With initiatives like TV Everywhere and broadband usage caps, is the cable industry biting the hands of the streaming video companies that are driving its most vibrant prospect for growth?
Now that Time Warner Cable (s TWC), AT&T (s T) and Verizon (s VZ) have kicked off the latest round of quarterly earnings reports by multi-channel operators late last month — a series that continues Wednesday when Comcast (s cmcsa) releases its first-quarter numbers — a case can be made that the cable industry has a better future in providing broadband services rather than TV/video bundles. And they have Netflix (s nflx) and YouTube (s goog) to thank for that.
This notion has picked up stream recently, with research company Sandvine releasing data last week showing that streaming on Netflix (s NFLX) accounts for 29 percent of broadband usage over fixed networks during peak hours (8:15 p.m. – 10:45 p.m.), up 4 percent from last year. YouTube (s GOOG) is second in line, accounting for 12.2 percent, up nearly 2.5 percent.
Overall, Sandvine found that “real-time entertainment” accounts for 58 percent of peak fixed-network traffic, up from 49.2 percent a year ago (see chart). Overall, median U.S. broadband usage has more than doubled over the last year to more than 10 gigabytes per month per household.
“The faster bandwidth consumption escalates, the better the cable industry is positioned,” wrote BTIG Research’s noted media technology analyst, Richard Greenfield, on his blog Tuesday. “With an increasing number of IP-enabled devices ‘on net’ in the home all the time, consumers will demand increasingly robust bandwidth and be willing to pay for it.”
For the last several years, cable companies have been losing multi-channel video subscribers to telco-based service providers. But as Greenfield also pointed out, with 214,000 net subscriber additions for high-speed data services in the first quarter, Time Warner Cable had more broadband growth than Verizon and AT&T combined.
The latter two companies are experiencing subscriber losses in the increasingly uncompetitive DSL sector. And their wireless broadband products don’t offer enough bandwidth to keep up with demand, Greenfield added. Neither AT&T or Verizon offers a cap as big as 10 GB a month, for example.
“While the broadband speeds delivered by wireless companies have notably improved, bandwidth caps mitigate the risk of wireless devices replacing in-home fixed broadband connections,” he wrote.
With escalating programming costs and stagnant revenue growth limiting the margins of video services, the performance of Comcast’s broadband services will undoubtedly gather close scrutiny by investors Wednesday.
Time Warner Cable’s revenue for residential video services rose only 2 percent to $2.7 billion, for instance, while revenue for residential broadband was up nearly 10 percent to $1.2 billion.