Over-the-top video can be telco TV friend, not killer

Most pay TV provider won't admit that video cord-cutting has affected their business. But, for most, it has ­ or it soon will.

Those consumers mulling cutting the cord typically have an over-the-top video service in mind as the alternative, but that's no reason for pay TV providers to fear content riding over-the-top of their networks. According to The Diffusion Group founding partner Michael Reason, pay TV providers should embrace OTC and find a way to incorporate it into their offerings. Speaking at TDG's pre-conference to the Over-the-Top Video Conference yesterday, Reason explained that pay TV providers might label cord cutting as churn, but they don't like to acknowledge it in any magnitude. And they are justified for the most part, because cord cutting is minor today, Reason said. It is, however, significant that the number of broadband households without any pay TV has doubled since early 2009. According to TDG's latest research, 13% of households do not have any pay TV service, up from only 6.9% in early 2009. TDG's also found that 8.4% of pay TV subscribers are likely to cancel their service altogether at some time in the next six months. From its surveys, TDG's identified four types of consumers ­ replacers, supplementers, OTC optimals and non-OTC consumers. The replacers are those likely to do away with their pay TV service entirely in favor of OTC broadband. Supplementers might keep their pay TV service, but they will augment it with an OTC offering. OTC optimals could do both ­ they are interested in replacing and supplementing their pay TV service with an OTC video service at different price points. Non-OTC consumers aren't interested in either route.