Could Cable's Phone Ride Be Over?

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Pali Research media analyst Richard Greenfield wondered aloud last week whether the bloom may be off the cable-telephony rose, as voice customer additions have shrunk in the past year and are expected to continue to be sluggish for the foreseeable future.

In a research note, Greenfield noted that industry-penetration leader Cablevision Systems, which has telephony in 40% of its homes passed and more than 60% of its basic-video base in a triple-play bundle, took six years to reach those milestones. Time Warner Cable after five years has about 15% penetration (27% of subs in a bundle); Comcast, four years into telephony, has 13% phone penetration and 24% of its subs in a triple-play bundle.

The year 2008, the analyst noted, was the first that net telephony additions fell for both Comcast and Time Warner Cable.

“While Cablevision is way ahead of its peers in telephony, the question is now becoming, will its peers be able to get to even 25% penetration, let alone the 40%-plus levels Cablevision has achieved or is the opportunity to further cement the bundle simply dwindling by the day?” Greenfield asked.

The analyst appears to be leaning toward more declines. He predicted that 2009 telephony additions will slow down even more, possibly as much as 40% for both companies.