Let’s just face it — the US telephone companies are phone companies in name-only. They have been losing their grip on the voice business for a long time now, but now it is becoming clearer that the group collectively is starting to lose their traction in the broadband business as well. Instead, it is the cable companies who are cleaning up. Take a look at the numbers so far and what you see is the first ever collective quarterly decline in broadband subscribers at the top three telcos — AT&T, Verizon and Qwest.
From AT&T’s (s T) investor report (download PDF):
- At the end of the second quarter, AT&T had 16 million total wired broadband connections, up 404,000 over the past year but down 92,000 from first-quarter 2010 levels. Total broadband connections, which include business and consumer wireline subscribers and wireless customers with 3G LaptopConnect cards, decreased by 93,000 in the quarter to reach 17.4 million.
- Total consumer revenue connections at the end of the [second] quarter were 44.3 million, compared with 46.3 million at the end of the second quarter of 2009 and 45.0 million at the end of the first quarter of 2010.
Now let’s shift to Verizon (s vz). From its second quarter 2010 earnings release:
Broadband connections totaled 9.3 million at the end of the second quarter 2010, a 2.5 percent year-over-year increase. This is a net increase of 28,000 from the first quarter 2010, as the increase in FiOS Internet connections more than offset a decrease in DSL-based High Speed Internet connections.
Now 28,000 net new connections for a company the size of Verizon and AT&T’s decline tells me something isn’t going too well. Sure the operators are desperately trying to get their DSL customers to upgrade to U-verse and FIOS, but those conversions aren’t happening fast enough. Richard Greenfield, who follows the cable companies for BTIG Research in a note earlier this morning to his clients writes:
We estimate loss of 46K (including Q, which is yet to report) – a notable change for the RBOCs in broadband.
Compare this to the cable guys. They just keep ramping up the speeds and keep winning the consumer mindshare. Many view DSL as a laggard technology and are happy switching to cable broadband. Greenfield further notes:
We expect the top two cable operators (Comcast and Time Warner Cable) to report collective broadband additions of at least 150K, if not more (compared to 398K in Q1 ‘10 and 554K in Q2 ‘09). In addition, we expect positive broadband additions for other major cable operators such as Cablevision, Charter, Cox, Insight and Mediacom, which should lead to an even greater advantage for cable in Q2 2010 versus the RBOCs. Cable’s broadband market share appears to be around 56%, up 100 bps year-over-year, while the RBOCs have fallen to 44% from 45%. We believe cable industry market share could reach 58% by the end of 2011, as share gains are beginning to accelerate.
My quick take: phone companies are too busy chasing the higher margin wireless and wireless broadband revenues that they are leaving their core businesses open to attack.
Related GigaOM Pro Content (sub req’d): Who Will Profit From Broadband Innovation?