Signal Distribution Group New Business Plan Abstract
Abstract (More Details Are Available In The Executive Summary)
The Signal Distribution Business Group has used existing relationships and developed new ones aimed at exploiting newly identified products and markets to pursue new business opportunities, supported by a new business model that falls under this group¡¯s charter of signal distribution. This will be aimed at developing opportunities for the new business group in general and specifically the Signal Distribution/Off-Air Antenna Business Group (SDG) to earn significant potential profit from new markets and new products for those markets with existing and soon to be developed applicable technologies.
Currently, there¡¯s a very strong accessory market demand. Consistent with trends pointing to overall CE industry growth, total retail accessories sales should reach more than $11 billion this year. Among US consumers, there is increasing demand for a growing number of technologies, especially including broadband Internet access, particularly for the ¡°Connected Home¡±, which is no longer considered just a luxury purchase.
The Revolution:
At present, we are witnessing a Technical home Communications/Entertainment revolution.? Voice and data have already started to converge, and now other entertainment services are beginning to join up. The opportunity that has now presented itself is to develop and bundle more applications to help consumers take advantage of networks in other ways. Research shows that there is a demand for and therefore, growth in the market for bundled services. And Networked entertainment is going to be the next big wave. This convergence is essential to mass-market success.? And Networked or IP (Internet protocol) enabled Consumer Electronics are expanding dramatically to include most consumer electronics products.
Networked Entertainment:
The wired, interconnected home with networked appliances and home entertainment promises to be the next wave in consumer electronics. Technologies, market drivers, and trends for products segments in the smart home can be divided into two categories - Home Networked Computer as the major network-capable CE platform for unifying Home Media Content and Home Control and Monitoring. Home networking and other technologies have reached an appropriate level of maturity so that both PC and CE vendors can now fully address connectivity for a myriad of devices in the home. And the race among Pay-TV, Consumer Electronics and PCs favors PCs.
A growing number of companies are offering solutions today that are likely to revolutionize the way in which consumers interact with computers, control various home systems, utilize entertainment components, and enjoy enhanced comfort features. Soon more consumers will be able to take advantage of advanced new services thanks to the Technology hidden behind the walls of their home.
The battles for the living room may boil down to telephone companies (telcos) vs. the cable companies, but don¡¯t expect either to win the consumers' hearts. Telcos are uniquely ill-suited to attack cable's Achilles' heel: lousy Service. No one pulls you aside at a cocktail party to say how much they love their cable or phone company. This fight is to see who is least despised. Battle lines for the broadband home have been drawn. The cable giants and telcos are going after the hearts and minds of consumers with cash back offers, free modems and introductory pricing in an effort to get their foot in the door. And, with an estimated 33 million cable modem and DSL residential subscribers combined in the United States according to the latest high-speed access data from MBC/CENTRISPlus, and new consumers making the high-speed switch every day, the battle is far from over.
Home networking revenue derived directly from home networking hardware and the incremental value of networking connectivity on entertainment equipment will grow from $6.2 million in 2004 to $8.5 million by 2008. The total value of equipment that incorporates a home networking connection will jump from $8.3 billion in 2004 to $17.1 billion by 2008.
PC-TV
Digital TV is coming home on PC-TV Tuners and set top boxes.? The big trend going forward will be the emergence of PC-TV Tuners enabling PCs to capture, store, manage and distribute a wide range of ¡°content¡± and DTT (Digital Terrestrial TV) Set Top Boxes with built in Personal Video Recorder (PVR) functionality, because it brings convenience to end users who need to navigate their ever-expanding programming choices. Research says the Digital PC-TV market will grow from about $504 million in the US in 2004, up to nearly $1 Billion during 2008. Worldwide retail value of all Digital Terrestrial Set Top Boxes is expected to take off during 2006, and power drive up to more than $10 billion during 2009, with a compound annual growth rate (CAGR) of 63.8%.
Digital Terrestrial TV (DTT) and Free-to-Air Satellite TV services will give the PC TV tuner market a huge boost over the next several years, reports In-Stat.? By 2009, the worldwide retail value of the PC-TV Tuner market is expected to reach US$ 3.7 billion, with a CAGR of 42.6%.
