Cable customers are increasingly choosing streaming TV and movie services instead of conventional pay TV offerings, which is cutting into operators’ bottom lines.

Ovum (News - Alert), a research firm, has released a 25-page white paper on OTT (Over The Top) services like Netflix that have a disruptive effect on cable providers.

“The OTT landscape is expanding rapidly, and this is having a profound impact on network operators especially in the area of TV and video services, which are particularly contributing to the revenue squeeze felt by most operators,” Jonathan Doran, a principal analyst for Ovum, said.. “Consumer appetite for video will continue to increase, which means operators will need to continue investment in network upgrades to handle the increased traffic at a time when broadband services are becoming commoditized.”

As both free and paid services improve in quality and reliability, it’s becoming more difficult for providers to justify the prices they’re charging for pay TV services. If cable and satellite operators wish to stay in business, they’re going to have to offer better and cheaper services to subscribers.

“In order to remain competitive, operators must exceed the levels of choice, flexibility, and personalization offered by OTT players,” said Eden Zoller, Principal Analyst with Ovum. “An important step towards this is to responsibly leverage customer data insights that can be used for service personalization and more sophisticated approaches to packaging and advertising.”

In other words, providers are going to have to get a better idea of what their customers are actually watching in order to figure out what to offer them.

One way to glean information from subscribers is through tracking DNS queries. DNS, or Domain Name System, is a distributed database that translates requests such as tmcnet.com into IP addresses that can be accessed by Internet-connected devices.

 “In the context of the OTT challenge and beyond, we view DNS data as the new secret weapon for Network Operators to create a differentiated subscriber experience,” Craig Sprosts, vice president of platforms and applications at Nominum, said. “DNS data contains significant amounts of information regarding subscriber needs, but historically it has been difficult and cost prohibitive to log and generate actionable insights. Nominum’s (News - Alert) recent launch of the N2 Platform and the IDEAL ecosystem of application providers has changed that through an integrated approach for network operators to leverage DNS data for benefits such as reducing churn and gaining new revenue streams through personalized service offerings.”