Research: It’s a Two Horse Broadband Race Between FTTP and Cable Broadband

Communications industry financial analysts at MoffettNathanson Research expect to see continued cable broadband market share gains, which have accelerated as bandwidth demand climbs during the COVID-19 pandemic. The researchers’ “equilibrium” forecast calls for DSL market share to drop to zero. And “mid-tier” telco broadband increasingly is becoming “just as obsolete,” the researchers said.

“Broadband is increasingly a two-horse race between cable and telco FTTH, where it exists,” MoffettNathanson argues in a new research note.

The COVID-19 Impact
MoffettNathanson isn’t the first research firm to note that cable made major broadband gains in the first quarter of 2020. Leichtman Research Group noted that the top cable broadband additions were up 122% over the same quarter of 2019, while the top telco broadband providers had a net loss of about 65,000 subscribers, compared to a net gain of about 20,000 in the first quarter of 2019.

Like LRG, MoffettNathanson attributes these changes to increased bandwidth demand as people spend more time at home during the COVID-19 pandemic.

“The increased level of usage was enough to convince many customers that they needed higher speeds to handle the number of simultaneous users in their home,” MoffettNathanon wrote.

The MoffettNathanson researchers also noted another dimension to the cable broadband market share gains. New household formation was quite high in the first quarter of 2020 – at least until the COVID crisis hit.

The implication of that finding is that cable’s broadband long-term gains may not be quite so impressive – and that telco losses likely would have been even worse were it not for new households ordering broadband.

Cable Broadband Market Share
MoffettNathanson defines “mid-tier” telco broadband to include fiber-to-the-node (FTTN), IP-DSLAM and VDSL technology supporting speeds as low as 10 Mbps and as high as 75 Mbps but with speeds that generally don’t exceed 25 Mbps.

“The pressures on broadband networks laid bare by the coronavirus crisis make it clear that market share will now migrate even faster in this large cohort,” the researchers argue. “As with legacy DSL, it is increasingly clear that this segment is simply not competitive anymore. Equilibrium market share in this cohort, if one looks out far enough, is 100/0.”

In the near term, the researchers expect to see cable companies take an 85% share of broadband connections in markets where they compete against mid-tier telco broadband. Even more negative for telcos, MoffettNathanson no longer sees telcos having an advantage against cable in FTTH markets. In the past, the researchers expected to see telcos gain 60% of broadband connections in markets where they had deployed FTTH but that projection was later reduced to 50/50. And according to today’s note, the researchers don’t envision that changing any time soon.

“It is . . . no longer sensible to argue that fiber has a technological advantage over cable,” the researchers argue. “With the coming advent of DOCSIS 4.0 (likely to be called ‘10G’), cable operators will be able to deliver 10 Gbps symmetrically. One has to look out well beyond 4K video to full virtual reality, and perhaps even holography, for applications that would make a 10 Gbps service insufficient.”