Despite being challenged by FTTP-powered services in various pockets of the market, the US cable industry still has plenty of room to expand its all-important broadband business over the next five years, MoffettNathanson concluded in a new report that resets the road ahead based on the competitive landscape.
"Our revised forecasts suggest there is a longer growth runway ahead for cable than contemplated in our prior forecast," industry analyst Craig Moffett explained in a report issued Monday.
His revised growth forecasts for the nation's two largest cable operators -- Comcast and Charter Communications -- are relatively small. However, his revisions on the two other publicly traded MSOs Moffett covers -- Altice USA and Cable One -- indicate they will rake in many more subs that previously expected. And some of that has to do with the degree of fiber-to-the-premises (FTTP) competition -- or lack thereof -- they face in their respective service footprints.
Based on a new analysis adjusted for the completion of AT&T's FTTP build, Altice USA has FTTP competition overlap in 42% of its cable footprint, compared to Comcast (34%), Charter (30%) and Cable One (8%).
Moffett's estimates of competitive overlaps factors in FCC's fixed broadband deployment data (updated through June 2018) cross-referenced with Census Blocks served by each service provider. That analysis was also based on a subset of US cable's more significant broadband rivals -- AT&T, Verizon, Frontier, CenturyLink, WideOpenWest, Windstream, General Communications and Cincinnati Bell.
Of the US MSOs included in the study, Altice USA is a bit of a special case. The operator has an FTTP network upgrade underway in its Optimum (former Cablevision Systems) footprint in New York, Connecticut and New Jersey, where it competes head on with Verizon Fios. However, its more rural Suddenlink footprint doesn't face nearly as much FTTP competition. Given that scenario, Moffett expects the bulk of Altice USA's broadband growth upside to originate from its Suddenlink footprint.
With all forms of competition factored in, Moffett sees Comcast's long-term "terminal" broadband penetration at 60%, compared to Charter (61%), Altice USA (60% -- 72% for Suddenlink and 53% at legacy Cablevision); and 71% for Cable One. In all instances, Moffett expects those terminal penetration rates to be higher than estimated current penetrate rates for each cable operator studied.
From a broader market standpoint, Moffett now sees US cable snapping up 73% of the market where operators face off against various flavors of DSL, versus previous expectations that cable operators would gobble up 63% of that segment of the market.
Where MSOs face off with fiber-to-the-premises (FTTP)/fiber-to-the-home (FTTH), Moffett now assumes a 50/50 split, compared to a previous forecast that FTTP would get 60% of the market. He attributes that adjustment in part to the speeds and other broadband performance boosts cable operators will be able to squeeze out of their widely deployed hybrid fiber/coax (HFC) networks. While DOCSIS 3.1 is capable of supporting multi-gigabit speeds, the new specs being developed, DOCSIS 4.0, put HFC on a path to support symmetrical 10Gbit/s speeds alongside low-latency capabilities.
"We expect there to be no meaningful functional difference, at least to end users, between FTTH and cable's DOCSIS 3.1 and, soon, DOCSIS 4.0, offerings," Moffett wrote. "In short, there is no longer a reason to assume that cable broadband is a disadvantaged technology even versus FTTH."
Fixed wireless skepticism
Moffett's latest analysis of the US broadband market does not include any share assumption for fixed-wireless broadband (FWBB).
"[W]e remain skeptical about FWBB using millimeter wave spectrum for propagation reasons, and we are skeptical about FWBB using mid-band spectrum for capacity allocation reasons," he wrote. "With that said, assuming that FWBB will have no impact is almost certainly too dismissive."
Moffett also acknowledged that the study also ignores pricing, which varies by operator and difficult to forecast how pricing will evolve in the years go come. "It is almost certainly the case that price matters; by ignoring it, we are implicitly assuming that terminal market share will turn out the same way in similar cohorts for different operators even if the pricing dynamics in each are completely different," he explained.
Cable makes more broadband gains in Q3
According to Moffett's analysis, US cable operators added 947,000 broadband subs, while the telcos lost 151,000.
"[I]t is increasingly clear that Cable's share gains are coming now from the 'middle tier' of TelCo speeds," he wrote. "The legacy DSL pool is being rapidly depleted, but as it has declined, TelCo gains in the middle tier have turned to losses, funding continued Cable growth."
Aided by new household formation, total broadband adds for Q3 were 795,000, up from 726,000 in the year-ago quarter,
- Ho Hum! Another Blah Quarter for Fios
- Charter Adds 276K Mobile Lines & 351K Internet Subs, Loses 75K Video Customers in Q3
- Verizon's 5G Home Blows Into Chicago
- Comcast tests 2.5-Gig gateway
- CableLabs Kicks Off Pursuit of DOCSIS 4.0
- Cable Infrastructure Spending Slogs Through Another Tough Quarter
- Focus on Mobile Margins, Profits Trump Need to Pump Big Volumes at Altice USA
— Jeff Baumgartner, Senior Editor, Light Reading