Fixed Network Broadband Market is Near Saturation

It almost seems impossible that fixed network broadband Internet access could have become a “legacy product” so soon, but that is what has happened. For the most part, nearly everyone who wants to use broadband already buys it. And for those who want access to the Internet, and don’t want to buy fixed network broadband, mobile broadband, using a smart phone, now is a growing trend.

Leichtman Research Group points out that  the 17 largest cable and telephone providers in the United States, representing about 93 percent of the total market, acquired about 580,000 net additional high-speed Internet subscribers in the third quarter of 2012.

Collectively, these service providers now account for over 80.7 million subscribers. Cable companies have 46.2 million broadband subscribers, and telephone companies have 34.5 million subscribers.

Keep in mind that not all households own or use computers, a primary indicator of potential demand for broadband. At about 80 percent broadband penetration, we already are very close to the percentage of households that own computers, use the Internet at home, and want to buy the product. .

Many studies show that income is directly correlated to PC ownership and broadband usage. Households with annual incomes of at least $75,000 buy broadband at at least an 87 percent rate. Homes with annual incomes of $30,000 to $49,999 buy broadband at a rate of about 64 percent.

That pattern roughly mirrors the TV market, where not all homes own TVs and not all households subscribe to video entertainment services, though most do. There are about 132 million U.S. homes. About 114 million have TVs. And there are about 96 million video subscriptions purchased by U.S. consumers.

Since many households own two or more PCs, it is difficult to determine precisely what percentage of U.S. homes actually are candidates for broadband services to support those devices.

The top cable companies added about 575,000 subscribers, while the top three telephone companies added about 5,000 subscribers, in large part because AT&T and Verizon actually lost customers.

AT&T and Verizon added 749,000 fiber subscribers (U-verse and FiOS) in the quarter, while having a net loss of 799,000 DSL subscribers.

The slow pace of net additions simply reflects a market that is nearly saturated. We will know when the market is completely saturated when net additions hit zero, or very close to it. .

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