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As Broadband Growth Slows, Telcos Lose Out

A new report from Pike & Fisher should strike fear in the hearts of telecommunications companies. First, it posits that broadband growth will decline by 12 percent in the U.S. (although subscriptions themselves will grow by 8 percent), and that of the 5.7 million new broadband subscribers anticipated in 2009, three fourths of them will choose cable. That’s certainly not good news for carriers hoping to stem landline loss (P&F estimates landlines will decline almost 16 percent next year to 86 million). It also puts a crimp in plans to offer converged services across televisions, mobile phones and computers — something both AT&T (s T) and the cable guys are itching to do.

Wireless subscriptions have helped carriers along, as the incredible growth of wireless data adoption has somewhat offset the loss of landlines and the slow growth of DSL. However, those new subscriptions may also wane. Pike & Fisher estimates that 60 percent of wireless subscribers will have a 3G handset, but the report didn’t make any guesses about wireless data subscription growth.

Fears of a wireless subscriber slowdown led yesterday to a downgrade of Verizon’s (s VZ) and AT&T’s shares from Craig Moffett, the communications analyst at Sanford Bernstein, who has also been less than impressed with Verizon’s investments in fiber. Anyhow, new subscribers on the wireless side don’t fill in the revenue gap incurred when landline and DSL subscribers leave. As for television services from the carriers, they’re growing rapidly, but still will likely have a mere 6 percent of the market, according to the Pike & Fisher report.

5 Responses to “As Broadband Growth Slows, Telcos Lose Out”

  1. Stacey points to the cord-cutting going on. Carriers looking to stem landline losses will need to add value beyond plain vanilla phone service. We’re beginning to see broadband users move away from traditional phone service and adopting Vidtel’s new telephony service as a “more for less” option. (Once teasers wear off, many people are paying $50 a month for phone service, so the average annual cost is $600. We’re seeing a trend of cable users dumping the traditional phone service in lieu of Vidtel’s $249.95/year telephony service that offers not only unlimited phone calling in the US and Canada but also video calling and video mail). Of course, today the service requires a video phone for $199.95 but adding that, it’s still a 25% cost savings for many even in the first year ($450 vs. $600..after year one, it’s 40+% cheaper). In this economy, anything saving $150 catches attention. When it starts solving another problem, people really wake up. Phone calling alone is not satisfying the need for people to connect. Wiith travel budgets slashed, we lose face time with people important to us. Here, someone will argue that video chat is mainstream but the irony is that it is the awareness, not usage (less than 1% of the population uses Skype), that is widespread. Let’s not forget the 99% of the population who are not as tech-savvy or who simply are too busy to coordinate video chat.

  2. Why is cable projected to win 75% of new accounts? Adding DSL to a phone line in Northern California can cost $15/month, far less than cable. Sure, DSL is slower, but I would have thought that price is more important than performance these days. Are the new cable broadband users ditching their land lines altogether?