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Little more than a year after the largest cable operators entered the telephony market, the industry had 927,463 clients as of August 31, 2006. This is a quantum leap compared with a year earlier, when there were 211,683 clients.
This significant breakthrough of cable operators into the telephony market illustrates the success of a strategy to ensure industry growth by diversifying the services offered.
The key component of the strategy was, unquestionably, the launch of high-speed Internet services about 10 years ago. In 2006, this service was still a major growth factor for the industry. The number of cable Internet subscribers reached 4.0 million at the end of August 2006, an increase of 17.2% over the end of August 2005.
Also evident in 2006 is the re-emergence of cable operators in the traditional television niche. The number of cable television subscribers reached 7.8 million on August 31, 2006, up 2.2% from August 31, 2005. This was the strongest year-over-year increase since 1994, when growth reached 2.3%.
The addition of many clients in the industry's three main markets led to a 15.9% increase in subscription revenues, which grew from $5.1 billion in 2005 to $5.9 billion in 2006. Two-thirds of the additional $800 million in revenue came from non-traditional service provision, mainly Internet access and telephony.
Internet access provision yielded $1.7 billion in revenue in 2006, a 19.9% increase from 2005, while telephony generated revenues of $267.8 million in 2006—five times more than in 2005. Revenues for television services increased by 7.5% to $3.9 billion.
The industry's profits are also on the rise, although its profit margin shrank.
In 2006, cable operators made $1.5 billion in profits before interest and taxes, an increase of 11.6% from the previous year. This represents a 2006 profit of 24.1 cents for each dollar of revenue, slightly less than the 24.9 cents per dollar in 2005.
This slight drop in the profit margin of cable operators is primarily the result of a 61.1% surge in sales and promotion expenditures, which climbed from $235.9 million in 2005 to $380.1 million in 2006. The fight for a share of the telephony market and the promotion of multi-service packages largely explains this surge.
During this time, wireless competitors—mainly satellite television service providers—saw the number of subscribers to their services reach 2.6 million in 2006, up 5.5% from 2005. Revenues for this industry segment reached $1.7 billion—an increase of 17.5%.
For the second straight year, wireless competitors made modest profits before interest and taxes. Profits dipped to $37.0 million in 2006 from the $44.0 million earned in 2005. This is a turnaround for this industry segment, considering it has posted losses before interest and taxes every year since its launch in 1997 until 2004.
Available on CANSIM: table 353-0003.
Definitions, data sources and methods: survey number 2728.
The publication Broadcasting and Telecommunications Service Bulletin, Vol. 37, no. 2 (56-001-XIE, free), is now available from the Publications module of our website.
For more information, or to enquire about the concepts, methods or data quality of this release, contact Daniel April (613-951-3177; daniel.april@statcan.gc.ca), Science, Innovation and Electronic Information Division.
