DSL as a product has many competitors, notably cable modem service, but also fiber to the home, mobile broadband and satellite broadband, in some contexts.

DSL also is a product with its own telco substitution occuring, namely in the form of customers who drop DSL to buy a fiber to home service, notably Verizon’s FiOS service.

During the fourth quarter of 2011, Verizon lost 103,000 DSL lines. AT&T lost 636,000 DSL lines. Time Warner Cable added 130,000 broadband connections during the comparable quarter.

That will lead some to speculate that DSL as a product cannot compete with cable modem services, and there is some truth to that assertion, in some markets or portions of markets, where operators have not invested aggressively, or where capital investment intentionally is being shifted to the mobile networks.

On a net basis, however, Verizon actually added broadband customers, gaining 201,000 FiOS access customers, for a net change of 98,000 customers.

Likewise, AT&T added 587,000 new U-verse broadband subscribers, for a net loss of about 49,000 customers. But there is a larger business context. It arguably does not make sense for either AT&T or Verizon to spend aggressively on a fixed network that actually is declining as a revenue contributor overall, compared to the mobile network.

Globally, there already are more mobile broadband subscribers than fixed network subscribers.
Mobile broadband subscribers surpassed wireline broadband subscribers in 2010 (558 million compared to 500 million).

Infonetics forecasts the number of mobile phone subscribers to grow to 6.4 billion in 2015 (the current global population is 6.9 billion).

The strategic context is different for fixed network operators who do not own mobile assets, and cannot acquire the scale to compete in what clearly has become a national scale business. In such cases, though the classic investment case might not suggest spending on ffiber to the home will generate as great a financial return as some alternative investments, that isn’t the issue.

Unless many smaller networks can upgrade to the fastest-possible fixed network, the entire business arguably is at risk. The investment, in other words, is strategic, rather than based on classic return on investment considerations.

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