Last Friday’s blog asked if we are nearing the top of the market in terms of broadband penetration. Overall households with some sort of Internet connection have only grown from 83% in 2012 to 84% today, with most of the customers now served with a broadband connection instead of using slower dial-up or satellite. Following are the numbers showing the new broadband connections of the major ISPs during the recent third quarter of this year:
|2Q 2017||3Q 2017||Change|
These figures come from reports published each quarter by Leichtman Research Group. These large ISPs control over 95% of the broadband market in the country – so looking at them provides a good picture of the industry. Not included in these numbers are the broadband customers of the smaller ISPs, the subscribers of WISPs (wireless ISPs) and customers of the various satellite services. Cable companies still dominate the broadband market and have 60.4 million customers compared to 34.1 million customers for the big telcos.
What do these numbers tell us about broadband growth? If you take the numbers at face value, a growth of 0.4% for the quarter would extrapolate to an annual growth rate over 1.5%, and would suggest that the market is still growing. But is it?
Within these numbers are broadband customers from new housing units. The country is expected to add at least 1 million new homes and apartment units this year, and if the ISPs sell to 84% of them, then 210,000 of the new broadband customers are due to the new housing units and don’t represent an increase in overall market penetration rate for the sector.
Further, we are now in the second year of the FCC’s CAF II program. The telcos in the above list are being given over $8 billion over six years (and 2017 is the second year) to bring broadband to over 5 million rural households. By now these funds should be adding new broadband customers for CenturyLink, AT&T, Frontier, etc. I haven’t seen any reports yet from the FCC quantifying the customer added as a result of CAF II, but it’s not hard to think this won’t mean something like 175,000 new broadband customers per quarter over the last five years of the program.
Assuming that CAF II customers are now coming on board, then the whole industry growth can be attributed to either broadband for new housing units or new rural households getting broadband for the first time. And that would validate that the broadband industry is not growing much otherwise.
The numbers also tell us a few more things. For example, in urban areas the cable companies are still wooing away DSL customers. But even that is slowing down. Cable company customer additions for the 3Q are 540,000, down from 780,000 a year ago. For the first three quarters of 2017 combined the cable companies have added about 2 million customers while the telcos have lost 430,000 broadband customers.