Broadband Expansion Slows

Carl Weinschenk

The Pew Internet and American Life Project reports that the rate of growth of broadband penetration is slowing. Broadband penetration was 66 percent in the second quarter of this year, compared to 63 percent during the second quarter of 2009.


Pew was not the only observer who saw a deceleration. A Leichtman Research Group report said that 19 cable and telephone companies representing 93 percent of the market saw net gains of 336,000 subscribers during the second quarter. That was the fewest of any quarter during the nine years it has been tracking growth.


A look at the granular numbers is even starker: The top phone companies lost 7,500 subscribers after gaining 385,000 during the year-ago quarter, while the additions during the second quarter of this year were only 53 percent of the second quarter of 2009. AT&T's loss of 92,000 is the first net loss for a top 10 provider. Overall, Leichtman said, cable companies now have 40.5 million broadband subscribers and the top telcos 32.9 million.


There was one bit of good news for the telcos in the Leichtman numbers: AT&T and Verizon added 451,000 subscribers to their U-verse and FiOS services, respectively. The losses-515,000 subscribers -- came from their antiquated DSL offerings. That suggests that the game plan of enticing subscribers to shift from DSL to fiber is working. The Denver Post offers quarterly numbers on Qwest and Comcast, both of which are far more modest than the year-ago quarter.


There are several ways to interpret the slowdown. The most obvious, that the economy is bad, isn't compelling simply because the situation was just as bad, or even worse, in the quarter to which comparisons are being made. A second explanation is that the reservoir of "low-hanging fruit" of potential broadband subscribers finally is running dry. That angle is validated, at least superficially, by this paragraph in the Pew press release, which suggests the novel idea that a good chunk of the folks who don't have broadband simply don't want it:

By a 53%-to-41% margin, Americans say they do not believe that the spread of affordable broadband should be a major government priority. Contrary to what some might suspect, non-internet users are less likely than current users to say the government should place a high priority on the spread of high-speed connections.

It is natural for percentages gains to slow as a segment matures. That, rather than reaction to a poor economy, likely is what is occurred during the second quarter. A slowdown in the rate of growth often is the precursor to actual shrinkage, which is not great news. It will be interesting to see what happens next quarter.

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