The Internet:
The younger viewers at the core of the program provider¡¯s audience are drifting away from TV, spending more and more time online.? They're using the Web to socialize and communicate, downloading songs, listening to Internet radio and pod-casts, and playing with online gaming.? It won't be long before they turn to the Web for longer-form video and TV, thanks to the rise of broadband. About 35% of the U.S. population has broadband, which is getting faster and cheaper every year.?
And for those that think the Internet won¡¯t be able to handle the load, researchers at the Global Environment for Networking Investigations have offered outsiders a glimpse at their project to effectively reconfigure the Internet and create an updated global computer network. The network is designed with security in mind and with the reach and scale to accommodate the increasing number of computers and devices, like appliances, that will be connected to the Internet via sensors. The New York Times.
In August, News Corp. consolidated Internet operations throughout the News Corp. Empire and created Fox Interactive Media.? There's no question that Murdoch¡¯s News Corp. will spend a small fortune to generate more subscribers for DirecTV in 2006 and beyond.? The media mogul seems to believe that the next year or two is crucial in the war between cable and satellite with the emergence of the many new technologies, such as HDTV and DVRs that are beginning to generate significant consumer interest.? People will start picking a TV provider based on which one has the most high-def channels or the best DVR features.? According to Parks and Associates over 25 million Multiroom DVRs will be deployed by 2009.
The Triple Play:
Bundling voice-over-IP (VoIP), together with video and high speed data packages are known by the players in these markets as the ¡°Triple Play¡±. Just the Networked Entertainment sector alone of this ¡°Triple Play¡± market should grow from $3.9 billion in worldwide revenues in 2004 to $16.1 billion by 2009.?
When the consumer talks about networked entertainment, the consumer is, by definition talking about multiple devices from multiple vendors that can be controlled through a linked networked system.? Because of recent advances in equipment and technology, the explosion in broadband usage and consumer preferences for a whole living networked unit solutions or the ¡°Connected Home¡± is unprecedented.? This ¡°Connected Home¡± initiative has expanded to include almost all of the home consumer electronics products (especially DVRs), when it comes to delivering VOIP, Video and High Speed Broadband Service to the consumer.
Targeting the Triple Play to the MDU market represents about 26 million MDUs within the United States alone.? We¡¯re in a whole new ball game now and everybody wants in.? The overwhelming numbers of residents within multi-tenant dwellings today are held captive by their entertainment service providers due to the limitations of a single coaxial run construction.? A true ¡°one-wire¡± MDU installation can offer a one point of entry solution for multiple subscribers within these multi-tenant dwellings and provide a true ¡°Triple Play¡± concept service package at a significant time and material cost savings.
Who¡¯s everybody?
Broadband Service Providers: Satellite, Cable, Internet, Wireless, Telcos and Component Manufacturers, Distributors and Retailers and Installers who want to be a player in the Inter-Connected CE world. To deliver the ¡°Triple Play¡±, all of these major service providers and manufacturers have geared up and are starting to hook up with strategic service provider partners.? And the investments these manufacturers and service providers are making are in the hundreds of millions of dollars.?
We¡¯re witnessing an early shift toward home networking as a key variable for motivating additional services in the home.? Equipment vendors and carriers have a significant opportunity to package data, voice, and multimedia networks and entertainment services as a complete bundle of services.
Network Distribution Media are the media layer of a home network and is defined as the physical media or transmission medium on which the networked information is distributed.
Current home wiring construction standards today support three separate types of wire infrastructure and include twisted pair CAT 3 for telephone, twisted pair CAT 5 for Ethernet and RG6 Coax for TV/video services. Other new emerging technologies provide for shared wire configurations that can be utilize for multiple purposes. A shared wire might be telephone wiring that is used for voice phone calls as well as for XDSL Internet access or HomePNA data networking.? Other shared wire systems include Broadband Over Power-Lines (BPL) but is not capable of supporting video services to the home.?
Where Are The Big Numbers?
26 million residents of MDUs, which have been historically underserved by Building-Centric Local Exchange Carriers, mainly because of a lack of this fast, reliable, seamlessly and cost effective delivery technology. Gateways are hot while modems are not. Cable Companies service around 54% of the market, DBS with 21%, with the Service Providers for the Internet, Wireless and Fiber Optics and Telcos all lining up to play.? The total value of equipment that incorporates a home networking connection will jump from $8.3 billion in 2004 to $17.1 billion by 2008.? Home networking is driven by two main applications that are converging, Computers and Entertainment Media.
