Coming off a record third quarter during which they added around 790,000 broadband subscribers, cable operators have been warned by MoffettNathanson analyst Craig Moffett not to get too excited about their prospects for continued growth.
"Broadband in the United States is rapidly approaching saturation, and the pool of legacy DSL subscribers from which cable has recently drawn so much market share is rapidly declining," Moffett said.
According to Moffett, as of the end of 2013, there were slightly less than 6 million DSL customers in the U.S. who had download speeds of less than 3 Mbps, and that number is likely much lower today.
Meanwhile, he said that residential wireline broadband service is available in 96 percent of U.S. households, and actually penetrated into about 81 percent of them. "We are approaching the ceiling," Moffett noted.
"To maintain momentum, cable operators will have to take share from FTTN [fiber to the node] buildouts that offer meaningfully higher speeds than legacy DSL," he added. "Can they? Meanwhile AT&T's commitment to build fiber to another 12.5 million customer locations will mark the largest increase in competitive fiber since the announcement of Verizon FiOS in 2005."
Moffett's bearish outlook on cable's continued ability to pull broadband market share away from telcos and continue to grow flies in the face of more bullish reports issued recently by peers.
"Our long-term penetration forecast is well ahead of consensus and calls for an acceleration in broadband subscriber growth," NewStreet Research's Jonathan Chaplin said last month. "We saw this play out in 3Q15 with cable companies reporting their best third quarter broadband adds in four years, with growth accelerating and beating consensus expectations."
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