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Cable Technology Feature Article

January 06, 2009

Will Cable Gains Hold in 4Q?

By Gary Kim, Contributing Editor

The 20 largest cable and telephone providers in the United States, representing about 94 percent of the market, acquired approximately 1.3 million net additional high-speed Internet subscribers in the third quarter of 2008, according to the Leichtman Research Group.
These top broadband providers now account for nearly 66.7 million subscribers. Cable companies have 36.5 million broadband subscribers, and telephone companies have about 30.2 million subscribers.
The top cable companies added over 870,000 subscribers, representing 67 percent of the net broadband additions for the quarter. For whatever reason, telcos seem to have slipped over the last several quarters in the net additions area, after pulling nearly even with cable companies in 2007 and half of 2008.
Of course, nothing matches the second quarter 2008, when apparent marketing inattention devastated telco net adds. By the end of the third quarter, the top telcos had reversed course.
In the third quarter, AT&T (News - Alert) added 148,000 net wired network broadband access customers, up from the 46,000 AT&T added in the second quarter of 2008. That's a far cry from the 300,000-plus quarterly net adds AT&T was putting up in 2007, but the broadband access market clearly is reaching saturation.
AT&T, Verizon (News - Alert) and Qwest all posted far better net addition numbers in the third quarter, compared to the second quarter. Verizon signed up net 129,000 subs during the third quarter, up significantly from 54,000 sub additions during the second quarter. Still, there is a shift going on, as one would expect. FiOS (News - Alert) accounted for 225,000 net additions, offset by a decrease of 96,000 digital subscriber line subscribers.
Qwest (News - Alert) likewise doubled its second quarter broadband access net additions. Qwest also seems to be having good success with its fiber-to-the-node services. Qwest now is marketing to 1.5 million potential customers and added about 40,000 new fiber-to-the-node subscribers in the quarter. The subscriber take rate of 7 Mbps or faster service in the fiber-to-the-node footprint is nearly 70 percent, Qwest says.
Still, cable continued to outperform the three telcos in the third quarter. The issue is whether telcos will have closed the gap in the fourth quarter.
The top cable broadband providers have a 55 percent share of the overall market, with a 6.3 million subscriber advantage over the top telephone companies, researchers at Leichtman say.

"Over the past two quarters the top cable providers accounted for 71 percent of the net broadband additions," says Bruce Leichtman, company president and principal analyst. That seems to be the result of deliberate marketing practices by cable and telco providers.
AT&T and Verizon seem to be emphasizing acquisitions of higher-value customers, where several years ago they were chasing the "lower price" segment of the market. Cable, on the other hand, seems to be merchandising broadband more heavily as part of its triple play bundles. In essence, the contestants have switched tactics. Cable, which had steadfastly refused to lower prices, seems now to be doing that, while telcos seem to be more focused on selling higher-speed, more-expensive tiers of service.
Separately, LRG research indicates 34 percent of U.S. households have at least one HDTV set, about double the percentage of households that had such TVs two years ago. Overall, 22 percent of all households purchased a new TV set in the past 12 months, with 43 percent of this group spending over $1,000 on a new TV.
LRG estimates that about 58 percent of all HDTV households are now watching HDTV programming from a multi-channel video provider, up from 53 percent last year.  However, about 18 percent of individuals with an HDTV continue to think that they are watching HD programming, but are not.
Whether it is true or not, survey respondents say replacing an older set was the reason for buying a new HDTV. Some 38 percent of HDTV owners say that replacing an old or broken set or "wanting to buy a new TV set" was the most important reason for getting their HDTV.
Significantly, some nine percent of respondents say that they switched multi-channel video providers when they purchased their HDTV.
Don’t forget to check out TMCnet’s White Paper Library, which provides a selection of in-depth information on relevant topics affecting the IP Communications industry. The library offers white papers, case studies and other documents which are free to registered users. Today’s featured white paper is Fixed Service Strategies for Mobile Network Operators, brought to you by Comverse (News - Alert).

Gary Kim is a contributing editor for TMCnet. To read more of Gary's articles, please visit his columnist page.

Edited by Michelle Robart