That means the new business group has to find ways to capture an important segment of this market, while finding ways we can work together with interested partners.? We know the digital integrated home market will be there.? As an industry, we've all been talking about this for the past four or five years.
SDG¡¯s Vision Of The Future:
The consumer electronics world and signal distribution opportunities are changing and the SDG is ready to change with it and embrace this new technology. A few issues have become quite clear: First, it's all about the customer, even if they don't really know what they want; second, home networking, HDTV and digital audio is the immediate future; and third, creating a higher standard of service is elemental to being successful and profitable. The important concept was the ability to adjust and adapt the SDG to the moment and the market, to properly position ourselves to take advantage of the explosion in broadband usage. Seeing this technological communications/entertainment revolution coming, it has been the goal of the SDG for several months to find and gather together a team of successful professionals (and their new products).
The goal was to be able to offer several markets, particularly the MDU market segment, a Signal Distribution System capable of delivering the ¡°Triple Play¡± on one existing coaxial cable. We will brand our Triple Play Bundle on one cable, the new business group¡¯s HOME RUN?. In addition to end-users, we want to offer the new business group HOME RUN package to other players in this market through marketing alliances, that are desperately looking for ways to deliver the ¡°Triple Play¡±, in an easy, fast and inexpensive way and to do it right.? That vision has come to fruition.? The new business group has the right partners and products under development to deliver this HOME RUN concept to the market place.
While continuing to exploit all the existing signal distribution opportunities, the SDG sees itself as also a redefine leader in delivering and distributing all the various signals to the individual components that make up the digitally integrated connected ¡°Smart Home¡± for the MDU and home industries.? What the SDG is doing is both timely and inevitable.? The plan is to do it right, first, while remaining the best choice relative to competitors that exist now and those bound to spring up in the near future.? This new opportunity and these new products will be directed at the MDU, ¡°Smart Home¡± (Integrated Home Networks markets), Triple Stacked satellite signal capabilities and Structured Wiring markets.
The SDG will offer four to five market specific systems/packages to service differing market segments in the following vertical markets: MDUs, home owners and home builders, consumer electronic mass retailer, recreational vehicle (RV), marine pleasure craft and medical telemetry market places as well as, those Distributors that sell and install products and/or services to these markets. The residential electronics systems professional has emerged as the "fourth contractor" in the building and remodeling industries with electrical, plumbing and HVAC professionals.
SDG New Business Model:?
The SDG has developed a business model that will allow it to play very successfully and competitively in this exploding consumer technology market by being the first to catch the anticipated huge growth wave in total signal delivery and distribution to the MDU (Multi-Dwelling-Unit) and ¡°Smart Home¡±, Structured Wiring and Wireless Remote Control of the Connected Home markets.? And these markets are truly huge.? There are 26 Million MDU residents and 100 million existing dwellings that need to be retrofitted to take advantage of the ¡°Triple Play¡±.? No one player can dominate it.
The competitive edge that the SDG¡¯s new business model has is its ability to take the ¡°Triple Play¡± concept one step further by adding our new structured one coax delivery system delivering satellite HDTV, high speed broadband Internet, VOIP and our wireless home integration capability to the bundle making it a true HOME RUN, the name we intend to brand our bundled package with Multilet, stacked technology and iCON Wireless Remote Home Control System inside our new structured wiring box.? The SDG HOME RUN plays to our targeted products' differentiated advantages in the chosen markets over any competition.
Multi-dwelling Units (MDUs) Market:
Apartments, planned communities, town homes complexes, and condominium or dormitory-type living arrangements, including health care facilities, office buildings and industrial parks are the hottest markets for broadband services today.? Worldwide, there will be just fewer than 1 million MDU in-building broadband subscribers by the end of 2004, these subscribers will grow ten-fold by the end of 2008.? 6 in 10 US Households will be Broadband by 2010 achieving a 62% penetration for U.S. households with broadband access to the Internet.
MDU Market Targets:?
