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How Quadruple Play Could Change US Cable Industry Dynamics

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Altice intends to replicate quadruple play model in the US

In the previous part of this series, we looked at Altice’s proposed acquisition of Cablevision (CVC) and how quadruple play works in Europe. Altice stated last year that it intends to replicate the European quadruple play model in the United States with its pending acquisition of Cablevision.

Currently, the US cable industry is undergoing a consolidation of sorts. This consolidation trend started with Charter Communications’ (CHTR) proposed acquisition of Time Warner Cable (TWC) and the merger of DIRECTV with AT&T (T). A quadruple-play option could further fuel this consolidation, as cable companies may merge with wireless carriers to offer quadruple play and reduce their network buildout costs in the process.

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Quadruple play could change the dynamics of the US cable industry

If Altice does succeed in replicating this model, it will likely change the dynamics of the cable industry. Currently, the US cable consumer is paying around $100–$150 per month for triple play, that is, the bundling of high-speed Internet, television, and voice services into one.

A quadruple play option would bring this cable bill down further. In fact, one of the reasons for US cable consumers’ moving to companies such as Netflix (NFLX) has been the higher cost of cable.

Quadruple play could also reduce customer turnover. For example, Cablevision already has a strong broadband penetration in the greater New York area, but this high penetration rate reduces the additional number of homes to which the company can market its services. To reduce customer turnover, a cable company such as Cablevision has to offer innovative products or better services and increase average revenue per user in the process.

Cablevision Systems makes up 0.04% of the iShares S&P 500 Index ETF (IVV). For an investor interested in exposure to the computers sector, IVV holds 3.8% in the sector.

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