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Cable Technology Feature Article

August 25, 2009

Is Cable a Better Investment Than Wireless or Telcos?

By Gary Kim, Contributing Editor

Does cable TV have better financial prospects than either wireless or telco businesses? Bernstein Research analyst Craig Moffett thinks so. Of course, Moffett has been saying that for more than 10 years. But here's the argument.

He notes that in the U.S. wireless industry, subscriber growth over the last 12 months is up 5.3 percent, but revenue per subscriber is down 1.7 percent, producing just 3.6 percent revenue growth.

The cable industry, by contrast, grew revenue per sub 4.1 percent over the same time period. Combine that with modest sub growth and industry growth was 5.3 percent.

Moffett says there are a number of reasons for this, not the least of which is that the wireless market is much, much more competitive.

In wireless, there are five facilities-based carriers in most markets and soon there will be as many as six or possibly seven n some markets.

Contrast that with the multi-channel TV market, where in 75 percent of the country there are just three players. While in a quarter of markets there are four players.

Broadband is even more concentrated. In most markets, there are just two terrestrial players. Prices are a tricky thing to measure, as speeds have been increasing. It might be fair to say that broadband revenue has grown but price-per-bit has declined.

But the point is that broadband “is quite simply a better business than either video or wireless.” Moffat argues. Telcos might not agree with that assessment, though. Broadband is the closest thing to a dumb pipe service one can imagine in the mass markets, at least at the moment.

He notes that the telcos are building out fiber to 40 percent of U.S. homes, but that for the other 60 percent, “cable modem service is looking more and more like it will be the only game in town.”

One might quarrel with that argument. There are two satellite providers and in many markets there will be four or five terrestrial wireless providers. As wireless networks are upgraded for faster speeds, not only will there be multiple pathways to each end user, but end users might stop watching as much video on the fixed networks.

But Moffett is correct in arguing that broadband is the foundation service for fixed network providers. As mobile networks also become broadband networks, though, the argument about mobility compared to higher raw bandwidth is going to be huge.

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

Edited by Patrick Barnard