Role of the Fixed Network is Backhaul, it Seems

"Over the past year, cable companies have added about 3.5 million broadband subscribers, while telcos have had net losses of about 500,000 broadband subscribers," says Bruce Leichtman, Leichtman Research Group president.

One has to wonder whether that is a sign of coming structural change in the fixed network markets.

For some time, it has been clear that the role of the fixed network is changing. Specifically, it can be argued that the primary strategic value of the fixed network is its role as the backhaul mechanism for wireless, untethered and mobile services.

Wi-Fi offload of mobile device data traffic provides one example. The universal use of Wi-Fi as the in-building distribution system for fixed Internet access and much voice traffic provide other examples.

The use of cable TV, telco and other Internet service provider distribution networks to support backhaul of traffic from coming small cells provider yet other examples.

In other words, it might be argued that the primary function of the fixed network is to act as the backhaul for untethered traffic and apps.

But the shift of market share also might mean a historic shift in the structure of fixed network communications markets, where policymakers always seem to begin their work with a perspective on “dominant” providers in any market.

Traditionally, it has been the legacy telcos that were viewed as the sole “dominant” providers. But the functional definition of “competition” in any market is that the former leader loses lots of market share. And telcos have seen that happen.

Looking strictly at fixed network services, cable companies now are the market share leaders in the foundation Internet access service, seem to have about a third of the voice market share, and remain ahead in video entertainment account share.

So in two of three anchor services, including the “growth” business of Internet access and the “revenue volume” leader of entertainment video, cable is the leader.

With cable’s success in the small business market now complemented by serious efforts to gain share in the mid-market and enterprise segments, we should expect to see further share losses by telcos, with cable gains, in those segments as well.

To be sure, in 2014 telcos still had about 85 percent business market share. But everyone expects cable to keep gaining share in the business market segment.

Eventually, cable is going to get into the mobile business as well, and virtually all observers believe cable will take share in that market as well.

At some point, assuming legacy telcos can hang on to leadership of the mobile segments of the business, we will have to assume that in the fixed networks business, cable is the leader, not the telcos. All our assumptions about regulatory policy will by then be quite outdated.

U.S. Internet Access Subscribers, 2nd Quarter 2016
Firms
Subscribers
Net Adds
Cable Companies


Comcast
23,987,000
220,000
Charter*
21,815,000
277,000
Altice**
4,105,000
24,000
Mediacom
1,128,000
14,000
WOW (WideOpenWest)
725,700
3,400
Cable ONE
508,317
(107)
Other private firms
4,745,000
15,000
Total Top Cable
57,014,017
553,293



Phone Companies


AT&T
15,641,000
(123,000)
Verizon
7,014,000
(83,000)
CenturyLink
5,990,000
(66,000)
Frontier^
4,552,000
(77,000)
Windstream
1,075,800
(16,200)
FairPoint
311,440
117
Cincinnati Bell
296,700
4,300
Total Top Phone Companies
34,880,940
(360,783)



Total Broadband
91,894,957
192,510
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