Cable companies have been busy recently. They are moving with some element of precision in building a ‘perfect competitive storm’ of sorts. In so doing, they are laying the ground work for some tough times ahead for their telco competitors, absent an effective response.
Cable is leading the assault with broadband, and DOCSIS 3.0 (D3) is their current (and future) weapon of choice. Early numbers are impressive. Consider the following evidence of cable’s potential conquest:
- In the last two quarters, Comcast added more broadband customers (608K) than AT&T, Verizon, and Qwest combined (401K). That’s 50% more net broadband adds for all three major telcos, from just one cable company.
- Cable companies are also looking to widen their lead in broadband speeds using DOCSIS 3.0 (Verizon FiOS and other FTTH offers notwithstanding). Heavy Reading reports that DOCSIS 3.0 will pass 90 million homes, or 70% of all cable homes by the end of 2012, nearly double the current rate. DOCSIS 3.0 is not just an urban market trend either. We reported on rural D3 market trends earlier. As an example, Mediacom reported during their last earnings statement that it will have D3 capable broadband in 50% of its footprint by mid year 2010.
- Cable also intends to use D3 to help combat cable broadband’s ‘Achilles heel’ – upstream bandwidth. Cable has been challenged in meeting the growing demand for upstream bandwidth. But Comcast reports they are now able to achieve ‘sustained’ upstream bandwidth of 75 Mbps.
- D3 is not about gaining additional market share with ultra fast connections of above 50 Mbps – at least not yet. It’s the mid tier speeds that garner the most attention – somewhere between 10 Mbps and 50 Mbps may be the sweet spot. Cable companies are also effectively using D3 powered broadband to up the speed of existing cable modem customers, often at no additional charge. As an example, Charter just announced its Free Charter Fast promotion, which raises broadband speeds for customers at no additional charge. Comcast has done similar moves in D3 markets.
- Cable companies also recognize the importance of wireless. They’ve sunk billions into Clearwire to be able to offer a WiMAX product of their own. Both Comcast and Time Warner have begun rolling out their own branded mobile broadband offer and Cox is about to do so (although Cox is building their own wireless network). Of all of these developments, cable’s wireless aspirations probably represent the smallest threat in rural markets.
While this assault is being led with broadband, there are other elements to this competitive storm as well. Cable companies are enhancing their video offerings, including embracing TV Everywhere initiatives. Comcast’s xfinity is leading the way, but others are doing innovative things as well, including Cablevision’s interesting ‘PC to TV Relay’ experiment. PC to TV Relay allows customers to in effect, build their own channel of personal and web based content, viewable on the TV.
It all adds up to this perfect competitive storm analogy I referred to early on. This storm compels the telcos who haven’t already done so to respond, primarily with FTTH. Good customer service, local presence, and a solid DSL product are very admirable and noble. But these storm clouds may demand much more.