The cable industry continues to dominate the phone industry in the race to sign up broadband subscribers.
Most public phone and cable companies have reported Q3 results, and so far, cable companies signed up 64% of new broadband subscribers last quarter, while telcos signed up 36%. (See chart below for details.)
Why are cable companies — led by Comcast (CMCSA) and Time Warner Cable (TWC) — dominating?
- In most areas, cable Internet is significantly faster than phone companies’ DSL services.
- As people use more bandwidth for stuff like Web video, we think they’re upgrading to cable Internet for faster speeds, especially when they move.
- Cable companies have attracted millions of digital phone subscribers via “triple play” deals, many of whom came from phone companies — and probably signed up for cable Internet, too.
Yet the phone industry — led by AT&T (T) and Verizon (VZ) — is actually doing better than last quarter, when it only took 27% of the market. How?
- Building out faster, fibre optic-based networks to compete with cable. Verizon’s “FiOS” and AT&T’s “U-Verse” are both helping keep existing subscribers — and attract customers away from cable. In Q3, Verizon attracted 225,000 net new FiOS broadband subscribers, and reported a net loss of 96,000 DSL subscribers. Similarly, Qwest (Q) said about two thirds of its new broadband subscribers in Q3 bought access via its fibre-based network.
- Starting to offer additional perks, like free wi-fi access. AT&T offers many of its broadband subscribers free wi-fi access at Starbucks and McDonalds stores, and just spent $275 million on 10,000 more wi-fi hotspots. (Cablevision is building out wi-fi service, too.)
We expect phone companies to continue losing share to cable companies until they build out their fibre-based services into more markets and upgrade their DSL service for faster speeds.
One caveat: Cable’s performance is probably better than indicated here, as Cox — a large cable provider — is private, and doesn’t report quarterly results.
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