Published on November 16th, 2017 | by Brad Gibson0
Slower US broadband growth begs the question ‘are we all on?’
Subscriptions to high-speed broadband in the US were down a little less than half in the third quarter of 2017 compared to a year ago, according to a new research report, offering more evidence that the broadband industry is nearing saturation. Experts are in agreement that as broadband subscriptions hit a peak, higher prices for consumers are inevitable.
The report from Leichtman Research Group shows 14 of the largest US cable operators and telephone provides, representing 95 percent of the market, added 380,000 high-speed internet subscribers in the quarter, compared to 625,000 in the year-ago quarter.
The top broadband providers accounted for about 94.5 million subscribers, with 60.4 million through cable operators, and 34.1 million going to telephone providers.
The nation’s largest cable operators added about 540,000 broadband subscribers in Q3, or 69 percent of the total additions they had in the year-ago period, LRG said.
Source: Leichtman Research Group
Telephone providers, meanwhile, lost 155,000 subscribers in the quarter, roughly equal to the 150,000 they lost in the same quarter of 2016.
For the first three quarters of 2017, cable operators added 2 million broadband subscribers, compared to a loss of 430,000 among the telephone providers, LRG said.
“Major providers now account for over 94.5 million broadband subscribers in the US, yet the broadband market is still expanding with cable providers continuing to drive the growth,” said Bruce Leichtman, president and principal analyst for Leichtman Research Group, Inc. “Over the past year, cable companies added about than 2.86 million broadband subscribers, accounting for 124 percent of the 2.3 million net broadband additions.”
These latest figures are further evidence that the number of Americans wanting high-speed Internet access is waning and is near its peak.
“Broadband appears to be inching towards saturation, and the growth rate of the market has (predictably) slowed down,” Craig Moffett, an analyst with independent research firm MoffettNathanson LLC, told BESTAppleTV.com.
With broadband penetration on the brink of 80 percent, Moffett believes the last 20 percent will come slowly, impeded in part by factors like a lack of rural availability and slow growth of new housing.
The consumer concern now…rising broadband rates
With broadband growth nearing its peak, industry watchers say the obvious next step is higher prices for consumers so cable companies and telephone providers can grow their profits as subscriber numbers for broadband ease and TV subscriber numbers fall.
“Cable is a broadband story, and every investor knows it,” Moffett wrote in a recent US broadband study, stating that he sees a deceleration in subscribers being offset by pricing increases in broadband.
“Our broadband business is increasingly the epicenter of our relationship with customers, and ultimately where we derive the majority of our profitability,” said Brian Roberts, Comcast’s chairman and CEO, during the companies third-quarter earnings call. Comcast is the largest cable and broadband service provider in the US, covering 41 states with more 22.5 million TV subscribers and 25.1 million broadband customers.
The question among industry experts is not if broadband prices will go up, but when. When it does happen, choice to beat price jumps will be a major question and problem for broadband users.
Unlike TV programming content – which now has multiple choices from cable to satellite, to streaming services like Sling TV and Hulu – broadband providers are few in each market which makes consumer choice limited.
“Price elasticity for broadband internet is relatively low,” Adam Levy, a reporter with The Motley Fool, recently wrote. “Most markets don’t have very many competitors, so substitutes for (broadband) service are hard to find. So, if cable providers increase their pricing, consumers will probably pay it, especially if they’re reliant on streaming video for entertainment. Operators can justify higher prices to consumers by providing faster connection speeds and phasing out lower-speed options.”