|
In the next year or so, cable modem vendors may indeed see a drop in the number of orders from MSOs similar to what they saw at the end of 2000. But it may not be entirely a sign of bad economic times--rather, it may have to do with the fact the word "retail" is creeping into the cable modem distribution plan for more cable operators.
While most think cablers will not abandon their modem supply business, operators and vendors are increasingly looking to the "r" word to drive new subscriptions.
The largest cable modem service, Excite@Home, has started up retail deployment along with electronics retailer RadioShack in the Comcast Cable Communications territory. Begun in late 2000, the promotion included not only the modem but also an optional $29.95 home installation kit.
For Excite@Home general manager Steve Brookstein, the retail play is part of the evolution of cable modem service. Although it now relies primarily on its cable operators to supply the modem, he sees the landscape changing. "It's still a minority for now," Brookstein acknowledges. "Most of it is coming through the traditional channels through the cable call centers. But that will shift over time and I really wouldn't want to speculate, but it's clearly in its infancy--it's just going to get more pronounced."
While there are no sales figures available, the service has seen a healthy pickup rate, says Scott Sternberg, Excite@ Home's director of development. "We've seen nothing but success in fourth-quarter sales," he says. "What we are looking at is moving toward self-installation and putting the process into the hands of the customer."
In fact, the promotion was successful enough that Excite@Home is now talking to its other cable partners about extending it into their territories. That could be an important boost for the service, which recently had to scale back its projected subscriber growth for 2001.
"We are looking at it as an opportunity for growth in the channel," Sternberg says. As to the reaction among member cablers, "I see them understanding retail can drive their business."
Excite@Home MSO AT&T Broadband, meanwhile, is expanding its retail deals this year. It already has a deal with big-box electronics retailer Circuit City to distribute modems and promote service in 90 stores nationwide, and this fall began selling cable modems at fellow appliance giant Best Buy in Dallas, Denver and the San Francisco Bay area.
Theresa Casey, Excite@Home's national director for retail, e-tail and OEM channel sales, says retail is not a replacement for in-house cable modem distribution but rather an extension. A certain number of customers will prefer to get their modems through the MSO, but with a proven retail track record for Internet products there is good reason to believe cable modems can prosper there, too.
"We feel it is important that where the customers are, that's where we want to be," Casey says. "We just feel to efficiently distribute our product we have to be every place our customers are."
AT&T Broadband has forged a new deal with a slightly different twist with computer distributor Gateway and will be offered in Gateway Country stores in Denver, Dallas, the San Francisco Bay area, Salt Lake City, Seattle and Portland. The promotion gives customers who buy a computer and sign up for high-speed service a free cable modem and free installation. That particular promotion will not include a self-installation kit, Casey notes.
On the modem supply side, Motorola's Broadband Communications Sector is aware of the growing retail trend, according to John Burke, vice president and general manager for Motorola's cable modem business. But even as the cable modem sector crawls out of a trough in late 2000 MSO orders, the retail play has not had a major impact--yet.
"Every MSO has a plan in place to support retail cable modem sales," says. "But I wouldn't characterize it as the reason for the drop in cable modem shipments in the fourth quarter."
But don't start looking for empty cable equipment warehouses just yet. Even if retail deals do proliferate among MSOs, Burke doesn't think they will abandon direct distribution. "I still think you will see a scenario where the modems will be deployed directly through the MSO," he says. "MSOs are in an aggressive growth mode right now and their object is to get as many high-speed cable modem customers as quickly as they can. They have a very well-oiled machine for that."
"The whole pie is getting much bigger through the year and the elements of each piece of that pie are getting bigger," he adds. "In the latter half of the year and extending into 2002 expect to see the retail piece of that pie grow at a very respectable rate."
With this growth in mind, Motorola has brought over John Pierce from its retail wireless phone and pager operations to become vice president of retail distribution of the Broadband Communications Sector. He says he saw a strong sign of the retail modem future at the International Consumer Electronic Show.
"Certainly we can say we have had a flurry of activity," he says. "At the recent CES show back in January we were really taken aback by how many retailers came to our booth. We had a considerable amount of activity-it was kind of the hit of the booth. They all see it as a place consumers will start seeking out as place to find this product."
One thing buoying the retail cable modem play is the groundwork laid in cellular phones, which also require the hardware and the service to be sold simultaneously.
"I think you are going to see even more explosive growth in this case because a lot of the precedents have been set by the cellular telephone distribution model," he notes. "There are a lot of hard trails in place from cellular that are going to boost cable modem sales."
Already, Motorola has its Surfboard series cable modems on shelves at Cablevision-owned The Wiz outlets in New York and other retail outlets through its MSO customers.
And it won't be just a big box play. Cablevision is unique in that it distributes cable modems directly through The Wiz, but it isn't alone. Cox Communications Inc. added product sales and demonstration areas to four of its service and payment centers last year, and plans are to increase that number to 20 this year. The centers give customers a chance to see cable modem and digital offerings operating first-hand and buy on the spot.
Beth Denning, director of Cox's sales and distribution, says the idea arose from the customers, who indicated in surveys during the past two years that they wanted to buy their modems and service in a retail, demonstration-oriented environment. Adding displays to the existing payment centers made the most sense, she says.
"It's been a great learning process just to see how many customers who have been coming in for services such as paying a bill or ordering service will also come in and buy," Denning says.
That uptake rate has been healthy-the retail operations at the payment centers have generated sales-much of it centered on high-speed data offerings-130 percent of original estimates for 2000.
Cox also has retail agreements with Circuit City and Comp USA, and it is planning to take up the Excite@Home promotion with RadioShack. Talks are also under way with Best Buy, Denning says.
All in all, Motorola's Pierce believes retail sales for modems are going to "grow exponentially in the next year."
"People in the industry are identifying what a tremendous opportunity it is to be able to drive subscribers through retail," Pierce says. "Now we see more and more people are starting to look at that business model."
|
