Cable television in the UK is having a tough time of it. Whereas US operators can expect to enjoy penetration rates of around 60%, the UK figure appears to have stalled at closer to 20%. The lack of take-up has dismayed some US operators who came to the UK expecting better. Nynex Corp’s 67%-owned UK Nynex CableComms Group Plc, as reported, is slashing about 310 jobs, nearly 10%, from its payroll. The cut is part of a restructuring that will see it centralizing its sales, customer service and other operations. A new telephone-based sales operation will largely replace its present door-to-door sales force. Direct savings from the staff reductions across all the divisions affected will total some #7m to #10m a year, the firm estimates. Spokesman Alan Saunders denied that he restructuring marked any deep malaise in the UK cable market, and says that the cuts are merely the result of an efficiency review run by management consultants Cooper & Lybrand.
Internet access
However he admits that we are disappointed with Cable television, but delighted with telephony and we don’t think we’ve done a very good job at educating the public about cable television. Only 18.9% of customers in its franchises areas had decided to buy cable television. To that end the UK Cable Communication Association is preparing a #12m advertising campaign will attempt to spread the word. Unfortunately, there are indications that poor programming, rather than lack of awareness is stymieing efforts to increase penetration. Nynex’s own figures show annualized churn of its television customers running at 30% – that means that nearly a third of those who sign up for the service have dropped out a year later. By comparison, churn for Nynex’s telephone customers is running at only 16% – and penetration is higher anyway. Though Saunders says that the company remains fully committed to building its residential customer base, Simon Norris, consultant with Cambridge-based Analysys Ltd says he expects a number of UK cable companies to refocus their efforts towards business customers. Its inevitable, he says: the cable industry has been struggling for a long time with churn rates… in terms of return on investment it has performed very badly. As for why the take-up has been so bad, Norris places the blame squarely on poor content. Though he believes that this will improve, this may be counterbalanced by future threats such as the advent of digital satellite broadcasting. As a result, he believes that residential cable television use in the UK will only grow very slowly. John Matthews, principle consultant with London-based Ovum Ltd, concurs – but warns that the cable company’s regional nature may mitigate their ability to capture business from international or nationwide organizations. what they need is the large local businesses such as police, local authorities and the utilities. Its not necessarily all gloom and doom for the residential sector however: not only is the telephony side doing very well, but there is the as-yet untested growth that may come from Internet access. When it comes to television however, the opinion from analysts appears consistent – the market needs better programs before it will take off.
