Where Cable ISPs Compete, They Win?

The U.S. internet access market is one of the few in the world where cable TV operators have been driving consumer internet access speed advances over the last decade. The United Kingdom is another such market.

In 2016, for example, on U.S. fixed networks, “average” speed increased 40 percent in a single year, and most of that was driven by Comcast and other cable TV operators.

In the United Kingdom, in 2016, Virgin Media, the U.K. cable operator, was far and away the fastest ISP, offering speeds more than twice as fast as BT or BT’s wholesale customers and about four times faster than ISPs using unbundled local loop access.

source: Ookla

source: Ookla

But speed is not the only significant business model impact in the U.S. and U.K. markets. At least as important--and arguably more important-- is the dramatic change in potential market shares obtainable by any former telco in such a market.

Facing accomplished competitors with scale, skill and other business resources, including their own facilities, a former incumbent telco might reasonably expect that its addressable market shrinks as much as half. In the U.K., Virgin Media’s network reaches perhaps a quarter of locations; in the United States cable operators have close to 100 percent coverage of telcos.

Verizon’s experience with its FiOS service suggests a telco facing a cable opeator might get 40 percent to 45 percent of the internet access market, even when fiber to the home is the access platform.

"At the end of the second quarter of 2017, cable had a 64 percent market share versus 36 percent for telcos,” said Bruce Leichtman, Leichtman Research Group president and principal analyst.

Unless something breaks the current trend, telos could collectively become something of an afterthought in the access business, with market share as low as 28 percent by 2020, according to New Street Research.

source: New Street Research

Stranding 60 percent of the deployed capital in FTTH access networks is one very good reason for some service providers to look at 5G fixed wireless. If the maximum share is range bound around 40 percent to 50 percent, then any solution that minimized stranded assets will improve the business case.