Sherry McCuller Senior Consultant SMcCuller@Magellan-Advisors.com Web: Magellan-Advisors.com

Sherry McCuller, Senior Consultant Web:        Magellan-Advisors.com

SHOULD COMMUNITIES CUT THE CORD?

Should Communities Cut the Cord? For Communities considering Broadband strategies, What role should video play?

Consumers are cutting the Cable Cord The number of households cutting the cord accelerated in 2016. According to Craig Moffett, industry analyst with MoffettNathanson, the Pay-TV industry lost 1.7 million (1.7%) of its customers in 2016, up from 1.1 million in 2015.

WHO’s CUTTING THE CORD?

Who’s Cutting the Cord? Tech-savvy consumers and Millennials are leading the way. Proliferation of streaming content makes cord-cutting an attractive option

Population Forecast by Generation Millennials (Ages 20 – 36): 75.4 million Born 1981 – 1997 Immigration adding more to group than any other Outnumbered Boomers in 2016 Will peak at 81.1 million in 2036 79.2 million by 2050 Generation X (Ages 37 – 52): 65.8 million in 2018 Born 1965 – 1980 Will outnumber Boomers in 2028 (64.6 to 63.7 million) Will peak at 65.8 million in 2018 Baby Boomers (Ages 53 – 71): 74.9 million Born 1946-1964 Will dwindle to 16.6 million by midcentury

Majority of Millennial men not subscribing to cable More than half had already cut the cord Only one third expect to pay for cable in coming year Not turning to other alternatives for traditional TV content.

Why are Consumers Cutting the Cord? Besides the ever-increasing cost of cable bundles and the 100+ channels they don’t want?

Why are Consumers Cutting the Cord? They don’t need cable.

Why are Consumers Cutting the Cord? The primary reason why Millennials are cutting the cord is because they're getting what they want from over-the-top streaming services like Netflix, Amazon Prime and Hulu. Over half of respondents said they were satisfied with what's available a la carte. OTT Content options are increasing, and they continue to get better. OTT Stream services offer the ability to watch on demand, on multiple devices including mobile devices, easily change devices mid-stream, and use separate profiles for different users

How are the cable companies responding? Cable companies with superior broadband internet offerings should continue to add new customers. Comcast added 1.4 million new internet customers in each of the last two years. Internet customers now outnumber video customers.

How are the cable companies responding? Cable has few options to prevent the rise of OTT streaming content. Offering “Skinny Bundles” of pared down programming at lower cost has helped to retain some customers, but cost is not the driver for Millennials and Tech Savvy Consumers. They want the convenience of On Demand and OTT streaming services over multiple devices. Cable companies now offering On Demand OTT streaming services on multiple devices (often at lower cost than their existing bundles). Dish Network owns SlingTV. DirecTV introduced DirecTV Now.

Putting it All Together The name of the game is Broadband. Improvements in reliability and speed are a prerequisite for a high quality customer experience with OTT streaming content. Content bandwidth requirements will continue to increase. 4K ultra today, what’s coming tomorrow? Infrastructure must be scalable to meet the needs of today and tomorrow. FTTH is the gold standard for speed, reliability and scalability.

Putting it All Together Some new entrants to municipal broadband systems are considering Broadband and VoIP services only. While this strategy can be financially feasible, it leaves out a (still) considerable share of the consumer market who want Triple-Play with video and would turn to a competitor, if one exists, to obtain it.

Putting it All Together Municipalities and cooperatives planning FTTH deployments should carefully consider advisability of investing in a video head-end. Transport and co-location at a remote provider’s video head-end can save upfront investment, decrease operating cost, and reduce risk from exposure to accelerating cord-cutting. Magellan has identified and structured strategic partnerships of this type, including transport arrangements upstream.

Putting it All Together Magellan helps its clients to develop and implement broadband infrastructure and service provisioning plans that leverage opportunities to increase revenues while lowering costs and minimizing risk.

Many thanks to SEATOA for providing opportunities for municipalities and their advisors to share experiences and learn!

Sherry McCuller, Senior Consultant Mobile:   828-284-3315 Web:        Magellan-Advisors.com