Bright Forecast for 2008: Cable and Telcos to Continue Battling

Carl Weinschenk

The competition between cable and telephone companies continues to accelerate, and business and residential users continue to be the big winners. While this is not a new trend, it is comforting to see that it is in full force in the new year.


Verizon said this week that it has more than doubled the speed of its digital subscriber line (DSL) service to 7 Mbps at 400 locations in the United States, and that the increased throughput will be available nationwide by the end of the year. The goal, this story says, is to increase interest in DSL to combat cable gains.


Verizon DSL sales had fallen off a cliff, dropping from 301,000 in the third quarter of 2006 to just 56,000 during the third quarter of this year. Part of that drop can be attributed to the transition of many customers to the company's faster FiOS fiber service, of course. The company apparently figures that there is enough of a market at the lower end of the speed spectrum to have two distinctly different broadband product families.


Perhaps the most striking example of how the deck chairs have been rearranged during the past decade is the fact that Comcast now says that it is the fourth largest telephone service provider in the United States. Wired describes the CES keynote delivered on Tuesday by CEO Brian Roberts. The next iteration of the industry's Cable over Data Service Interface Specifications, DOCSIS 3.0, will be available in some markets by year's end. The story details innovations planned by the company, including ultra fast movie downloads and Tru2Way, an open access cable converter. The company will embed the circuitry into many devices, the story says. Necessity -- in the form of innovation -- apparently truly is the mother of invention.


This is an interesting look at how the telcos are gearing up for competition from an analyst with PDS Consulting. The writer says that Verizon is importing executives that have "marketing-oriented, hyper-competitive" attitudes from the its wireless arm. Likewise, AT&T's merger with BellSouth has given the company more control over the wireless company, formerly called Cingular, that had been owned by the two before the merger. The post ends with examples of aggressive bundling initiatives from each company.


Not surprisingly, analysts find that the competition is leading to increased spending and more expansive services. This In-Stat press release hypes a study that says 90 percent of cable systems now offer high-definition television. This, the commentary says, likely was driven by the "stiff competition" offered by telco and satellite video services. The firm found that 84 percent of systems offer 750 MHz or more of bandwidth, OpenCable Application Platform (OCAP)-based set top boxes are beginning to be deployed and that 42 percent of cable television subscribers also subscribe to broadband services.


The reason for the desire to engage its customer base is is clear: The survey found that 54 percent of the cable systems said that the telephone company was offering service somewhere in their footprints. The release didn't describe the average size of the telco offerings within their service area. Regardless, the fact that there are telco competitors in more than half of the operators' areas is extraordinary.


The scrutiny that the competition causes is clear in this Telecosm post. Ike Elliott says that Verizon and AT&T won the battle in 2007. The two telcos' stock price rose more than 15 percent, while Comcast's was down 35 percent -- perhaps the driver of Roberts' service announcements at CES -- and Charter performed at an even lower rate. The reasons are simple: Cable is losing video customers and its broadband progress is middling. Its success in voice, the writer says, is not enough to offset these twin sources of bad news.

Add Comment      Leave a comment on this blog post
Jan 16, 2008 2:34 AM Bruce Stenman Bruce Stenman  says:
Sam Walton gained market share by carefully avoiding going toe to toe with major chain retailers and instead opening stores in under served rural areas. The telcos are competing aggressively in the urban markets and largely ignoring the outlying areas that are served only by satellite companies HughesNet and WildBlue. My office is 1780 feet from the AT&T substation and 10 years ago I could get only ISDN. Now in 2008 I can still only get ISDN from the local phone company. The company that has been given the local cable monopoly still cannot provide data services and charges twice as much as the satellite (Directv and Dish) companies for its digital entertainment content. Verizon and Sprint are providing EV-DO but the propagation is line of site so it works only in areas that are completely flat with no hills or trees to block the signal from the tower. So like so many others across the country I use HughesNet and pay twice as much as for DSL and get one twentieth the service level. One would think that the cable companies or the telcos would see this as a business opportunity. One would think. Reply
Jan 16, 2008 2:36 AM Bruce Stenman Bruce Stenman  says:
Forgot to mention. I live 60 miles from the heart of Silicon Valley. Reply

Post a comment





(Maximum characters: 1200). You have 1200 characters left.




Subscribe to our Newsletters

Sign up now and get the best business technology insights direct to your inbox.