New Video Dynamics: Competitive Analysis of Broadband Providers

• Both Industries Are Losing Core Customers: The heightened competition between cable and phone companies is occurring at a time when both providers are losing their traditional, core customers. Cable operators, however, are on the rebound with 2006 marking the first year since 2000 that the industry hasn't lost basic customers.
• Each Industry Seeks To Capture Market Share In Its Rival’s Core Business: Cable is gunning for the phone industry's voice customers while the telcos are trying to siphon away the cable industry's video customers. But, in this regard phone companies pose a much smaller threat to cable operators than cable operators pose to phone companies.
• Both Industries Suffer Major Infrastructure Weaknesses: Telephone companies are stuck with a narrowband terrestrial architecture and are attempting to overcome this handicap through time-consuming and costly FTTN and FTTP rebuilds. Cable operators lack the critical component of mobile telephony needed to offer a viable quadruple-play offering and are attempting to bridge this gap through a partnership with Sprint-Nextel.
• The Next Major Competitive Development is the Quadruple Play: The addition of wireless services to the bundled mix give phone companies a new competitive advantage. AT&T and Verizon are miles ahead of cable in the mobile communications realm. AT&T stands to further cement its top-ranked status after Apple starts shipping its market-changing iPhone device (AT&T has an exclusive deal to offer the iPhone), while Verizon has aggressively moved beyond mere mobile voice service by developing wireless broadband connectivity and content services.
• Cable’s Voice Customers Could Outnumber The Telephone Industry’s Video Customers By A Margin of 2:1 By 2017: Cable's inherent infrastructure advantages ensure that at least on one measure, it will win the competitive race. Our analysis shows that in ten years, the number of cable voice customers could be double the number of telco-wired video customers.

Summary and Analysis

I. Cable and Telco Core Customer Trends

II. Cable and Telco High-Speed Customer Growth

III. Cable Competition in the Voice Business

IV. Telephone Company Entry into the Video Business

A. Telco-Related Video Growth

B. AT&T

1. U-Verse Facilities-Based Video Services

2. Delays and the Specter of Capacity Limitations

3. U-Verse Deployments and Subscriber Counts

4. Homezone Hybrid Services

C. Verizon

1. FiOS - Fiber-to-the-Premises

2. FiOS TV Deployments and Subscriber Counts

V. Mobile Services: The Next Competitive Battlefield

A. Cable’s Efforts to Mount the “Third Screen”

B. Telephone Company Mobile Momentum

1. AT&T Wireless

a. Bundled Services - AT&T and the Quad Pack

b. AT&T Content Offerings are Slim, But the iPhone is Coming

2. Verizon Wireless

a. V Cast Service Leads the Way in Mobile Entertainment

VI. Competitive Analysis of Broadband Providers

A. Current and Projected Market Shares: Cable Delivery of Voice Services

B. Current and Projected Market Share: Telco-Wired Video Services

About the Author

About Emerging Media Dynamics

(List of tables and list of figures on next page)

List of Tables

Table 1 - Basic Customer Counts for Top Cable Operators, Q4 05 to Q4 06

Table 2 - Verizon FiOS High-Speed Customers, Penetration Q4 05 to Q4 06

Table 3 - Top Cable and Phone Company High-Speed Subscriber Counts, Q4 05 to Q406

Table 4 - Cable Telephony Subscriber Counts, Q4 05 to Q4 06

Table 5 - Incumbent Telco Video Subscribers, Q1 05 to Q4 06

Table 6 - AT&T U-Verse Service Commercial Deployments as of March 2007

Table 7 - AT&T U-Verse Service Packages as of March 2007

Table 8 - AT&T U-verse Homezone Service Summary

Table 9 - FiOS High-Speed Service Availability and Penetration, Q4 05 to Q4 06

Table 10 - FiOS TV Service Availability and Penetration, Q4 05 to Q4 06

Table 11 - Verizon FiOS TV Launches by Date, State and Community

Table 12 - Verizon FiOS TV Services, Packages, Prices and Features

Table 13 - SpectrumCo Partners Auction Shares and Dollar Amounts

Table 14 - FCC Advanced Wireless Services Auction - Cable Winning Bids, Markets

Table 15 - AT&T Wireless Key Financial and Operating Statistics, Q4 04 to Q4 06

Table 16 - Representative Prices for AT&T Quad Pack

Table 17 - Verizon Wireless Financial and Operating Statistics, Q4 04 to Q4 06

Table 18 - Representative Prices, Verizon Ultimate Freedom Package

Table 19 - Residential VoIP Subscriptions by Type of Provider, 2003 - 2017

Table 20 - Telco-Wired Video Subscriptions, 2003 to 2017

List of Figures

Figure 1 - Total Cable Industry Basic Subscribers, 2000 to 2006

Figure 2 - Combined Access Lines for Top Telcos, Q1 03 to Q4 06

Figure 3 - Total Cable Modem and Telco Broadband Subscribers, 1997 to 2006