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Cable MSOs Maintain Lead in High-Speed Broadband Market

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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 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 prime cable TV and telecom operators jointly had approximately 92.9 million high-speed Internet subscribers at the end of 2016, representing more than 95% of the nation’s total broadband market. Of the count cited, cable MSOs commanded nearly 58.4 million subscribers (62.9%) while the remaining 34.5 million customers (37.1%) were serviced by telecom operators.

In 2016, seven major cable TV operators added a net of 3.3 million high-speed Internet subscribers. This figure was almost similar to that of previous year’s net subscriber addition. On the other hand, seven major telecom operators lost 599,000 net subscribers compared with a loss of just 185,000 customers in the previous year. As a result, total net high-speed broadband subscriber addition in 2016 was 2.701 million.

In the fourth quarter, top two cable MSOs in the U.S., namely, Comcast Corp. (CMCSA - Free Report) and Charter Communications Inc. (CHTR - Free Report) added 385,000 and 391,000 high-speed broadband subscribers, respectively. Contrarily, telecom behemoth AT&T Inc. (T - Free Report) lost 13,000 subscribers while Verizon Communications Inc. (VZ - Free Report) gained 68,000 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 to 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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