NEW YORK -- Time Warner Cable has announced plans to roll out an expansive video-on-demand service in New York that will be the nation's broadest offering of the technology to date.
The move reflects the cable industry's need to expand their services in order to create new sources of revenue, and is a step closer to its ultimate goal of delivering video, data and voice traffic to consumers through a single broadband connection.
Within two weeks, some 250,000 of the company's subscribers in New York will have access to video-on-demand services. By the end of the year, that should expand to all 500,000 digital cable subscribers in that area.
"This rollout is happening quite quickly," said Barbara Kelly, general manager and senior vice president for Time Warner Cable of New York.
With video-on-demand, customers can order movies and other content through the cable set-top-box. Unlike existing pay-per-view services, viewers can stop and start the show at any time, and are also able to rewind, fast-forward or pause the program, just like using a standard VCR.
Along with movies, Time Warner will also offer programming from premium cable channels. Any customer can order movies for a flat fee, while the premium cable shows are available only to viewers who subscribe to those channels and who also pay an additional monthly fee for the on-demand service.
Mike Paxton, senior analyst for In-Stat/MDR, said this will be the country's largest video-on-demand service, once it is completely up and running.
Adding these services is a key element in the cable companies' long-term strategy. Not only does it generate an incremental source of revenue, it is also a factor in retaining some of the customers who have been defecting to satellite TV carriers, said Paxton.
More importantly, it moves the cable vendors closer to offering the so-called triple-play of video, voice and data services.
"The triple-play is very important to the cable operators," said Paxton. "If you can package all three, you will reduce subscriber churn and attract new customers."
And, once a high-speed network has been established, offering new services to existing subscribers requires few additional costs, so almost all the additional revenue goes straight to the bottom line.
Both the cable industry and many telephone carriers are moving toward the triple-play jackpot, but Paxton said the cable operators are closer to their goal.
Patton said approximately 2 million U.S. households receive voice telephone service through a coaxial cable, and that number is double the figure seen in 2001. In contrast, TV programming through high-speed DSL connections offered in trials by telecom vendors in this country is limited.
Time Warner's Kelly said that the company is currently testing telephone service in some of their markets. The cable provider is also developing home-networking products and cable boxes with built-in digital recording features, all of which are aimed at adding new services and new revenues streams to their customer base.
"We have built up our network over the past several years," Kelly said, "and our intent is to maximize that broadband infrastructure."
Lindsay Schroth, an analyst at the Yankee Group, said that wide-scale on-demand services are the next logical step on the path to offering all three services. "Video-on-demand deployments show that the unified network is coming up to speed," she said. "Customers will definitely want the triple-play of services."
She added that cable companies have extensive experience in delivering video content, which is more challenging than voice traffic. As a result, the telephone carriers are lagging behind in the race to offer all three services.
"Cable operators are starting to deliver voice services now, and I think it's really scaring the (phone carriers)," Schroth said. "The cable vendors are in a really good position."
