing digital services. The cable industry’s major investment efforts to upgrade their analogue infrastructures to digital resulted in the availability of telephone (especially through Voice over Internet Protocol technology) and Internet access services. This meant that the cable operators started to thread the domain of telecommunication companies. Today’s cable infrastructures are upgraded to Hybrid Fiber Coax systems.

In order to compete, a similar upgrade strategy was chosen by the telecommunication companies. Their legacy systems were analogue, and while they were the first communications infrastructure to be extended all the way to homes and offices, the only service available on it was telephony. After having “digitized” their infrastructures and systems, the Telcos were able to offer Internet access; first through dial-up technology, then ISDN, and nowadays through broadband technologies.

Now that the bundle of services, better known as “triple-play”, are available nationwide through both the Cable operators and Telcos, and because the quality of service is almost similar, the competitive edge will be much sharper. There is nothing “unique” that the Cable operators and the Telcos can offer to each others’ subscribers; thus, “stealing” each other’s customers must be done on price: i.e., lower monthly subscription fees.

Despite the Telcos and Cable Operators’ upgrades of their old systems, they cannot keep up with growing demand for bandwidth, the “need for speed”, and improved services. The upgrade from analogue to digital was a necessary step, and allowed the legacy systems operators to squeeze more revenues from their existing infrastructures thanks to technological advances.