Telcos are winning the cable TV battle but are they losing the broadband war?

July 23, 2010

War scene

The latest quarterly numbers from AT&T and Verizon Communications points to steady addition of TV customers which they are very likely winning from the cable companies as well as satellite players. AT&T said it posted its first ever billion-dollar revenue quarter for its U-Verse services (which includes Internet).  It added 209,000 U-Verse TV subscribers and now has 2.5 million in total. Meanwhile Verizon said it added 174,000 FiOS TV subscribers and now has 3.2 million in total.

Together the telcos, wh0 only launched their competing services less than five years ago now have a more than 5 percent share of U.S. pay-TV homes.

So well done to the telcos! Or is that the whole story? Analysts at Bernstein Research point out that both phone companies lost a combined 65,000 Internet access subscribers (after netting out additions from U-verse/FiOS and losses of DSL customers).

This comes as Wall Street continues to expect cable companies to continue to grab market share in broadband subscribers even as they lose basic cable TV subscribers. After looking at the telcos’ numbers this week, Collins Stewart analyst Thomas Eagan more than doubled his expectations for cable’s share of broadband additions when they report over the next fortnight in a short analyst note.

“We had expected that the cable operators would take 43% share of the broadband adds in 2Q10. It appears now, however, that the cable operators might take more than 90% of the broadband net adds.”

So as your phone company looks more like your cable operator and your cable company starts to look more like your phone guy who will be the long term winner here? Many analysts expect that more and more video will be distributed via the Internet in the not too distant future via services like Hulu and Apple iTunes. So,  while the operators are busy fighting their corners, maybe being a top US Internet service providers will come back into fashion after all. 
 We’re not sure, but we’re fairly certain it won’t be AOL.

(Photo: Reuters)

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