Just imagine, when you include the 26 million MDU residents in the US, the owners and/or managers of MDUs and those that sell and install products/services to these residents, all keenly interested in delivering the ¡°Triple Play¡± just how excited they will be to discover that they can provide a more enhanced HOME RUN Bundled solution.? Our Completive Edge in this market deals directly with builders, installers and consumers when they consider the potential of retrofitting more than 100 million existing dwellings.? The only way that a new construction MDU install can be done today with HDTV service from satellites, including Internet service, is to pull two or more cables.? Similarly, to retrofit older constructed buildings, these installations will require pulling additional cable throughout the entire building.? This is extremely costly in time-and-materials and would simply be financially out of the question for a large number of these older buildings.? Wireless Internet access points provide some relief by illuminating one additional CAT5 wire, however wireless has several draw-backs to MDU use. It is susceptible to RF interference and is less secure.
The new business group¡¯s HOME RUN is the answer and the product for all of these opportunities.
The SDG Has Found The Products For Delivering The Triple Play On One Coax Cable:
The next step for the SDG was to buy, build or partner with companies offering pieces of whole living unit solutions that would link VoIP, Video and High Speed Broadband Data Transfer with various other devices such as existing home PCs, Stereos, PVRs and much more and do it over one existing cable. The SDG has signed NDAs with and is in the process of finalizing contracts drawn between the best companies for the following product solutions to answer this huge revolution and this ¡°Triple Play¡± opportunity, turning it into a HOME RUN. And the new business group has the opportunity to own everything from the roof to the wall outlet.
The MDU (Smart Home) Triple Play Coax Delivery System:
The HOME RUN is the delivery system for the ¡°Triple Play¡± to each residential unit over an existing single coax cable. The manufacturer is Macab and the MDU Product of interest is the patented Multilet System, delivering both high speed broadband, Video and VoIP on one coax cable from one connection point. The Multilet product exploits the simple fact that data (Ethernet) and TV signals use different frequency bands. This means that the same coaxial cable can be used for both data and TV traffic. The only requirement is that a filter is installed in the building or house's wiring closet to combine the data and TV signal and thereby enable transmission via the same cable. The old radio and TV outlet in the apartment is replaced by combined TV, radio and data outlet that separates the signals again. The Multilet solution turns the CATV cabling into an Ethernet-based local area network (LAN).
As production builders and developers embrace structured wiring, installations have grown from 34,500 housing units in 1998 to more than 2.5 million housing units last year, are estimated to build 3.4 million this year and are projected to construct about 4.6 million new homes with structured wiring next year. With a market projected by Parks Associates to be worth more than one-half billion dollars annually, it is expected that more homes will be pre-wired with an advanced networking infrastructure.? In other words, the networked home that consumers thought was decades away may be sitting in the development just down the street from consumers.
The TRIAD Triple Stacked Technology Market:
Today, no matter how consumers install satellite TV in an MDU, a minimum of 2 cables must be pulled in order to provide satellite HDTV signals to the Decoder equipped HDTV or Set Top Box. Our new HOME RUN Technology bundle allows us to retrofit existing MDUs to receive all the HD channels, because only approximately 1% of MDUs have more then one cable run through out the building. Triple Stacking the Satellite HDTV signals offers a second more cost effective and much better option.
There are HD channels located on 3 satellites.? With existing technology and dual stacked LNB¡¯s, the consumer can get all the satellite channels and some HD channels, but can¡¯t see the third satellite. But with 3 LNBs and triple stacking technology, the consumer gets all the satellite channels, plus all the HD channels from all three satellites.? This takes the dual stacked LNB Technology to the next level by allowing the satellite dish to look at 3 satellites, the third being the one dedicated to delivering additional HD channels and, by stacking all these signals, combines them onto one wire.? This technology is part of the new business group¡¯s HOME RUN.
Entry Into The Market:
The Signal Distribution Group¡¯s entrance into the structured wiring market, is keyed to the development of a The new business group structured wiring box, which must include as part of the ¡°Bundled¡± product offering, not only the Multilet systems, but also the TRIAD Triple Stacked Technology and the iCON Wireless Remote Home Control System. The new business group will then be able to offer a truly unique and very much needed bundled product, to several markets that no one else can offer and will be at the top of the food chain.
