Whole home DVR: competitive advantage or simple necessity?

Since early May, the talk of whole home DVR service has given way to reality as cable operators, one by one, launch their new offerings to subscribers across the U.S. Cox Communications got the ball rolling as the first cable operator to announce its service, and two more providers were quick to chime in. Now, rumors are swirling around a possible Comcast whole home product.

With all the good news out there, it's hard to rain on anybody's parade. Operators see whole home DVR as a way to keep subscribers in the fold. But once every triple-play bundle out there features a whole-home offering, what's to keep subscribers from jumping to a competitor?

Competition for end customers is increasing while the cable industry finds its new subscriber numbers leveling off. Time Warner Cable saw 105,000 basic cable subscribers walk away in the fourth quarter of 2009, while cable competitor AT&T U-Verse had to work hard to keep new subscriber adds above 248,000--something it had no problem doing just a year earlier.

FTTH provider Verizon last month dropped its two-year contract requirement in the Tampa, Fla. area and in Pennsylvania, and this week announced it would offer a one-month trial to new subscribers in Tampa--a clear ploy to bump subscriber numbers, hang the cost (and it's a big cost, at $1,350 per install).

Overall, SNL Kagan reports, cable subscribers in the U.S. slipped from 62.6 million in 2008 to 62.1 million in 2009.

Meantime, many viewers are eyeing the Internet more and more as an avenue for entertainment and spending less time in front of the television. While the TV still reigns as the primary source of movies and other programming, some consumers have already cut the cord and do all their communicating and movie-watching online or wirelessly.

So, whole home DVR is not the solution to subscriber losses--but it can be an effective tool in reducing them.

For starters, the whole home upgrade is an important step for traditional cable in that opens the way for them to deliver IP-based services-voice, data or over-the-top video, a technology both maligned and admired by cable stalwarts--to subscribers. "Whole home DVR is an important next step in cable's intentions to network key IP devices in the home," a Cisco spokesman says in a recent press release on its site.

Whole home networking is a value-added service that comes just as cable operators are trying to figure out their next big thing--quad play, the magic bullet that most hope will have subscriber numbers climbing again.

But just having whole home service is not enough--not when most of the top 10 cable providers will have their own offerings before the end of the year. Customers may respond to lower prices for the DVRs, but ultimately it's the quality of service--both from the technology itself and in terms of customer service--that will keep subscribers in place.