High Speed Access and Video Entertainment are "Legacy" Services, But with Vastly Different Growth Profiles

Though both high speed access and linear video subscription services might be deemed “legacy” services, there is a big difference. In the U.S market, for example, the high speed access market is growing, in terms of subscribers, while the video entertainment market is shrinking.

Consider that, in 2013, the video services market shrank by at least 105,000 customers, while high speed access grew by at least 2.6 million accounts.

The 17 largest cable and telephone providers in the United States,  representing about 93 percent share of the market, acquired over 2.6 million net additional high-speed Internet subscribers in 2013, according to the Leichtman Research Group.

The high speed access market still is smaller, in terms of subscribers, than the video entertainment market. There are at least 84.3 million high speed access subscribers. In all, there are 94.6 million linear video subscribers served by the largest fixed network service providers.

In the past, one might have argued that “always” would be the case, since not every household owns computers, and not all computer owners use the Internet. The situation is changing, as was predictable.

These days, even if “using a computer” is not the reason for buying a broadband connection, watching TV, listening to music, playing a videogame, offloading mobile data usage or buying merchandise might well be the driver.

If so, high speed access adoption should eventually exceed the number of linear video subscriptions, implying there is upside for high speed access accounts of perhaps 10 million more households.

Cable companies have 49.3 million broadband subscribers, representing 58 percent market share, while telephone companies have 35 million subscribers, representing 42 percent market share.

But the net additions are heavily dominated by cable companies, which garnered 82 percent of the net broadband additions in 2013.

The top cable companies added nearly 2.2 million broadband subscribers in 2013, while the top telephone providers added 480,000 net high speed access subscribers in 2013.

In part, those telco results are driven by deactivations of digital subscriber line connections by fiber to home or fiber-reinforced access connections.

AT&T and Verizon added 3.3 million fiber subscribers (U-verse and FiOS) in 2013 but also saw a net loss of 3.05 million DSL subscribers.

U-verse and FiOS broadband subscribers now account for 47 percent  of telco broadband subscribers.

Still, the fact that cable now gets more than 80 percent of netw new additions is significant. Even if one grants that telcos primarily are interested in upgrading customers from DSL to fiber connections, the net new subscriber figures suggest cable connections have emerged as the preferred high speed access product.

So far, there is no similar pattern in the linear video subscription business. The latest data from Leichtman Research Group suggests only a grinding and slow shift of share from cable to telco providers.

The total linear video market, which includes cable, satellite and telco providers, lost about 105,000 net video subscribers in 2013, so the market contracted slightly.

The largest U.S. cable operators lost a net 1.7 million video customers in 2013, according to LRG, while satellite providers lost 170,000 subscribers. Telcos gained 1.5 million video customers.

Basically, the market share shift amounted to an annual cable provider loss of about 1.8 percent and a gain by telcos of about 1.6 percent.

In the market as a whole, there were 94.6 million subscribers at the end of 2013. The top cable operators had 49.6 million video subscribers, satellite TV companies had 34.3 million subscribers and the top telephone companies had 10.7 million subscribers.

Cable had 52 percent market share, satellite providers 36 percent share and telcos (AT&T and Verizon) about 11 percent share, according to Leichtman Research.
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