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.”

Only 25% of Census Blocks Have Competition for 100 Mbps Broadband (INCOMPAS report)

Only one-quarter of developed U.S. census blocks have two or more providers of 100 Mbps broadband, according to a broadband competition report from INCOMPAS – and according to the competitive carrier association, competition is even less than that finding would suggest because the finding is based on Form 477 data collected by the FCC.

Virtually everyone agrees that the Form 477 data overstates broadband availability. In this case, an entire census block would be considered to have 100 Mbps broadband, even if only a single location in the census block can get service at that speed.

The finding is one of a range of data points that INCOMPAS uses to back up its assertion that “the fixed BIAS [broadband internet access service] market, as well as the business data services marketplace, remain highly concentrated” in certain geographic areas.

Other key INCOMPAS findings about the BIAS market:

• 31% of developed census blocks have no provider offering service at 100 Mbps speeds

• 41% of developed census blocks have only one such provider

• Only 5% of census blocks have three or more providers advertising 100 Mbps service somewhere in the block

• Virtually all census blocks with gigabit service have only a single provider of service at that speed

INCOMPAS Broadband Competition Report
INCOMPAS filed the broadband competition report with the FCC in response to the Communications Marketplace Report issued by the FCC several months ago.

In comments included with its filing, INCOMPAS urged the FCC not to remove pro-competitive policies such as network unbundling and resale requirements. INCOMPAS also argued that the FCC prematurely deregulated business data services (BDS) pricing in 2017, which according to the association, has caused incumbent carriers to raise BDS prices.

According to INCOMPAS, AT&T, Verizon, Frontier and CenturyLink have raised BDS pricing and CenturyLink’s increases for special access DS1 channel terminations were as high as 150%.

Broadband speeds are too low in too many places, said Chip Pickering, CEO of INCOMPAS, in a press release about the INCOMPAS broadband competition report. In addition, he said, “prices are high and consumers are fed up with terrible customer service.”

He added that “More competition is the answer, and it’s time for the FCC to launch a competition crusade based on gigabit speed goals that create jobs and new opportunities for small business growth.”