Is The Cable Industry Broken?

Fast-forward to right now. We are in the heart of — and since last year, have been in — the Adelphia/Time Warner/Comcast three-way transaction. Again, it's a high-profile engagement within the highest levels of the organization.

CM: You have been working with Comcast for some time now.

Shah: Comcast was a three-million-subscriber company when we started working with them. Right now, it's a 25-million-subscriber company. When President and COO Steve Burke came to Comcast, I gave him his first digital video briefing. So, that's the kind of relationship that we have.

CM: In your convergence space, what new trends are you starting to see as new technologies continue to pop up?

Shah: Fixed-mobile convergence is an area that we really think is going to be taking off. Now it's become quite fashionable to talk about, but two years ago, we decided that if we were going to expand outside of broadband, we would go to areas that we know a lot about and then expand out from there.

So what we started focusing on about two years ago in the mobile segment was fixed-mobile convergence. And you may or may not have heard, but T-Mobile has just recently launched a phone called T-Mobile at Home, which is a dual-mode WiFi GSM phone with which, if you go into any WiFi hotspot, it seamlessly moves to WiFi, hence relieving all minutes and costs from the seller infrastructure. And, in the home, where most people have bad coverage, 55 percent of the homes now have a WiFi network, so it goes seamlessly onto that. Not only does their coverage improve, but T-Mobile doesn't have to buy more spectrum to be building more towers, because, as usage grows, they have to buy more spectrum. There are tons and tons of benefits — but also hundreds of technological problems and operational problems.

We actually were the ones to do the execution management for T-Mobile. Mark Rowland, a partner at IBB, was the program director of the T-Mobile at Home program.

Now we're helping Time-Warner, because they've just launched a joint venture this spring. We are actually helping another client in Europe around this. So you will see that fixed-mobile convergence will be a big area.

CM: The nature of the kind of convergence that you were doing ten years ago was probably very different than what you see today. Could you give us a brief summary of that shift and what the future may hold in this arena?

Shah: One thing that was absent ten years ago was broadband. All this convergence was between computers, and it was very differently stated. It was convergence within the computing industry and the consumer electronics industry. That was the mantra in those days. Remember the television-meets-the-PC kinds of stories? Set-top boxes, interactive television, TV portals, Web on the TV . . .

But there was no business model for computer on the television. What happened instead was that television became better TV rather than interactive TV with the PC. And it became better TV by more choice, which is more channels, more control by video on demand. If you look at some of the technologies that underpin video-on-demand, they were not as sexy and were not talked about as much, but they were fueled by a lot of this convergence, because it's got a lot of IT and computing, since set-top boxes needed to do a lot of things.

So it wasn't that Internet got placed on the TV, but what happened was that TV became better: more choice, more control, anytime, anywhere, meaning more time shifting.

CM: So where is it all headed?

Shah: I've always said that there will eventually be three large cable companies and three large telcos. The way it's now gone, it's down to two large telcos — if the BellSouth merger happens. And this is going to be a very, very different situation than what happened in the long distance arena or in submarine cables, transatlantic submarine cables, which was hyper-competition, in which eventually everybody kind of pulled each other down.

What we are moving toward is a duopoly. The telcos don't compete with each other, the cable companies don't compete with each other, but they compete amongst each other. Telcos don't compete with telcos and cable companies don't compete with cable companies. So, in each market, there are two major full-service providers that have all four services: broadband, video, phone, and mobile. So it's a perfect duopoly, which means that there has to be a lot of innovation without the hyper-competition and the price erosion that comes with it, which is kind of a great breeding ground for very good, healthy growth because none of them can outprice and kill the other one. It's not like having two companies and one of them is bigger, and you can price-cut them. Nobody's going to make Comcast bankrupt by price-cutting them, and vice versa.

There will be two healthy duopolies, and then there will be a couple of pure plays. Satellite is a pure play, and a company like T-Mobile and others like it are pure plays, which will be mainly price plays.

In terms of clients, the client nature has not changed, but, because of the consolidation, what's happened is that a couple of big, full-service companies have emerged. Many of the Comcasts did not have high-speed data. They certainly did not have phone, and, of course, they had no mobile. Verizon did not have video. They were in the early days of broadband. So what's happened is that their portfolios have filled out; they have all the services.

The number of companies competing with that full portfolio has gone down to two per market, so they are now poised for a period of time to have this healthy duopoly competition. If you're a consultant in that space or if you're a player in that space, it bodes well, because it's not like the long-distance wars when there was so much pressure on prices that you would erode each other out of the market.

CM: How are you able to staff such large engagements?

Shah: When we started, we were a bunch of people who were extremely experienced in the broadband space and, instead of using generic junior people at the bottom end of the pyramid, we actually — we used to call it adding a multiplier effect on the client's organization itself — we did large engagements and continue to do them by actually leveraging either a lot of the client personnel or, in many cases, other consulting companies. We would even use the Big Five who are doing lots of the execution or data cleanup or some of those kinds of things that are needed for large engagements.

CM: So part of what you bring is the ability to coordinate with other consulting firms?

Shah: We do execution management, and we get really detailed and down and dirty in multiyear execution management. But, many times, we prefer to do it with the client's team, because when you're doing culture change and execution, it's infinitely more effective when client personnel are doing it, rather than somebody else from the outside.

CM: However, you may have greater input into how your client uses its people . . .

Shah: We have had the privilege of becoming the trusted adviser. We call ourselves the "inside outsiders." We've become native in many, many, many of our large clients so that we become part of their trusted group of people and, hence, are able to, first, cut across company silos — with no political agenda. Second, we're able to add external resources if needed or if necessary.