Report: Declining CPE costs, DOCSIS 3.1 upgrade will reduce pay-TV capex costs

The migration to DOCSIS 3.1 coupled with the growing use of smart TVs and over-the-top streaming devices such as Roku and Apple TV will result in a decline in pay-TV capital expenditure costs, according to a research report from MoffettNathanson.

Although set-top boxes will stick around for the foreseeable future, Craig Moffett of MoffettNathanson said that he does expect lower customer premises equipment costs because customers will consume more and more video over their own Apple TV and Roku boxes or connect their cable directly to their smart TVs, Moffett wrote in a research report, according to Investor's Business Daily.

In addition, Moffett noted that pay-TV providers are in the midst of transitioning to DOCSIS 3.1, which will further reduce their costs. Comcast (NASDAQ: CMCSA) has told FierceCable that the company is testing the technology now and plans to upgrade its entire cable network footprint with DOCSIS 3.1 technology within the next two years.  

"We're testing it this year," Robert Howald, Comcast's VP of network architecture, told FierceCable earlier this year. "Our intent is to scale it through our footprint through 2016."

In addition, Moffett forecast that Comcast alone will see its CPE spending drop from $3.7 billion in 2015 to about $1.6 billion by 2019. Besides lower equipment costs, Moffett also expects pay-TV providers like Comcast will save money from fewer truck rolls to households.

Likewise Charter (NASDAQ: CHTR), which is in the midst of acquiring Time Warner Cable (NYSE: TWC) and  Bright House Networks, could see its CPE costs decline from $2.97 billion in 2015 to $917 million by 2019, Moffett said.

However, fewer set-top boxes will also result in lower STB rental fees. According to one report cited by Investor's Business Daily, customers spend around $89.16 annually renting a single set-top box. Homes with multiple set-top boxes spend about $231.82 per year.

Moffett's analysis echoes what some cable executives have been predicting. Last month, Tom Robey, senior VP of investor relations for Time Warner Cable, told investors that while the transition away from leased set-top boxes will likely take years, the pay-TV industry is migrating to a "bring your own device" model.

Robey's comments mirror those of TWC Chairman and CEO Rob Marcus, who has said trials of a new streaming pay-TV service being conducted by the MSO in New York -- which currently uses TV Everywhere services and Roku devices -- are primarily aimed at dispensing of CPE costs. 

For more:
- see this Investor's Business Daily article

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