Phase I Introductory Objectives:
The primary objective in Phase I of this new business plan for the new business group version of the Multilet system, TRIAD Triple stacked technology, Structured Wiring Box and the iCON Wireless Remote Home Control System are to get them designed right, the prototypes built, tested, branded, packaged and introduced.
Phase II Objectives: Looking at partnerships and alliances
We have identified the need and opportunity to partner with high profile and quality manufacturers, programming and service providers, installers, MDU owners and distribution channels that can provide wide distribution with high-profile name awareness in consumer electronics.? With these strategic partnerships, we can solidify retail distribution channels and build on them through alliance sales of their products and our bundle, establish increased advertising and marketing venues and gain immediate consumer support and loyalty.
Because of the timing of our introduction at the EXH trade show and because the savvy marketers are already looking for their ¡°Triple Play¡± partners, we need to start looking for our Strategic Alliance Partners by mid October at the latest.
Branding and Positioning: This involves the process of managing the "Total Customer Experience" (that one-to-one relationship that causes loyalty for our company and its brands.) A brand represents all the promises the new business group wants people to believe about its product offerings.? Having a well-known brand helps consumers to sift through a plethora of choices and bond with a company. The new business group¡¯s well-established reputation will help considerably in the branding process.? The HOME RUN brand will position the total package.? Each product will also be branded individually.
Product Introduction: Our primary marketing objectives are to get these new bundled products in front of the right people as quickly as possible, considering the timing of the introduction, while keeping the introductory costs to a minimum, considering the biggest bang-for-the-buck.? We will position these products squarely against the competitive alternatives and the market need and carve out our piece of this huge emerging market.
Trade Shows: We will use Trade Shows such as EHX West Coast, CES 2006 and the EXH East Coast. Because of the unique benefits of our new product line, the design and function of this exhibit must be unique also, to communicate quickly those benefits.? Unlike our usual 20x20 truss structure, we are constructing a 10x10 house, 8 feet high with a representation of a roof, using our exiting truss system, three of the walls will look like and representing three different rooms (home theater, kitchen and home office) and the fourth will have a presentation of the MDU Star and Cascade installation methods and products.
We want to display WORKING product in order to quickly communicate and drive home what need these new products fulfill, so the entire booth will be wired LIVE, showing how our HOME RUN bundled product handles signal distribution throughout the unit.? The booth will be constructed as a fully functional MDU style residential unit install and demonstrate the capabilities of the new business group HOME RUN.
Public Relations Plan: Public Relations is a broad field that encompasses publicity, but also includes such things as press releases and news conferences, special events and sponsorships, and other activities designed to get ink and mold opinion.? The Public Relations Strategies for the MDU, HOME RUN Structured Wiring Box, TRIAD Triple Stacked Technology and iCon Wireless Integration Remote markets for the introductory phase of this plan are to save the majority of trade press activity, interest and impact for the EHX West Coast trade show by keeping all information regarding them from the Trade Press until just before and during the EHX West Coast trade, with the exception of a few key, trusted journalist, who will be given the whole story in time to place it for magazine coverage in November. A total of 14 Press Releases will be sent out.
The second most important tool for making a suggestion to a journalist, behind a product backgrounder, is the press release.? Simply put, a press release is a pseudo-news story that presents the most newsworthy aspect of new our products and the new business group in a format and language familiar to the journalist.? We will use both hard copy and digital press kits (Virtual Press Office) as in the past, to get this information in front of the press.
Advertising Plan: Visitors attend trade shows with a pre-set agenda.? And those who do attend are serious about it and have a "must-see" list of both exhibits and seminars.? The role of trade-show exhibits in purchasing decisions is very specific; over half the visitors want technical or product knowledge. Attendees will want to talk with us.? So the objective and ultimate result of any advertising or promotion should be a visit to the booth by our targeted prospects and customers.? Specifically, our print advertising should contribute to accomplishing this goal.? We will use key trade publications, timed with our introduction, to announce our new HOME RUN product line.
