The economic downturn, in particular the housing market slump, that has been pressuring U.S. telecom operators now seems to be extending to cable operators as well. After enjoying nearly eight quarters of solid growth, it looks like the U.S. cable telephony business is slowing down.
The proverbial canary in the coal mine sounded the alarm yesterday. ARRIS, which makes hardware for cable operators, lowered its second-quarter forecast for both profits and revenues. Management blamed maturing cable telephony deployments and a slow housing market on the reduced demand for cable telephony services.
I think both are valid points. First, cable voice has become pervasive. You can now call your cable operator and get a fixed line connection without worrying if they actually offer voice service in your market. (Whether you’re happy with them, however, is a different story altogether.) So it’s hardly a surprise that the demand for equipment would slow down.
As we’ve previously noted, cable VoIP has been on a tear. At the end of the first quarter, Comcast had 5.1 million customers, while Time Warner Cable had 3.17 million, followed by Cox’s 2.46 million, Cablevision’s 1.68 million and Charter’s 1.08 million. Many of these subscribers came at the expense of telephone companies. Telegeography estimated that there were about 16.3 million VoIP households at the end of the first quarter of this year.
The cable companies benefited from the previous surge in new housing starts, which led to spectacular growth in their broadband and voice telephony businesses and in turn, made it easier for people to switch away from telephone companies. A slowdown in this business is only natural. In fact, I wouldn’t be surprised if large cable companies saw a sharp slowdown in broadband growth as well.
The real question is, just how big will the slowdown be? With the second-quarter earnings season just getting underway, it won’t take long to find out.