The basic realities that service providers and carriers are gaining or losing subscribers in various sub-segments of their customer base is well known. What is interesting, however, is how the advent of broadband and other recent developments have made the shifts broader and more dramatic.
Many media companies released their quarterly results during the past few weeks. This round-up by The Associated Press posted at MSN offers telling results on how ISPs fared in their broadband initiatives. Verizon, for instance, gained a paltry 2,000 broadband customers due, it said, to the sunsetting of its Digital Subscriber Line (DSL) offering. AT&T also lost DSL subscribers, but gained overall due to the addition of 553,000 U-verse customers. Cable operators logged data gains of between 25,000 (Cablevision) and 156,000 (Comcast).
So the telcos had a rough quarter in data. It’s also no secret that their voice services — the platform upon which their telecommunications empires were built — is fading. The technology is too inefficient compared to broadband’s packetized voice. What may be a bit surprising is how quickly that is happening. GigaOm offers a snapshot suggesting just how quickly this is happening:
Wireline penetration has fallen from 88 percent in 2003 to 67.5 percent at the end of 2011. At the end of 2011, there were a mere 69.5 million wirelines.
Of course, the telcos to a great extent are offsetting these losses with video gains. That’s the point: The field will become even more diffuse — with telecom companies fluidly winning and losing and doing the best jobs they can of flowing into new services — as time goes on. Broadband is an equalizer: If you can offer one packetized service, you can offer another.
A wildcard is the growth of what used to be referred to as “non facilities-based” providers. This simply means that the services piggyback on the infrastructure built by other companies, usually cable and telcos. Skype and Vonage on the voice side and Hulu and YouTube in video are prime examples of modern, non-facilities-based service providers.
Even though it seems to be in the driver’s seat, cable operators are victims of the transition. Indeed, though this quarter was slightly better than the year-ago quarter, the news still wasn’t good for what still is their core video business, according to Yahoo Finance:
In the second quarter of 2012, the top nine cable companies lost 540,000 video consumers, a bit lower than the 600,000 video subscriber loss in the second quarter of 2011, according to Leichtman Research Group.
The reason that the cable barons are smiling is that the industry has the platform and the foresight to compensate for products that are fading and to get into new areas, such as mobile backhaul and home automation. The telephone industry — particularly AT&T and Verizon — have created similar platforms and thus also have the ability to add new services as the old ones are contested by new entrants. For that reason, the facilities-based companies always will have the advantage simply because their platforms allow them to be more than one-trick ponies.