A new Strategis Group report predicts that digital cable will overtake analog usage by the year 2006, eventually competing with satellite services.

by Roy Mark of www.internetnews.com [May 21, 2001]

Forecasting a 32 percent growth rate in digital cable subscriptions over the next six years, a new Strategis Group report predicts digital cable will almost overtake analog usage by 2006. The company says digital cable subscriptions are expected to grow from just over 9 million at the end of 2000 to almost 50 million by 2006.

By 2006, the report states, digital penetration will reach 49 percent of the total video market, but more impressive according to The Strategis Group is the climb from current levels. Driven by carrier upgrades, 14 percent of current basic cable subscribers have converted to digital.

Going forward, wider availability and new value-added services such as Video on Demand (VOD) are expected to drive analog subscribers to upgrade to digital and to lure digital broadcast satellite (DBS) subscribers to the service.

"Overall, the digital platform has the ability to offer better services," said Charles Dorrier, analyst and co-author of the report. "As the value proposition to consumers increases with the addition of new services, the transition to digital will be rapid and inevitable."

The use of digital signals by the cable operators increases channel capacity and provides the bandwidth necessary to compete with the satellite providers. Multiple service operators (MSOs) can now offer many more channels, as well as advanced services such as VOD, t-commerce, walled gardens, and personal video recorders (PVRs).

Yet, despite the clear benefits of digital, the remaining question is how operators will push the new service to the household. Some are using a "more is better" approach, while others campaign on the availability of the advanced, future services. A potential obstacle for digital—persuading the customer to convert—may in fact prove to be challenging.

"We believe that consumers are ready for this service," said Keith Kennebeck, another analyst at The Strategis Group. "Now that operators have progressed with network upgrades, they must focus on the message being sent to subscribers. There must be a clear reason to upgrade to digital, and subscribers must be convinced that the new service is valuable."

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