News

Analysts: Data's Still Strong

11/09/2003 7:00 PM Eastern

Analysts poring over third-quarter financial results were generally impressed that cable MSOs managed for the most part to maintain their market shares in high-speed data additions, despite telephone companies' highly publicized price reductions.

"Cable captured an impressive 65% share of residential high-speed market subscribers in Q3," Smith Barney Inc. analyst Niraj Gupta wrote in a research note to clients. "In Q3, MSOs benefited from seasonality, expanded retail distribution and a larger upgraded [high-speed Internet]-capable footprint."

What's interesting is that four of the five largest high-speed providers — Cox Communications Inc., Comcast Corp., SBC Communications Inc. and Verizon Communications Inc. — all posted record additions for the quarter.

Cox added 169,000 cable-modem subscribers, while Comcast lured in 472,000 subscribers. SBC signed up 365,000 digital subscriber line customers and Verizon added 185,000.

Providers have been offering consumers DSL pricing below $30 a month, which gave the three major phone companies (including BellSouth Corp.) 660,000 DSL additions in the third quarter, the RBOCs' best quarter in history.

Cable operators, meanwhile, have been increasing downstream speeds to 2 and 3 Megabits per second, reasoning that it's better to compete on service attributes than price.

That strategy also appears to be working, as the top six MSOs are on track to reach close to 1.1 million additions in the third quarter.

Merrill Lynch analyst Glen Campbell estimates U.S. high-speed data penetration has reached 19.3%.

"Tiering could accelerate dial-up migration and overall market growth," he added, in research note. "Tiering could help mitigate any longer-term disintermediation risk on their core video service."

Data Ramps Up in Q3
Cable MSOS
3Q 2002 (000) 2Q 2003 (000) 3Q 2003 (000)
* excludes Qwest
Cox 157 113 169
Comcast 342 350 472
Time Warner Cable 257 170 190
Charter 150 76 141
Cablevision 70 68 TBA
Insight 40 11 29
Total 1,016 788 1,001*
* excludes Cablevision
DSL Providers
3Q 2002 (000) 2Q 2003 (000) 3Q 2003 (000)
Qwest 17 10 TBA
Verizon 155 101 185
SBC 226 304 365
BellSouth 121 103 110
Total 519 518 660*

September