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Summary:

Cable beat the telco carriers two to one for broadband adds in the third quarter of 2008 according to data out from Leichtman Research Group Inc.

[qi:011] Cable beat the telco carriers two to one for broadband adds in the third quarter of 2008, according to data out today from Leichtman Research Group. Of the 1.3 million total broadband adds in the quarter, 873,745 went to cable, as opposed to 425,868 who signed up for DSL service. We’ve pointed out that cable is gaining over DSL during the last few quarters, and even wondered what the telcos would do as DSL lines fell. Before we credit cable’s fast speeds compared with DSL for its advantage, however, Bruce Leichtman, president and principal analyst for Leichtman Research Group said, “It is more a function of the telcos’ shift in focus towards higher value subscribers while cable has been consistent in marketing broadband as part of its nearly ubiquitously available Triple Play bundles.”

Basically, decent cable broadband is everywhere, but telco broadband worth having isn’t. Leichtman Research also found that that the 20 largest cable and telephone providers in the U.S. — representing about 94 percent of the market — now account for nearly 66.7 million subscribers, 36.5 million for cable and 30.2 million for telcos. With a recession here, I wonder if pricey speed boosts from carriers will have much effect on the telcos’ broadband decline.

  1. I agree with Bruce Leichtman that the marketing of triple play services is a key driver of cable adds vs. DSL. To date, the appeal of triple play has been price and convenience; however, there are additional benefits that may be less obvious. Triple play lays the foundation for cross-service interaction, not to mention interaction between services and the subscriber, that represent new revenue opportunities and can continue to drive growth. Services such as caller ID on the TV represent potential new sources of incremental revenue—who wouldn’t pay a buck a month for this? In addition, more advanced services such as automatic access to premium channels and DVR content via the PC, remote DVR programming, and cross-platform targeted advertising will grow demand and drive new revenue opportunities. This potential is by no means a certainty; the challenge for cable operators is to take advantage of the foundation they are building to ensure they continue to provide significant value beyond bandwidth.

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  2. A little perspective…

    For roughly 12 quarters prior to the most recent few, telco net broadband adds exceeded cablecos. The numbers above also do not appear to include fiber-to-the-premises (FTTP), virtually all of which is telco. The bottom line is that we are likely to see a highly competitive (and therefore good for consumers) duopoly where telcos and cablecos have 49% broadband market share each with the remaining 2% going to fringe technologies.

    Triple play was a focus in the past but is less so today. My bet is that the winner will be the broadband provider best able to deliver internet video; and those that watch a lot of it know that this isn’t just a bandwidth issue. I’ll further wager that cablecos will be skittish about making internet video (and I’m talking TV shows and movies delivered to 50″ HDTVs, not YouTube on a PC) work better because they are already, after all, in the video business and view internet video as the enemy.

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