After years of broadband subscriber losses, larger telecom companies are poised to see subscriber gains in the 2023 to 2024 time frame, according to researchers at investment bank Cowen. This will occur as the telecom companies complete “record-setting” fiber broadband deployments.
But the cable companies’ broadband market share will decline only slightly, from 60% today to 58% in 2027, the researchers argue. Meanwhile, the size of the broadband market will increase.
Telco Broadband Subscriber Losses
The researchers estimate that the telcos will build broadband to 38 million homes by 2026 when they will have fiber broadband available to 80 million homes. By 2025, Cowen expects 75% of net broadband additions to be served by fiber-to-the-home.
“The cable decade of dominance of DSL share-stealing is over, though we note that it is far from doom-and-gloom for cable operators,” the researchers said in a research note.
The Cowen researchers note that cable companies will play “effective defense.” They expect cable companies to lock in existing subscribers with one-year or two-year promotions, to lower prices and to offer attractive mobile/broadband bundles.
The researchers also note that cable infrastructure supports an “affordable pathway” to 10 Gbps speeds to compete with fiber broadband and that the total addressable broadband market will expand as broadband becomes increasingly critical and as $130 billion or so in government funding becomes available for broadband. The researchers predict 97% broadband take rates for occupied homes (90% of total homes) by 2027.
The Cowen analysis of the telco vs. cable broadband marketplace is somewhat different from that of some other financial researchers.
Researchers at MoffettNathanson also see telco fiber deployments increasing and cable companies responding with lower pricing. But they also note another competitive edge for the cable companies – cable wireless offerings are dramatically more profitable than telco wireless offerings because the cable companies are better at offloading traffic onto Wi-Fi.
The upshot is that the cable threat to telcos is more immediate in comparison with the telco threat to cable, MoffettNathanson argues.
It’s worth noting, though, that the MoffettNathanson note was written before the infrastructure bill became law. That law makes an unprecedented amount of funding available for broadband deployment and affordability programs that could impact the MoffettNathanson forecast for the market.