The latest deep dive analysis from broadband financial researchers at MoffettNathanson seeks to answer an important question: Will cable broadband market share decline as telcos deploy fiber?
The answer depends on a range of factors, including how extensively telcos will deploy fiber, how much it will overlap cable broadband and more.
As the researchers note, the COVID-19 pandemic has driven people to upgrade broadband speeds, which often causes them to shift to a cable provider from a telco provider, as cable infrastructure provides higher speeds than telco infrastructure, except where the telcos have deployed fiber. This, coupled with improved fiber economics, is driving telco fiber upgrades.
The researchers’ telco fiber deployment forecast through 2025 is based on:
- When AT&T announced the spinoff of WarnerMedia, the company said it would have 30 million locations with fiber-to-the-home (FTTH) by 2025, suggesting that the number of additional locations would be in the range of 15.6 million. The company also has said it wants to have FTTH available in at least 50% of its footprint.
- Frontier, which has FTTH available to about 3 million homes, plans three additional buildouts, each targeting 3 million locations. The first of these buildouts is expected to last as long as 10 years. The MoffettNathanson forecast assumes 4.5 million locations by 2025.
- Lumen is expected to add 3 million FTTH homes over the next four years; Consolidated 1.6 million; Windstream 1.5 million; Ziply 800,000; and Verizon 1.5 million. Companies expected to add 300,000 locations or less include TDS, Cincinnati Bell and Shentel.
The researchers note, though, that these telco fiber deployments may not overlap cable company broadband as much as might be expected. They note, for example, that “well over half” of AT&T’s fiber investment was brownfield or overbuild areas.
“We suspect many would have assumed the percentage to be much higher,” the researchers wrote in a research note released today.
Cable Broadband Market Share
Using their telco fiber broadband deployment forecast, the researchers looked at the extent to which four major cable companies are likely to see their service areas overlapped with telco fiber in 2025.
Altice USA had the highest overlap at 61%, but that’s a relatively small increase over the company’s current 45% overlap. In comparison, Cable One could see its overlap jump from 10% to 36%, while Comcast could see a jump from 34% to 55% and Charter could see a jump from 30% to 54%.
According to the researchers, “overbuilders typically achieve most of their subscriber gains over their first three to five years in a given market (or, conversely, incumbents will typically lose most of the share they’re going to lose in the first three to five years after being overbuilt).”
Long term, the analysts see cable having a 50% broadband market share in markets in which they compete with FTTH—significantly less than cable’s 85% market share against VDSL and 95% market share against DSL.
The upshot is that the MoffettNathanson researchers have lowered their long-term forecasts for cable operators, but target share prices are minimally changed.
The researchers note, though, that a variety of factors could impact the forecast, including how telcos and cable companies price their broadband services.