Direct Sales Plan: For the MDU market, which includes targets for our HOME RUN Bundle, SDG sales, along with a coordinated effort with our alliance partners, will make direct corporate sales calls (on existing and new customers) to targeted prospects that offer the largest opportunities for sales, such as the top 10 apartment, Real-estate Investment Trust (REIT) and apartment management firms (which we have identified), large master installer groups, national builders, Hotel/Motel Chain, Universities, Security companies and Health Care companies (Hospitals, Convalescent homes, Managed Care Facilities, Home health monitoring). Structured Wiring Market targets include those mentioned above and also include Business LAN (IT managers, Network administrators, Purchasing managers, Executives). The iCON Wireless Remote Home Control System, while included in our HOME RUN Bundle, will also be sold to the RV, 18 Wheel Tractor Cab and Marine Markets and, most importantly, to mega retailers as a stand alone product.
MDU HOME RUN Installation Projections:
Delivering the Triple Play to MDUs is a very new market segment for installers and service providers, because until just recently, the equipment and technology didn¡¯t exist. Numbers of new subscribers do exit, but are not broken down between MDU and Home subscribers.
To estimate the number of new MDU installs was a matter of combining research facts, estimates, calculations and assumptions. No matter how it is arrived at, the numbers are huge. One thing is sure; the increases in MDU installations will skyrocket when the new business group¡¯s HOME RUN is introduced.
Research Sources:
Primary Research Sources: For this plan, the following sources were accessed and information extracted on the targeted products and markets from:
Organizations and Associations Research
CEA, CEDIA, National Multi-Housing Council (NMHC), National Association of Home Builders (NAHB), NCTA (National Cable & Telecommunications Association), the National Consumers League (NCL), Federal Communications Commission, Fiber-to-the-Home Council
Manufacturers Research
ComponexX, Leviton, On-Q Legrand, Honeywell, UStec, GE, superioressex.com, FutureSmart Networks
Targeted Industry Research Companies Research
In-stat, Parks Associates, Allied Business Intelligence, Morgan Stanley, Nielsen Media Research, Kagan Research, The BRIDGE (DataBRIDGE), Leichtman Research Group, Bernstein Research,
Strategy Analytics, TVPredictions.com, The Carmel Group, Forrester Research, eMarketer, Center for Exhibition Industry Research, IDC, Infonetics Research, MBC/CENTRISPlus
Media Research
TWICE, Wall Street Journal, New York Times, Cabling Installation & Maintenance Magazine, ElecronicHouse.com, SkyRETAILER, TechWeb, Business Week, Advertising Age, Hospitality Net
General US Research Estimate:
Forrester Research predicts:
Six in 10 US Households will be Broadband by 2010, By 2010, 62 percent of U.S. households will have broadband access to the Internet, Broadband access will more than double this decade, reaching 71 million US households in 2010, Only 8.8 percent of US households have a home network today, dominated by households with multiple PCs and broadband access to the Internet. Forrester contends that benefits like surfing the Internet while watching TV, shopping in the kitchen, and
listening to digital music in the living room will drive home networking adoption to 46.5 million households by 2010.
Bernstein Research suggests that:
About 90 million consumers are expected to be connected to an Internet service by the end of 2010, with 80 million surfing the Web via broadband means, expects 9.2 million broadband subscriber net additions this year, with DSL and cable modems taking nearly equal share of net additions.
Most observers expect robust broadband growth in the coming years.
Strategy Analytics says that by 2010 nearly 80 million U.S. customers will use some type of broadband service.
General Facts:
Residential Broadband Services:
Last year was a major breakthrough for residential broadband services, as the year ended with over 20% of all US households subscribing to the service. With 20% penetration, broadband is now clearly a mainstream service.
These subscribers include both residential and business subscribers, although residential subscribers clearly dominate the broadband market. Cable modem continues to be the most common broadband access Technology, with 55% of all broadband subscribers. DSL remains the second most common broadband access Technology with 34% of all subscribers. Emerging broadband technologies such as fixed wireless broadband, satellite broadband, and broadband over power line (BPL), in that order, are the next largest technologies for broadband.
