As I was conducting research for another reason, I checked household penetration of cable TV services and frankly was shocked to see that 2009 cable penetration was about 49 percent of homes able to buy it, representing about 62 million housholds. That was shocking because I can remember a time when cable penetration was in the 65 percent to 70 percent range. The dip is the direct result of competition from satellite and telco competitors.
Looking at AT&T’s most-recent quarterly reports, the company added a net 231,000 U-verse customers in the first quarter of 2010, bringing U-verse subscriber counts up to about 2.3 million, and driving a 32-percent increase in consumer IP data revenues.
Wireline IP revenues, representing U-verse services plus non-U-verse broadband, now represent 37 percent of total consumer wireline revenues. AT&T says it now more than 75 percent of the way through its U-verse build and remains on track with its plan to reach 30 million living units with U-verse. That means 25 percent more homes will be marketable for wireline-based triple-play bundles.
The implication is that broadband services, including video services most especially, finally are starting to offset voice line losses, as has been the goal of triple-play services. Typically, more than 75 percent of U-verse TV customers also subscribe to U-Verse broadband and voice services, the company says.
That is important for AT&T for the same reason triple-play services have been important for cable TV operators, allowing them to sustain revenue growth at a time when the number of customers they serve actually has been declining.
In the first quarter, AT&T posted small growth in overall consumer wireline revenues, demonstrating that more-robust video and broadband access revenues can offset voice revenue losses, in combination with the power of bundles.
If this trend continues, AT&T could see actual growth in its consumer wireline business, something that has not generally been deemed feasible for most of the past decade.
At Verizon, FiOS revenue, though up 40 percent year over year, also was accompanied by the third consecutive quarter of lower year-over-year decline in wireline revenue. But FiOS is the growth driver. A year ago FiOS made up about 30 percent of Verizon’s consumer revenue. At the end of the first quarter, FiOS represented more than 41 percent of consumer wired services revenue.
Verizon has surpassed the three million customer mark in FiOS TV, with 168,000 net adds this quarter, and with 12 million homes open for sale, penetration of FiOS TV is 25 percent.
FiOS Internet subscribers grew by 185,000 net customers in the quarter, bringing Verizon’s total to 3.6 million subscriptions. With 12.6 million homes open for sale, Internet penetration is 29 percent.
The point is that broadband services steadily are becoming the growth driver for wired portions of AT&T and Verizon businesses, consumer and business, wired or wireless. We might not be at the point where we can say, with certainty, that broadband is the majority of consumer wired services revenue. But we seem to be nearing a point where voice line losses will no longer be the dominant background factor executives must focus upon.
In fact, it is conceivable that wired service losses will halt, at some point, ending a transition period for wireline service providers and establishing a new equilibrium.
