Blog Post

And Broadband Goes Slo-Mo

[qi:051] U.S. broadband subscriber growth, which had been rising at a blistering pace for nearly 12 quarters, started to slow down in the three-month period that ended in June. This is a problem not just for the larger broadband service providers, but for smaller players like Embarq (EQ) and CenturyTel (CTL) who are also experiencing the pain of price wars.

The country’s nineteen largest cable and telephone providers added more than 1.7 million net high-speed Internet subscribers in the most recent quarter, according to Leichtman Research Group (LRG). These companies cover about 94% of the market. LRG estimates that there are now 58 million U.S. broadband subscribers; 31.5 million for cable and 26.4 million subscribers for the phone companies. [digg=http://digg.com/tech_news/And_Broadband_Goes_Slo_Mo]

That’s 400,000 fewer than the second quarter of 2006 and, according to LRG, it’s the lowest number of U.S. broadband subscribers since the second quarter of 2004. Phone companies added about 925,000 subscribers, representing 54% of the net broadband additions for the quarter. The slowdown has impacted pretty much all ISPs, across the board.

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During a recent conference call with Embarq executives, Christopher Larsen of Credit Suisse asked them discuss their second-quarter numbers, asking them if the slowdown was localized to AT&T (T) and Comcast (CMCSA.) Daniel R. Hesse, CEO and Chairman of Embarq replied:

….market is beginning to get more competitive largely because what we are seeing is the cable companies for a long time have had kind of one-size-fits-all approach for their price piece net offer and now they are beginning to offer lower speeds like sub 1.5 and 1.5 megabit kinds of speeds that are lower price points.

In other words, a price war is looming, especially at the low end of the market.

…we are seeing some increased competition in the high-speed Internet business and saying cable companies increase their speeds on the high-end a bit. Mostly the same prices they are charging, or we are charging before. How they have steered their service and are going after dial conversion customers with $20 price points for 1.5 service. And so we are seeing an increase in competition in high-speed Internet.

Glen F. Post III, chairman and CEO of CenturyTel, pretty much alluded to the same on his conference call.

On the broadband side, there is more competition… primarily it’s coming from the triple play as the… of course the cable companies roll out their voice-over-IP. So it’s obviously more to competition. We don’t think we will see an acceleration in our adds. We don’t expect major declines for the rest of the year with our broadband adds as well.

It is clear – this slowdown is going to create some interesting situations, possibly an all out price war, which is not such a bad thing for the broadband subscribers.

More thoughts on this later in the week.

17 Responses to “And Broadband Goes Slo-Mo”

  1. What I have noticed is that Comcast Cable is accepted and enjoyed by most people because they are not locked into a contract and the speeds are generally faster then DSL. The fact that there is no contract is very attractive to me because it allows you to try out the service. ATT DSL is always pushing a contract on you which turns many people off.

  2. Actually, this is good for the consumers. Slow downs mean cheaper prices and more competition. The same scenario is happening here in the UK. Like any other business, the fittest will survive. There is nothing wrong from a consumers point of view that cable companies are able to offer triple deals or even quadruple ones like Virgin Media does in the UK.

  3. Hmm, perhaps if they would have actually reached out to rural communities full of people dying to get ANY broadband, they would have had more growth and revenue, but no, we’re just too dumb and redneck for that fancy internet.

  4. desertviking

    Maybe more consumers are going the mobile card route? I bought a new house, but didn’t put in a landline nor broadband, I just bought a Sprint mobile card. It is not as fast yet, but its nice that I can use it anywhere. $60 a month…How are the numbers for that segment?

  5. I would say at this point everyone interested in being online already is.
    Remember in March a survey was released stating that nearly a third of Americans were not interested in getting internet access at home.
    At some point (possibly now?) there will be a saturation when it will be very difficult to add any more households to the list of internet subscribers for the reasons listed in the survey.
    http://www.reuters.com/article/oddlyEnoughNews/idUSN2323460320070326

  6. Until the government starts treating broadband like the utility it should be and embarks on a program to upgrade everyone to 100MbS speed, this will be a limiting factor to our economy’s growth. Other countries with ubiquitous high-speed broadband at low prices will innovate next-generation Internet services at a higher rate and eclipse America’s leadership position.

  7. John Scott

    Price is still a problem for many. Plus, coverage in rual America is not very good. Cable companies are not expanding into smaller communities. In Europe wireless local networks located at local businesses and providing service for surounding area’s is very popular. But, in the US everything has to be done big. DSL here is limited by design. So unless we embrace wireless technologies for the folks in the boonies. They will not have broadband.

  8. i would subscribe if they’d put it in my area how bout instead of screwing around with this crap how bout they try a new way to get more subscribers such as going to areas that don’t have highspeed internet and putting some in

  9. Could this also be a slowdown in Internet adoption. The recent boom has been significant, with people who were on dial up now able to surf high speed, and many who were not on the net at all, now surfing high speed. From the sounds of the numbers posted, the high speed adoption rate over the past number of years has been significant. Are we simply running short of people who feel the need to be on the net right now? The late late adopters.

  10. Sandeep Sahai

    Hi

    I guess phone company would see major drop in new subsrciber for High speed for the simple reason that cable would provide better speed and more service. For example Digital phone service is one of the main factor which would drive new customer to go to Cable company. Again directly or indirectly it is VOIP which is hurting or perhaps redefining the whole Telecom industry.
    So my take is this is the start of new era…