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Cable MSOs Maintain Lead in High-Speed Broadband Market

T VZ CMCSA CHTR

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Per a recent report by Leichtman Research Group Inc. (LRG) the cable multi service operators (MSOs) in the U.S. have successfully maintained their lead over telecom operators in the high-speed broadband (Internet) market. This comes as a respite, especially at a time when the cable TV operators have been losing their foothold in the core video market to fiber-based telecom operators and online video streaming service providers.

The second quarter of 2014 marked the first year in the 66-year long history of the cable TV Industry, where cable MSOs outpaced telecom operators in the high-speed broadband market. Since then, cable MSOs has been rapidly gaining foothold in the space.

According to data compiled by LRG, 14 large cable TV and telecom operators jointly had approximately 92.5 million high-speed Internet subscribers at the end of the third quarter of 2016, representing about 95% of the nation’s total broadband market. Of the count cited, cable MSOs commanded nearly 57.8 million subscribers (62.5%) while the remaining 34.7 million customers (37.5%) were serviced by telecom operators.

In the third quarter, seven major cable TV operators added a net of 774,956 high-speed Internet subscribers while seven major telecom operators lost 149,593 net subscribers resulting in a total net subscriber addition of 625,563 for the broadband industry. In the first nine months of 2016, the cable TV operators have gained around 2.44 million subscribers in contrast to a loss of about 475,000 subscribers on the part of the telecom operators.

In the third quarter, top two cable MSOs in the U.S., namely, Comcast Corp. (CMCSA - Free Report) and Charter Communications Inc. (CHTR - Free Report) added 329,000 and 387,000 high-speed broadband subscribers, respectively. On the other hand, telecom behemoth AT&T Inc. (T - Free Report) lost 23,000 subscribers while Verizon Communications Inc. (VZ - Free Report) gained 24,000 subscribers. All four stocks currently carry a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here

Over the last ten years, the internal dynamics of the pay-TV market have been gradually shifting from cable TV offerings toward fiber-based video services of large telecom operators. Moreover, the strong presence of online video streaming providers is posing a significant threat to the existing pay-TV business model. Video offering, which represented the core business function of cable TV operators, seems to be fast slipping out of their hands.

Nevertheless, of late, with the deployment of the next-generation DOCSIS 3.0 technology, cable TV operators have extensively penetrated into the high-speed Internet market. In an attempt to capitalize on this technology, leading cable TV operators are increasingly emphasizing on the broadband market. At this juncture, a strong momentum in the high-speed data (Internet) market bodes well for cable MSOs.

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