FCC:
The Federal Communications Commission says in recently-released research that high-speed connections serving residential, small business, larger businesses, and other subscribers increased by 34 percent, to 37.9 million users, in 2004. Leading the growth were cable modem service and DSL offerings. DSL lines increased by 45 percent, to 13.8 million, last year, while high-speed cable connections increased by 30 percent, to 21.4 million lines, during 2004
According to Bernstein Research
The DSL subscriber base grew by 10 percent in the first quarter, compared to 6.1 percent for cable modem service and DSL lines increased by 45 percent, to 13.8 million, last year, while high-speed cable connections increased by 30 percent, to 21.4 million lines, during 2004 Also, broadband penetration of online households has exceeded 50 percent.
According to data from Leichtman Research Group:
The 20 largest cable and DSL providers in the United States, representing about 95 percent of the market, acquired a record 2.6 million net additional subscribers in the first quarter. The top broadband providers account for more than 35.8 million high-speed Internet subscribers, with cable controlling more than 21.1 million broadband subscribers and DSL having more than 14.7 million customers. The top DSL providers added a record 1.38 million subscribers in 2004, representing 54 percent of net broadband additions for the three-month period versus cable, which added 1.2 million subscribers.
Builders, installers and consumers must consider the potential of retrofitting more than 100 million existing dwellings.
Research from In-Stat research shows that just under half of the US residential market has purchased multiple telecommunications services as a package in 2005 from a single provider, up from just one-third in FY 2004.
Subscriber Facts:
Nielsen Media Research
In August of 2005, revising upwards the total number of television households in the United States. They now estimate that there are 110.2 million TV households in the U.S., up from 109.6 million in the 2004/2005 season out of 118,000,000 homes (2000 Census). Satellite penetration is now 19.7%, up from 18% a year ago, versus wired cable penetration of 65.8%, down from 66.9%.
The Bridge
Compared the Top 12 Satellite and Cable Operators subscription (out of 25 listed) increases from the second quarter of 2004 to the second quarter of 2005, there was an increase of 6,099,000 subscribers representing a 5.6% increase. (Note: Time Warner Cable numbers were not available for the 2Q04 and were estimated at 10,000,000). Other high-speed service from Fiber Optic and Power Line technology increase 13.8% from 2003 to 2004 adding 96,000 new subscribers.
Average Units Per MDU
RBG & Company: In a study done by RBG & Company on the St. Louis MDU market, they found that the average number of units in an MDU was 208 and in another 215. The National Multi-Housing Council research said that properties with 50+ units represent just 2% of all properties, but account for nearly 50% of Apartment dwellers.
Leichtman Research
Cable Broadband Internet subscribers increased 5% in the first quarter of 2005 adding 965,000 new subscribers (See Chart below). DSL subscribers increase 1Q04 to 1Q05 adding 4,506,000 new subscribers for a 30.5% increase. The average of all complexes 50+ was about 160.
Estimates:
There are estimated to be 26 million MDU residents in the US as of 2005
The annual value of Consumer Video Subscription Services delivered over Internet Protocol networks will grow to $4.6 Billion in the US by 2008.
Networking adoption in homes is estimated to grow to 46.5 million households by 2010.
The total value of equipment that incorporates a home networking connection will jump from $8.3 billion in 2004 to $17.1 billion by 2008. That¡¯s a 106% increase.
Research says the Analog PC-TV market will grow from about $504 million in 2004, up to nearly $1 Billion during 2008. The value of Digital PC-TV Tuner products, including the value of digital terrestrial set top boxes, will grow to more than $2.8 Billion during 2008.
Worldwide, there were just fewer than 1 million MDU in-building broadband subscribers by the end of 2004, these subscribers will grow ten-fold by the end of 2008.
Kagan analyst Renee Shaening suggests the cable industry will more than double its overall revenue, from $66.5 billion this year to $139 billion by 2015.
Reviewing the information, we have very conservatively estimated that:
- The number of MDUs in the US is estimated at 26 Million and represent 23.6% of the 110,200,000 TV Homes (Nielsen Media Research)
- Research estimates for new installations for June 2005 through June 2006 show for Cable TV 2,398,000, Cable Broadband 984,500, DBS 650,000, DSL 875,000, Telcos 402,000 and BPL 96,000, totaling 5,406,100.
New MDU Construction Assumptions and Calculations:
- New installations for 2005 with grow 2.5% and 5% each year thereafter.
- The average number of units in an MDU is 160, yielding 34,663 MDU buildings in 2005-2006.
