Broadband Growth Falls Sharply in the U.S.

14 Comments

q22009broadbandstats.gifAfter years of breakneck growth, U.S. broadband is in slowdown mode. During the second quarter of 2009, U.S. service providers added less than 650,000 new accounts, down more than 50 percent from 1.6 million additions in the first quarter. (Stats below the fold.)

To be fair, the second quarter is seasonally the slowest for the U.S. broadband industry, but overall subscriber gains are down 28 percent from last year’s 887,000 net new additions as well. So far, the U.S. has added about 2.25 million new subscribers in 2009, down about 27 percent from 3.1 million additions during the first two quarters. At this rate, the U.S. will add significantly fewer subscribers during 2009 vs. 5.4 million in 2008.

The slowdown is fueled by two major trends: First, nearly two-thirds of U.S. homes have broadband. Secondly, the overall economic slowdown and bursting of the housing bubble have chilled demand for Internet connections.

During the second quarter of 2009, phone companies added 385,000, or 61 percent, of the total new subscribers, with Verizon (s VZ) leading the way: 186,000 followed by AT&T (s t), which signed up 112,000 net new broadband customers.

So what does it all really mean?

We’re going to see a renewed focus by carriers on offering higher-priced tiers. Comcast (s CMCSA), which added a minuscule 64,000 net new subscribers in the second quarter of 2009, has already indicated its intentions to roll out higher-speed offerings across its entire footprint. I think this speed growth — both upstream and downstream — is going to be accompanied by more “metering.”

The phone companies are going to respond as well. Qwest (s Q) is already offering 40Mbps-type speeds. AT&T is a bit mysterious — it hasn’t quite boosted its DSL speeds and has been slow in growing its U-Verse business. Verizon clearly is in the driver’s seat, especially when it comes to lumbering Time Warner Cable (s TWC). (Related post: Verizon FiOS Media Manager: Easy Set-up, So-So Delivery.)

I would say Verizon, Cablevision (s CVC), Comcast and Cox are the companies that will lead the super-speed (or as I like to call it, ultraband) charge. Some of the independent phone companies are busy merging with each other, and that is going to keep them distracted. ;-)

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14 Comments

Kevin Walsh

It seems that since the macro economic picture remains dire, politicians are increasingly enamored with second order derivatives. Yes, the economy is still shrinking but it’s shrinking more slowly than in the past. Yes, people are still losing jobs but they’re losing them at a slower rate than they did last quarter. Yes, the patient is still bleeding but…, well, point made.

These are, of course, efforts to seek out positive data points (green shoots) among a sea of negative indicators.

In some ways the inverse is happening with regard to broadband growth. This market sector is actually growing yet since it’s not growing as fast as it once did we take that as a negative (Government Motors should be so lucky).

I would argue that broadband growth is being tempered the fact that, as Om points out, broadband penetration already exceeds two-thirds. Further growth will inevitably decline as penetration approaches the level at which PCs have penetrated US households. In fact, it can be mathematically proven that broadband growth will, at some point, bottom out at just a little less than population growth.

Curtis

@Om,

What impact (if any) do you think the burgeoning mobile broadband push is having on consumers? For instance, do you think that many may be refraining from new fixed broadband plans and considering a mobile broadband bundle for use at home and on the go?

Om Malik

I think the mobile broadband is pretty interesting right now — it is taking the really low end users, people who are doing basic Internet tasks such as email, surfing, Facebook etc and giving them an option.

However, the way I see it, today’s mobile broadband packages fail to thrill because of the bandwidth constraints and the data transfer limits. However going forward it should become part of people’s broadband package. I think we are seeing signs that carriers are experimenting along those lines/

VIRTUAL WEB SYMPHONY

What’s the big deal. Downturn has been all pervasive. Broadband numbers have taken a beating. So have many other growth indicators. These are all inter-related. Trigger has to come from somewhere and everything will fall in place. And even broadband new additions will show the growth.

kyle

Yes. Rent comes beofre broadband service. I wonder if the countires that US businesses outsource jobs to are seeing s similar reduction in broadband sales.

Om Malik

I explained this in my post: it is not just the slowdown. I think the market penetration is a much bigger problem right now. The number of people with computers and the number of people with internet access (high speed) is pretty much in sync now. So that is a big big problem.

JfStX

Well..you may be right in metro areas….
but if they plan to grow in numbers, they will need to expand in rural areas. Rural areas are where the potential is. Wireless carriers are rapidly adding/upgrading those areas to take advantage of the growth/revenue. I know….I’m rural and my sprint 3g has gotten faster in the last 2 weeks. I’m hitting consistent 2megs down now

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