Cable operators have been on the run from multichannel video competitors since at least 2003. DBS providers then phone companies and then DBS and phone companies in partnership with each other have been eating into the cable industry's dominant market share. The past few quarters have been particularly rough ones for even the strongest cable companies as broadband growth plateaued and basic subscriber counts surprisingly dropped. Cable's continued strong growth in the phone business only partially offset these disappointing trends.
It's too soon to tell but the top four incumbent telcos in the U.S. (AT&T, Verizon, Qwest and Embarq) may prove less of a threat to cable's core video customer base going forward than they have in the past several years. According to our analysis, during Q4 07,the top four telcos added 549,000 net new video customers, about 27,000 fewer new video customers than they added during Q3 07.
This is the first time since the second quarter of 2006 that the combined gains of the top telcos slipped. As the chart above shows, the phone companies have had momentum on their side since Q2 06, particularly picking up steam in Q1 07 when Verizon stepped up its FiOS TV deployments.
Still, the phone companies collectively topped the five million video customer mark by the end of 2007 (with most of these still flowing from the telcos' DBS partnership pacts and not from facilities-based competition.) That's about the same as the third largest cable company in the U.S., Cox Communications, reflecting a chunk of subscribers that could have gone to cable.
There's still plenty of room for the telcos to grow. Verizon, which accounts for about 40% of all telco-related multichannel video subscriptions, still hasn't rolled out its FiOS TV service to about 40% of its fiber-upgraded footprint, although it's not clear if the telco plans to push its network-based TV services to all capable homes.
AT&T was ostensibly less than half-way finished with its roll-out of fiber-to-the-node TV services at the end of 2007, with around eight million of an estimated 18 million homes passed. But, AT&T's Uverse project has been beset with delays and cost-overruns and while the number of AT&T Uverse video customers jumped by more than 80% from Q3 07 to Q4 07, the total is still tiny, only 231,000 subscribers by year-end.
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