Prices charged by cable operators for broadband services will double over the next several years, offsetting declines from broadband saturation and erosion of linear pay-TV services, says New Street Research analyst Jonathan Chaplin.
In a note sent out to investors over the weekend, Chaplin noted that while cable operators continue to steal high-speed internet marketshare from telephone companies, MSO’s rate of ISP customer growth is actually slowing.
Chaplin said customer growth came in at 6.4% in the fourth quarter of 2016, down both year-over-year (from 6.9% in Q4 of 2015) and sequentially (down from 6.9% in Q3 of 2016).
Net additions of HSI customers for cable companies, meanwhile, were down in Q4 to 3.783 million from 3.840 million in the fourth quarter of 2015
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Chaplin believes cable operators are poised to capture the bulk of the remaining adds.
“Our long-term penetration forecast is predicated on cable increasing its market share, given a strong network advantage in 70% of the country (this assumes that telco fiber deployment increases from 16% of the country today to close to 30% five years from now)."
Cable operators controlled 65% of the U.S. broadband market at the end of 2016, Chaplin added. By 2020, he estimates their market share will grow to around 72.2%.
MSOs, he said, controlled 62.889 million broadband subscribers at the end of last year. By 2020, he predicts that number to grow to 78.331 million.
Chaplin, meanwhile, predicts average revenue per user (ARPU) will also grow, as cable operators find ways behind usage-based pricing to increase prices.
“Comcast and Charter have given up on usage-based pricing for now; however, we expect them to continue annual price increases,” Chaplin said. “As the primary source of value to households shifts increasingly from pay-TV to broadband, we would expect the Cable companies to reflect more of the annual rate increases they push through on their bundles to be reflected in broadband than in the past. Interestingly, Comcast is now pricing standalone broadband at $85 for their flagship product, which is a $20 premium to the rack rate bundled price.”