Leichtman Research Group (LRG) says the largest U.S. cable TV operators now have more high speed access customers than they do video customers, according to Bruce Leichtman, LRG president and principal analyst.
And, sometime in 2015, it is possible AT&T will have more fixed network video subscribers than high speed access or voice customers, if its acquisition of DirecTV is approved.
Those two potential facts speak volumes about the new shape of U.S. fixed network communications markets.
Not only are the largest telcos and cable companies dramatically changing their revenue sources, but the basic “product” has become a bundle of services, anchored by broadband services of two types: high speed Internet access and video entertainment.
So the largest U.S. cable TV companies now arguably are Internet service providers with substantial video and voice operations, while AT&T’s fixed networks segment might become a business driven by video entertainment, while it continues to have significant high speed access and voice operations.
Cable Operator Revenues
High speed access revenues continue to fuel revenue growth at telco and cable companies, while video market share is shifting slowly in favor of the telcos, with emphasis on “slowly.”
The largest 13 linear video subscription providers in the United States, representing about 95 percent of all customers, lost about 300,000 net video subscribers in the second quarter of 2014, Leichtman Research Group also says.
The top nine cable companies lost about 510,000 video subscribers in the second quarter of 2014, the fewest losses in any second quarter since 2009.
Satellite TV providers lost 78,000 subscribers in the quarter, compared to a loss of 162,000 in the same quarter of 2013.
The top telephone providers added 290,000 video subscribers in the quarter, compared to 373,000 net additions in the same quarter of 2013.
Altogether, 588,000 net customers were lost by cable and satellite providers, while telcos gained 373,000. That means 215,000 customers simply stopped buying the product.
But telcos and cable companies still are adding high speed access customers. In the second quarter of 2014, 17 of the largest cable and telephone providers in the United States, representing about 93 percent of customers in the whole market, acquired nearly 385,000 net additional high-speed Internet subscribers.
Significantly, the top cable companies accounted for 99 percent of the net broadband additions for the quarter, compared to the top telephone companies.
These top broadband providers now account for over 85.9 million subscribers — with top cable companies having nearly 50.7 million broadband subscribers, and top telephone companies having over 35.2 million subscribers.
For the top cable providers (not including overbuilder WOW), the number of broadband subscribers exceeded the number of cable TV subscribers for the first time ever.
The top cable TV providers had 49,915,000 broadband subscribers at the end of the second quarter of 2014, compared to about 49,910,000 cable TV subscribers.
The top telephone companies added only about 2,000 net broadband subscribers in the second quarter of 2014. In large part, that is because Verizon and AT&T are losing digital subscriber line customers about as fast as they are adding U-verse or FiOS fiber access customers.
AT&T and Verizon added 627,000 FiOS or U-verse subscribers in the second quarter of 2014, with a net loss of 636,000 DSL subscribers.
The top linear video subscription providers account for nearly 95.5 million subscribers. The largest nine cable companies have 49.9 million video subscribers. The satellite TV companies have 34.3 million subscribers, while the biggest telephone companies have about 11.3 million subscribers.
Market share trends were consistent with past recent quarters: cable companies and satellite providers lost customers, while telcos gained, though the rate of cable losses moderated.
Observers long have suggested both cable companies and telcos would eventually derive most of their revenues from high speed access.
Telcos largely have left behind the time when voice drove their revenues. Only recently have cable TV companies begun to see the same displacement of legacy revenue. But that time nearly has arrived.
The shocking change will be if AT&T acquires DirecTV. In that case, video entertainment instantly will become the single largest driver of AT&T fixed network revenues.