Wednesday, September 23, 2015

Who Leads U.S. Fixed Network Markets? Some Clearly Say "Cable TV"

Definitions matter. For example, Access Platforms, in an analysis of “overbuilders” in San Antonio, Texas, uses a definition of high speed access provider market I had been unaware of, and illustrates the fundamental nature of the market.

Access Platforms, noting that cable TV service providers have 62 percent high speed access market share in San Antonio, considers AT&T an overbuilder.

My traditional understanding of an overbuilder is that it is a third or ancillary provider of triple play services in a market, in addition to the presumed incumbents, a cable TV operator and the local telco.

Access Platforms defines overbuilder as “Companies (independent telco and municipalities) that build additional systems over existing cable systems in order to provide a competitive service in a market.”

That might apply to virtually any fixed network service--video, Internet access or voice--normally sold by a triple play services provider.

Access Platforms considers all providers other than the cable TV operator as overbuilders, such as Google Fiber, a fixed wireless or perhaps satellite internet access service. Eventually, TV white spaces and other networks also will be added to the competition in some locales.

So here’s the key assumption: where it comes to high speed Internet access, according to Access Platforms, it is the cable TV operator that is the incumbent, and everyone else is a challenger.

The fact that a telco operates in region, and historically has been one of the two major suppliers of Internet access, does not appear to matter.

There is cable, which is the incumbent, and then there is everybody else. Looking at all of the constituent services, for example, satellite has significant share, based on its video services, with about 29 percent market share. Cable has 34 percent, while telcos have 21 percent, while other overbuilders have perhaps 15 percent share.

While I would not use such a definition, the implications are huge. Cable TV is considered the incumbent to beat. Everybody else is an overbuilder.

If you wonder why AT&T or Verizon face huge issues related to their fixed network businesses, that framework explains why. Cable is the new leader.

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