Mobile services will drive broadband cord-cutting

mobile services
Cable companies are looking for ways to grapple with the broadband-cutting threats posed by mobile services

US pay-TV operators like Charter and Comcast are making big pushes into the wireless space. They’re rolling out mobile services in an effort to make their offerings stickier as they struggle to fight the emerging trend of consumers cutting not just their pay-TV cord, but also their wired connection to the Internet.

It’s part of the industry’s transition from primarily providing pay TV to providing connectivity in multiple forms.

Earlier this year, during earnings calls, both Charter and Comcast made it clear they were focusing on businesses that had higher profit margins than pay TV. Comcast, for example, said it already had made a successful “transition to a connectivity centric model.” Charter, too, made it clear video was simply a lever to “drive our core business, which is connectivity.”

It’s not just cable operators looking to mobile services.

While Charter, Comcast and Altice USA (which acquired Cablevision) all were expected to make offers for T-Mobile and Sprint mobile assets that needed to be spun off to facilitate the Department of Justice’s approval of a merger between T-Mobile and Sprint, it appears Dish Network, perhaps with help from Google, is now the frontrunner, giving the satellite another form of delivery as well.

Consumers force change

The changing consumer appetite for how and where content is consumed has, obviously, roiled the pay-TV waters. It’s forced operators’ hands in the migration to “connectivity companies” as they’ve looked to alterative delivery methods to replace revenues lost to cord cutting.

For example, while operators last year saw more than 3.52 million subscribers leave pay-TV, an increase from the 3.11 million who cancelled in 2017, and Q1 2019 losses topped 1.32 million, broadband subscriptions have grown, especially for cable operators. In 2018, cable saw broadband subscriptions climb 6%, with Comcast and Charter each adding more than 1 million subs. The top cable operators added more than 2.4 million broadband subscribers in 2018 for a 65% marketshare of wired broadband connection in 2018.

But, some reports say the wired broadband market, with more than 98 million subscribers in the US, may be approaching saturation. And, just like with pay-TV, subscribers churn may accelerate as users look for the best deals in a market. Increasingly, those deals may come from mobile services, especially as next-gen technology like 5G begins to roll out and 4G becomes “basic” service over the next couple of years.

That change already is happening.

Using smartphones to access Internet

A study from the Pew Research Center found that 37% of Americans say they go online primarily using a smartphone, nearly double the number in 2013. Not surprisingly, the share is significantly higher among younger adults, with 58% of 18-29-year-olds saying they primarily use a mobile service to access the Internet. But even the number of older users (30-49) has nearly doubled to 47% from 24%, with growth accelerating even faster among 50-64-year-olds (to 27% from 6%) and users 65+ (15% from 2%).

While wired broadband remains a mainstay for most Americans connected to the Internet, more than one-quarter (27%) of adults say they don’t subscribe. Nearly half of those non-subscribers (45%) say they use mobile services instead, up from 27% in 2015.

Pew also found that while 73% of Americans have a home broadband connection, 81% have a smartphone. Some 96% of Americans aged 18-29 own a smartphone, as well as 92% of those 30-49.

Mobile services impact broadband take

Recent research from Parks Associates posits that the mobile services arms race among providers will accelerate in coming months as 5G mobile adoption and 10G fixed broadband service spreads.

The researcher found broadband households that consumed more than six hours of video a week on smartphones were “highly likely” to cut the broadband cord in the following 12 months. It said average mobile viewing among all broadband HH s was just 2.5 hours a week.

About 10% of all broadband HHs are likely broadband cord-cutters, Parks said in its study, Examining Broadband Cord Cutters, with half being “highly likely.”

fixed broadband providers that do not offer mobile services are particularly susceptible to cord-cutting among their current subscribers.

“But these subscribers are aware of the other options available to them and could become actual cord-cutters if their current service does not continually meet their needs.”

“Potential broadband cord-cutters rely on their mobile devices for entertainment,” said Brett Sappington, senior research director at Parks. “They are significantly more likely to watch live video content via mobile, including live TV broadcasts and livestreaming.”

Smartphones at center stage

Looking to the future – the near future – it’s obvious that smartphones will play an ever-growing role.

As Pew found, 81% of Americans own a smartphone. Among 18-29-year-olds, that number is 96%, among those 30-49 it’s 92%, smartphone ownership among those 50-64 is 79% and even among those ages 65-74, ownership is a whopping 59%.

One more number that’s often overlooked: while 92% of adults with HH earnings of $75,000 or more say they have home broadband (95% have smartphones), that number falls to 56% among HH earning less than $30,000 a year. Smartphone ownership in that demo? Almost three-quarters, 71%.

The bottom line

Americans, especially younger ones, increasingly are turning to smartphones for all of their digital engagements, especially as unlimited data plans become the norm. That’s prompting more consumers to question why – and whether – they need two sources to access the Internet. As 5G ramps up in the next couple of years, that’s a question that will be asked more often.

Video, of course, is a key consideration.

For regional broadcasters, sports leagues and content creators, distributing content direct-to-consumers is table stakes. You need to make mobile services a pillar of your business strategy, not just pander to it. If you’re not focusing on mobile, you should be.

Stay tuned.

Jim O’Neill is Principal Analyst at Brightcove. You can follow him on Twitter @JimONeillMedia and on LinkedIn