- New construction of MDUs will increase 1% a year, yielding 34,979 total MDU buildings for 2006, growing 1% a year.
- If 20% of new installations will be in new construction, this would yield 6,996 building targets in 2006, increasing 5% a year.
- If 75% of MDU owners want a packaged bundle when they buy multiple services, this would yield 5.247 total potential MDUs to sell to, increasing 1% a year.
- If 75% of MDU owners choose to buy in 2006, this would yield 3.935 total potential MDUs to sell to, increasing 1% a year.
- If The new business group penetrated this potential market at 25% with owners choosing The new business group¡¯s HOME RUN bundle, this would yield 984 estimated The new business group HOME RUN building sales in 2006, increasing 2% a year.
MDU Retrofit Market
- If 20% of the estimated 34,979 installations for 2006 are in new construction, than 80% will be retrofits, totaling 27,983 potential retrofit MDUs in 2006, decreasing 5% a year.
- If 10% of the owners of older building choose to retrofit in 2006, this would yield 2,798 MDU units available to retrofit, increasing 2% a year.
- If 75% of those owners choosing to retrofit buy bundles services, this would yield 2,099 MDUs in total choosing to retrofit in 2006, increasing 1% a year.
- If 25% of these owners choose the new business group¡¯s HOME RUN to retrofit, increasing 2% a year, this yields potential MDU sales of 525 MDU buildings.
Sales Projections
- 984 new construction and 525 retrofitted MDU buildings total 1,508 MDU buildings sold the new business group¡¯s HOME RUN in 2006.
- The price per MDU unit for the HOME RUN will be $175.
- Multiplying 1,508 MDU buildings sold times 160 average units per MDU times $175 per unit, the estimated Gross Sales for the HOME RUN to MDUs for 2006 will be $42,237,331.
- Estimating the cost of the Distribution/Installer chain at 60%, this would yield $16,894,933 in Gross Sales to The new business group of the HOME RUN in 2006.
- With an estimated Gross Profit margin per sale of 45%, this would yield $7,602,720 in gross profit to the new business group in 2006 for HOME RUN sales.
- These numbers are for the MDU market and do not include other very large markets such as the SDU market, Hotels (454 chains), Health care, RV and several other targeted markets.
5 Year Projections:
New MDU Properties:
Using a 2.5% increase in 2006 and a 5% increase thereafter for estimated MDU installations, 160 average units per MDU, a 1% increase per year in new MDU construction, 20% as the number of new installations that will be in new construction, increasing 5% a year, 75% wanting a bundle when they purchase services, increasing 1% a year, 75% of MDU building owners choosing to buy in 2006, increasing 1% a year, a 25% The new business group MDU penetration of this market segment, increasing 2% a year, a constant sale price per unit of $175 and a 40% constant Gross Profit Margin¡
Retrofitted MDU Properties:
If 20% of the 34,979 new installs in MDU are in new construction, than 80% are in retrofitted MDUs, decreasing 5% a year, the average number of units per MDU is 160, 10% of MDU owners choose to retrofit in 2006, increasing 2% a year, 75% choose a bundle when retrofitting, increasing 1% a year and 25% of the owners choose The new business group¡¯s HOME RUN, increasing 2% a year, a constant sale price of $175 per Unit and a distribution percentage of 60%...
We estimate the 5 year MDU Gross Sales, The new business group Gross Sales and Gross Profit Figures for both new and retrofitted units are estimated as follows:
Sales Projections:
2006
Gross Sales to MDUs at $47,237,331
The new business group Gross Sales at $16,894,933
The new business group Gross Profit at $7,602,720
2007
Gross Sales to MDUs at $59,087,015
The new business group Gross Sales at $23,634,806
The new business group Gross Profit at $10,635,663
2008
Gross Sales to MDUs at $79,328,745
The new business group Gross Sales at $31,731,498
The new business group Gross Profit: $14,279,174
2009
Gross Sales to MDUs at $103,355,337
The new business group Gross Sales at $41,342,135
The new business group Gross Profit: $18,603,961
2010
Gross Sales to MDUs at $131,592,594
The new business group Gross sales at $52,637,037
The new business group Gross Profit of $23,686,667
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