Cable operators continued to grab market share from telco service providers in the area of residential high-speed broadband during the third quarter, but customer gains seem to be decelerating.
Reporting third-quarter earnings last week, Comcast said it added 214,000 broadband users during the three-month period, while Charter claimed additions of 249,000. In the third quarter of 2016, the top two U.S. cable operators reported gains of more than 700,000 users, with Comcast adding 329,000 and Charter up 387,000.
Meanwhile, Verizon posted a gain of 66,000 wireline internet users for its Fios platform, versus just 24,000 in the third quarter of 2016. AT&T said it gained 29,000 U-verse wireline broadband users after losing 23,000 in the comparable year-ago period.
In an investor note today, Deutsche Bank predicted total wired broadband gains across providers in the third quarter will come to around 550,000, off from around 800,000 in Q3 2016.
Notably, Comcast and Charter experienced slight decelerations in HSI customers in the second quarter, with Comcast adding 175,000 HSI users vs. 220,000 in Q3 2016 and Charter adding 267,000 vs. 277,000 in the year prior.
Deutsche Bank suggested that around 81% of the country has broadband and that much of it is underpriced. Cable’s current share of the U.S. wired broadband market stands at around 64%.
“We think the (much discussed) shift to OTT video highlights the value of the broadband pipe, and the associated pricing power carriers have via this revenue stream going forward (given rising usage/customer utility),” said analyst Matthew Niknam in a note to investors.
In the same memo, Niknam also predicted that AT&T would lead a competitive response to cable.
“On its [third quarter] call, AT&T outlined a roadmap to hit ~50mn customer locations with enhanced broadband speeds (50Mbps+) by 2020 (from ~30mn+ today),” he wrote. “We believe the incremental locations will come from: (1) greater FTTH footprint (6 million today, going to 14 million by 2020), and (2) additional VDSL upgrades and future 5G builds (we believe the incremental 5G locations will be out of footprint)."