Cablevision to Offer 101 Mbps Downstream Broadband for $99.95 a Month

| Apr 29, 2009 | Digital Home - U.S. | Competitive Intelligence Report

| Analyst: Larry Hettick

Current Perspective: Positive
Vendor Importance: High
Market Impact: Moderate

Event Summary

April 29, 2009 -- Cablevision announced the upcoming launch of Optimum Online Ultra, a new high-speed Internet product that will deliver the nation's fastest downstream broadband connections of up to 101 Mbps. The service, which delivers upstream speeds of up to 15 Mbps, will be offered across the company's entire service area beginning on May 11, 2009. Cablevision also announced that it was doubling the downstream speed of its Optimum WiFi wireless Internet service to up to 3.0 Mbps.

Analytical Summary

• Current Perspective: Positive on Cablevision offering the nation’s fastest consumer broadband service, because at 101 Mbps, the service provides download speeds twice as fast as Verizon’s FiOS service and the $99.95 a month price tag is $40 less than the standard FiOS price of $139.95 for the FiOS 50 Mbps tier.

• Vendor Importance: High to Cablevision, because by its Q4 2008 estimates, it faced telco competition in approximately 1.5 million of its 4.7 million home homes passed, with Verizon competition intensifying in the New York metro area as Verizon ramps up its FiOS build-out. Before FiOS, Cablevision had the fastest Internet speeds in the New York metro, a claim it can once again make until Verizon matches or beats the competitive offer.

• Market Impact: Moderate on the digital home services market nationwide, because Cablevision’s footprint is limited to the New York metro area. In addition, few consumers really need a 101 Mbps Internet connection; Cablevision’s 30 Mbps tier or Verizon’s 50 Mbps FiOS download speeds will more than suffice for most consumers. However, the new service offers the fastest consumer broadband speed at less per megabit than any other cable or telco service, so the offer may spark a new “speed war” between other MSOs and Verizon simply for the boasting rights.

Recommended Competitor Actions

• AT&T also needs to commit to a fiber-to-the-premises (FTTP) architecture across a majority of its footprint if it intends to compete with MSOs on Internet connectivity speeds beyond the 18 Mbps downstream available with its VDSL architecture.

• ADSL providers such as AT&T, Verizon, and Qwest should stress that they have cut their rates to as low as $10 to $25 a month for budget-conscious consumers. With a 6-7 Mbps service already widely deployed, ADSL providers should also point out that most users will not see a substantial speed difference for common applications such as Web surfing, chat, and e-mail — and that the speed difference for bandwidth-hungry users comes with nearly a $90 premium.

• AT&T and Verizon should point out that, so far, they do not impose a usage cap, a potential competitive advantage over cable providers. Moreover, major telcos should capitalize on their business data experience, network infrastructure, and OSS/BSS advantages as they consider a CoS/QoS-based consumer Internet service.

Recommended End User / Customer Actions

• Broadband customers should avoid buying the fastest speed just for the sake of having the fastest speed; rather, users should evaluate how they would benefit from ultra fast speeds. While a faster high-definition movie download is clearly possible with a 101 Mbps connection compared to a 1.5 Mbps downstream connection, most consumers do not consistently need such high speeds and the price premium may not be worthwhile for the occasional demand in bandwidth.

• High-speed Internet users comparing Optimum Online Ultra to Verizon FiOS should also look at the upstream speeds they need. Some residential users that have a home office and send out large files might prefer FiOS over Optimum Online Ultra, because it offers upstream speeds (20 Mbps) that are faster. In addition, FiOS offers a 20 Mbps symmetrical service for $64.95 a month.

• As Cablevision launches the new Optimum Online Ultra in areas where FiOS is also available, customers should be prepared to negotiate with both Cablevision and FiOS for the best possible value based on their bandwidth requirements, especially when it comes to bundle discounts that include the higher speed tiers.

• All consumers should look at the value of their entire triple play bundle and decide if an a la carte menu is preferable given their unique requirements for voice, video, and data. In some cases, it may be sensible to buy a broadband connection from a different provider, as opposed to buying a fully bundled offer; in other cases, that value of the entire bundle may outweigh a faster Internet connection speed.

CLIENTS ONLY

Current Perspective

Competitive Positives and Concerns

Recommended Vendor Actions

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