Telcos Top Cable in Q3 Data Wars

Keeping up their recent winning ways, U.S. phone companies added more high-speed data subscribers in the third quarter than their cable rivals did, according to the latest research compiled by Cable Digital News.

For at least the eighth time in the past 10 quarters, the bigger phone providers outpaced the larger cable guys as both industries turned in steady, if not spectacular, performances, collectively signing up more than 2.5 million Americans for high-speed Internet service. The nation's largest phone companies added more than 1.3 million broadband subscribers in the quarter, compared to about 1.2 million customers for the biggest MSOs.

Thanks to these latest gains, the Bells nibbled away again at the cable industry's broadband lead, slicing cable's market share further below its one-time height of about 70 percent. Yet, due to their big headstart earlier in the decade, cable operators still retain a decided edge over the telcos as the number of U.S. broadband homes surges past the 50-million mark.

With the total number of high-speed data customers now approaching 51 million in the U.S., the two rival industries finished September with cable companies boasting about 28.2 million subscribers, or slightly less than 56 percent of the market, and phone companies accounting for more than 22.7 million subscribers, or more than 44 percent of the market.

Adding Canada to the mix, the entire North American broadband industry ended the summer with about 55 million subscribers. Cable operators accounted for more than 32 million customers, while the phone companies accounted for the remaining 23 million.

The new CDN figures generally concur with recent market estimates by other industry analysts. All market watchers see cable's broadband lead continuing to slip as the phone companies make strides with cheaper DSL prices, rollouts of new fiber-rich networks, multi-product bundling, and other aggressive marketing tactics.

Bruce Leichtman, president and principal analyst of Leichtman Research Group Inc. (LRG) , says U.S. phone companies have now added about 1.5 million more broadband subscribers than did cable operators over the last two years. But, even with this slippage, he notes, cable companies still have about 5.4 million more data customers than the telcos.

The phone and cable industries fell about 100,000 new subscribers short of their breakneck pace in last year's third quarter, when they collectively netted more than 2.6 million broadband subscribers in the U.S. But the summer results still mark a strong showing for the two industries during what's usually the second or third strongest quarter of the year.

In fact, Leichtman notes that the two industries gained about 450,000 more broadband subscribers than they did in the second quarter, traditionally the worst three-month period of the year. The telcos and MSOs each added at least 200,000 more customers than they did in the spring.

On the cable side, the continuing deployment of VOIP services by most major cable operators and the corresponding nationwide rollout of discounted triple-play bundles continued to drive broadband growth over the summer.

Comcast Corp. (Nasdaq: CMCSA, CMCSK), which is rolling out $99 triple-play packages in markets around the nation, easily led the way with a huge pickup of 536,000 cable modem customers. Time Warner Cable Inc. (NYSE: TWC), which is also promoting $99 triple-play bundles in its markets, followed next with 251,000 new data subscribers.

Verizon Communications Inc. (NYSE: VZ) scored the highest among the Baby Bells for the third consecutive quarter, adding 448,000 broadband customers, up from 440,000 new customers in the spring and 389,000 in the year-ago period. Verizon reported netting 147,000 FiOS Internet customers in the third quarter, boosting its grand total to 522,000. It also added 301,000 DSL subscribers.

Look for both industries to experience an even stronger fourth quarter, which is usually the best of the year. But, with the phone companies still undercutting MSO prices by at least $10 a month, the momentum likely won't shift back in cable’s favor until at least next year.

Table 1: 3Q06 N American Cable Modem Subscribers by MSO
Cable Operator Net Adds New Total
Comcast 536,000 11,000,000
Time Warner 251,000 6,398,000
Cox 100,000 3,200,000
Charter 88,100 2,343,200
Cablevision 72,438 1,963,880
Bright House 20,000 850,000
Insight 44,800 579,300
Mediacom 28,000 544,000
CableOne 15,172 276,434
RCN 12,000 269,000
Other 155,000 800,000
Total U.S. 1,322,510 28,223,814
Shaw 25,907 1,306,991
Rogers 51,800 1,250,000
Videotron 43,000 769,000
Cogeco 12,601 343080
Other 10,000 210,000
Total Canada 143,308 3,879,071
Total North America 1,465,818 32,102,885
Source: Cable Digital News Estimates, Company Reports

— Alan Breznick, Site Editor, Cable Digital News

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