Yesterday’s New York Times piece by Lorne Manly and Ken Belson on the threat to cable posed by phone companies received a lot of play in the blogosphere. The thrust of the article is that the phone companies are between a rock and a hard place and are pushing into video to save their hides, an effort that is an uphill struggle for the narrowband, non-entertainment-oriented telephone companies. (My favorite quote from the piece comes from Todd Dagres at Spark Capital: he said that the telcos “see their land-line business as an ice cube melting in the sun right now, so they need to become a purveyor of content.”)
This fits right into my analysis of the competitive landscape, but one point missing from the piece is how the cable companies and phone companies face weirdly parallel dynamics. (For more on this, see today’s issue of IP Media Monitor.) Both industries are experiencing losses in their core video customer bases, and both industries can count on high-speed data services for growth.
As the chart on the left depicts (click on thumbnail), the top cable companies (Comcast, Time Warner, Cox, Adelphia, Cablevision, Mediacom and Insight) lost around 400,000 basic cable customers from Q3 03 to Q3 05, with even stalwarts such as Cox experiencing a drop in core video customers. At the same time, however, as the chart also shows, cable’s real growth story is high-speed data, with the top operators increasing their collective broadband subscriber counts from 14.2 at the end of Q3 03 to 22.7 at the end of Q3 05.
The same holds true for the telcos. As the chart on the right shows, from Q3 03 to Q3 05, the top telcos —AT&T (formerly SBC) BellSouth, Verizon and Qwest — lost over 15 million access lines. At the same time, the number of DSL customers climbed from 7.2 million to 15.0 million, providing one of the few true growth areas for the phone companies.
Despite these parallels, the NYT’s piece is on the mark — cable has the upper hand becaused of its bandwidth, which has allowed the industry to swoop into the voice business while telcos are still figuring out the video business.
Cynthia Brumfield at 9:45 AM|Comments(0)
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