Can Overbuilder ISP Market Share Exceed 30 Percent?

One key metric for any internet access overbuilder (any internet service provider competing against both a cable operator and a telco) in a market is take rate: the percentage of addressable homes that sign up for service. 

The reason is that a rule of thumb suggests an ISP competing as an overbuilder has to get about 30 percent share to be sustainable. The corollary is that the business case for other incumbents can get perilous, as that leaves 70 percent share for all the other providers.

It might help if the incumbents have multiple revenue streams to rely on (voice and video entertainment being the most common, plus business services). Still, a viable overbuilder dramatically reshapes both market share and profitability profiles for incumbents. 

Ting Internet seems to have overall take rates of 28 percent. In the past, Ting has estimated it would get about 20 percent take rates  within the first 12 months of active marketing, with a goal of reaching 50 percent over five years. 

In the past, Ting Internet has reported 30 percent take rates, so the latest data suggests that is a reasonable expectation for the markets Ting chooses to address. 

As was the case for overbuilders in the video entertainment business, and now with triple-play and internet access overbuilders, it has proven difficult to reach 20 percent market share after several years of operation.

As even the most-successful overbuilders have discovered, being the market leader is difficult, as the leader’s market share, in a competitive three-way market, might not exceed 30 percent or so of homes (potential accounts).

EPB in Chattanooga, Tenn., for example, is the poster child for overbuilder hopes, having gotten as much as 45 percent of consumer market share in its service area (with share defined as revenue-generating units, not “accounts” or “homes”).

EPB’s internet access share might be about 27 percent, its video share lower than that. An interesting statistic, in that regard, is that about eight percent of EPB’s internet access customers buy the gigabit service.

EPB’s market share is highly unusual in most overbuilder markets, as EPB arguably competes with Comcast, not AT&T, which has negligible video share in Chattanooga.

In a triple-play market, that is important. Comcast might have 61 percent video share, while EPB might have 36 percent share, leaving only three percent video share held by AT&T. Essentially, EPB has become the number-two provider, relegating AT&T to third place, something that is not the case in most other U.S. markets where three mass market fixed network suppliers compete.