Singularity in half the U.S.? Cable is now 50/5 or higher for nearly everyone. The numbers from Leichtman are inescapable; Cable is clobbering DSL in the U.S. The question mark after "singularity" is only because this is a single quarter; another quarter or two and the death march will be almost irreversible. Telco broadband dying across much of the United States wasn't inevitable. DSL is still beating cable in Canada, England, and France.
For several years, nearly everyone except a few top analysts and the companies involved thought cable was decisively knocking out telcos. I frequently pointed out that telcos were doing fine in about ~50M homes with faster DSL (AT&T U-Verse, millions at Century) or fiber (Verizon FiOS.) The losses were coming in the about ~25M homes AT&T and Verizon hadn't upgraded in a decade or more. They intend to shut down landlines for most of them, expecting to be more profitable because many would switch to their wireless.
Except for Harold Feld, Washington isn't willing to face that reality. Telco landlines are about to disappear across as much as half the area of the country. As Blair Levin confirmed a while back, D.C. has no idea what to do when competition isn't working. They continue to bury their head in the sand.
What explains the (apparent) strong trend? Factors include:
- AT&T has ~15M homes that have not been upgraded to U-Verse. They've been hemorrhaging customers for years in those areas. The 123K lost Q2 suggests even in the 30-33M U-Verse homes, customers are switching. AT&T has been assuring Wall Street that peak U-Verse speeds of 45-75 megabits down would be enough. Most customers are on 16 megabits or less, and AT&T needs to bond lines many places to get to the higher speeds. The 50-60 megabit standard cable offering is a natural way to upgrade and costs something similar to AT&T's 16 meg. It will take three years for T to upgrade 1/3rd of U-Verse to G.fast and fiber home. Starting in 2017, T will vector some of the remaining U-Verse lines. That will allow speeds of 150-250 megabits ~300 meters out but falls below 100 megabits at around a kilometer. AT&T's cabinet network wwas built to about a two-kilometer design.
- Verizon FiOS has some of the highest prices in the world, starting at $70. They try to disguise that with bundles and short term offers. Verizon for years was better on both wired and wireless. Their whole business model is based on being able to charge more. They have 10-15M homes with 10 year old DSL as the only offering. They lost 83K, as cable download speeds catch up and sometimes beat FiOS. AT&T and T-Mobile have pretty much caught up on the wireless side in most of the country, as Verizon has cut capital spending. U.S. wireless sucks in international comparison. Every week I get an announcement from another country that is upgrading LTE to 100-300 megabits down. Verizon is mostly at 5-25 megabits. Adjusted for population, the U.S. giants have a third as many cell sites as China Mobile and Korea. Spain has twice as many, as well as more fiber home. CEO Lowell McAdam still thinks his wireless network among the best in the world. That's dangerous.
- Century/Qwest (-66K,) Frontier (-77K), and Windstream (-16K) have upgraded a fraction of their lines to VDSL and fiber and have plans to expand the upgrades. It may be too little, too late. They've done some remarkable marketing to hold their own against cable the last few years despite inferior networks. For a long time, they have been mortgaging their future by underinvesting. The bill may be coming due, although they each are telling investors the losses will soon stop. They have been paying out far more in dividends than they have earned and have few resources for the upgrades to stay in the game.
Susan Crawford, one of the best, has been saying for several years the U.S. is headed towards a cable monopoly. That's clearly true for 1/3rd of the country. I've been contending the data didn't support her fears in more than half of the U.S. These figures suggest this has now changed, although a single quarter is not proof. A while back, I pointed to financial issues at the telcos, in terms that would be a "sell" rating if I picked stocks. Remember that I look at longer term issues than the markets, which is why I leave the investment advice to friends.
Comcast is "going coast-to-coast" with gigabit DOCSIS 3.1 in the next 12 months.
|Broadband Internet||Subscribers at end of 2Q 2016||Net Adds in 2Q 2016|
|Other major private company***||4,745,000||15,000|
|Total Top Cable||57,014,017||553,293|
|Total Top Phone Companies||34,880,940||(360,783)|