US Broadband Growth Slows

Telcos in the US can't count on wireline broadband to fuel growth any more

Raymond McConville

November 13, 2007

2 Min Read
US Broadband Growth Slows

Broadband subscriber additions in the United States could be reaching a plateau, according to a report from one financial analyst.

It might appear that the U.S., with barely more than 50 percent of homes linked to broadband, has a lot further to go. But in a report issued today, UBS AG analyst John Hodulik notes that only 77 percent of all U.S. homes have a computer, meaning much of the available market is already eaten up.

"This suggests the days of wireline broadband connectivity as a major growth driver of U.S. telecom are largely over," he concludes.

Third-quarter numbers seem to back him up.

Hodulik writes that broadband subscriber growth in the U.S. was 18 percent for the third quarter of 2007. That's a drop from 19.8 percent growth in the previous quarter and 30.1 percent growth in the third quarter a year ago.

The sputtering U.S. economy hasn't helped either. Pressure on the U.S. consumer has led to higher wireless churn rates, and those effects are spreading to wireline services as well, Hodulik claims.

Analysts have also pointed out lately that the tanking housing market has begun to hurt telecom, because wireline services are, after all, connected to homes.

Some carriers agree that broadband growth has flattened. "It's not surprising to us," says a Verizon Communications Inc. (NYSE: VZ) spokesman. "Broadband is becoming a more mature product, and people are looking for more speed and capacity. We think a lot of the people who are going to migrate to broadband from dialup have migrated."

Verizon's stance certainly reflects the trend in its numbers. While subscriber adds to its newer and faster FiOS service are rapidly increasing, its overall broadband growth sank in the third quarter.

The same can be said for AT&T Inc. (NYSE: T), which saw its faster-than-DSL U-verse service growth heading in the opposite direction of overall broadband growth in the third quarter.

The end result is that telcos will have to rely on market-share gains to protect broadband growth, Hodulik writes. He expects U.S. broadband growth to continue to fall in the coming years, from 16 percent in 2007 to 12 percent in 2008 and 10 percent in 2009.

— Raymond McConville, Reporter, Light Reading

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