Broadband Growth Skids at AT&T

AT&T’s (s T) continuing reliance on its fast growing wireless business cannot hide the fact that the wireline broadband growth is slowing for the company, as its first quarter financial results show. Even as its competitors have offered higher speeds at better prices, Ma Bell has muddled along, choosing to devote all its energies elsewhere.

During the first quarter of 2011, the Dallas-based company added 175,000 new wireline broadband connections, down a whopping 31.4 percent from 255,000 new additions during the first quarter of 2010.  When compared to the fourth quarter of 2010, wireline broadband additions fell 20 percent.  Leichtman Research Group estimated that AT&T had 16.3 million broadband subscribers at the end of 2010.

AT&T is getting clobbered because it has started to fall behind the cable guys – not exactly white knights – who are at least offering broadband packages that are in tune with today’s consumer. Unlike Verizon (s vz), which is deploying fiber to the home and can offer consumers up toi 100 Mbps, AT&T’s U-Verse broadband plans at best can be described as ho-and-hum with speeds that can’t crack the 25 Mbps barrier. Let’s just face it — Ma Bell is a dusty old company that uses M&A to paper over its inability to come-up with innovative new offerings.

Today, when it comes to broadband there is a comfortable duopoly with no-one motivated to innovate. Cable guys are aggressive enough to stay ahead of lumbering phone companies like AT&T. Unfortunately, we are going to see the same dynamics come to play on the wireless side, thanks to the T-Mobile-AT&T merger, which will prove to be counter-productive.