Occasionally I see a statistic that really surprises me. I just read a quote from Dave Watson, the President of Comcast Cable where he told investors that Comcast has an overall 47% broadband market penetration rate, meaning that 47% of the households in their footprint buy broadband from Comcast. I would have guessed that their market penetration rate was higher. He did say that they have markets where they exceed a 60% market share.
There are a few reasons why their overall market share isn’t higher. For one thing, the company overlaps a lot of the same big markets where Verizon competes with fiber-based FiOS. The company also competes with fiber overbuilders like US Internet in Minneapolis and Sonic in the Bay Area that are chipping away at broadband customers. The company is also competing against a few municipal fiber overbuilders like in Chattanooga where the city-based fiber ISP has won the lion’s share of the market. It’s clear that fiber is a formidable competitor for any cable company.
Comcast also faces significant competition in the MDU market where there are numerous companies vying to serve large apartment buildings and complexes. For example, a big percentage of AT&T’s fiber expansion goal to pass 12 potential customers has been achieved through building fiber to large MDUs all around the country. There are also a number of successful ISPs that compete nationwide in the large MDU market.
Comcast, like all of the big cable companies, was a latecomer in competing for the business market. Historically the cable companies didn’t build their network in business districts and the telcos and CLECs gained early control of this market. Comcast and other cable companies now compete vigorously in the business market, but this is the one market segment that is competitive almost everywhere.
It is clear that Comcast is winning the battle against DSL. Comcast added 1.35 million broadband customers in 2018, while the telcos collectively lost nearly half a million customers.
I believe that the secret to the recent Comcast success is from offering faster broadband speeds. The company has upgraded to DOCSIS 3.1 and now offers gigabit broadband speeds. More importantly, the company has unilaterally increased speeds across-the-board several times to give them a significant speed advantage over DSL. The most recent speed increase last year increased base product speeds to 200 Mbps. It’s now an easy marketing advantage for the company to contrast this with the top DSL speed of 50 Mbps. Comcast is betting that speed wins and looking at the trend of their customers versus the telcos they seem to be right.
Comcast is also benefitting from the fact that many homes now find themselves bumping against the speed limits on slower products. Many homes that use multiple devices simultaneously are starting to find that a broadband speed of even 50 Mbps isn’t adequate for the way they want to use broadband. We are finally reaching the point where even the best DSL is becoming obsolete for many families. This trend is certainly accelerating and we saw 3.5 million new cord-cutting households last year who now watch all video online.
Even knowing all of the above market trends I was still surprised by the 47% market share. My firm does broadband surveys and we’ve never seen a Comcast or Charter market share below 60% in the markets we’ve studied. Of course, our experience is biased by the fact that we are only studying markets where somebody is thinking about building fiber, and there are undoubtedly Comcast markets that are considerably higher or lower than the 47% average market share.
I expect the Comcast market share to keep climbing. I think they have now won the war with DSL and in those markets where they aren’t facing a fiber competitor they will continue to pick up customers who realize they need more speed. As the household demand for broadband continues to double every three years, the migration from DSL to cable broadband is likely to accelerate.
I think it’s likely that telcos with copper networks are starting to lose steam. As the telcos keep losing DSL customers one has to wonder how much money the telcos will spend on advertising to support a sinking market. Just like I’m always surprised when I find out that there are still a few million dial-up customers remaining across the country, I think we have reached the tipping point on DSL, and DSL will start to be considered as a dead and dying technology. It might take another decade for DSL to finally die, but that slow death is finally underway.
You’re doing the surveys so in possession of actual data, but the “I need > 50Mbps” doesn’t sound right out here in the hinterlands. It’s the “I am dying from 3Mbps” that is more the issue. Also, telcos are serving lots of marginal communities with DSL that are either getting added to Comcast’s range.
At my house, which is 1.3 miles from the CO I can get 5Mbps for $45/mo from CenturyLink or I can get Comcast has (up to) 15Mbps for $29/mo or (up to) 60Mbps for $39/mo. Which doesn’t seem like much of a choice.
Apart from Comcast’s lousy reputation I don’t see why anyone would stick with CenturyLink.
(For various reasons I have Comcast Business so I may be seeing fewer reliability problems than other users. Unclear if they can give me less oversubscription and I live in a quiet, probably gamer-free neighborhood, so I may also be having an unusual experience. Elsewhere I do know people that complain about congestion, but those neighborhoods are getting upgraded to fiber as I now speak…)
My experience is that within six months after you bring so-so broadband to an area, the requests start rolling in for faster speeds. At first rural folks are thrilled to get any broadband solution if they never had one. But once you satisfy that basic need, as families start trying to use the broadband they quickly find the limitations, such as the inability to do simultaneous tasks like gaming and streaming video at the same time.
You may be dealing with actual vibrant young people. I’m skewing to an older demographic 🙂
What are the actual drivers for greater than 50M broadband? I’m not going to argue that more capacity isn’t better, but we continually hear from operators that by opening up connections to a bandwidth capacity greater than 50M doesn’t result in increased consumption.
A number of comments:
1) From all my work I agree with the operators. Households seem to be wanting 50 Mbps. 3-4 years ago it was 25 Mbps and the number keep climbing over time.
2) The 50 Mbps number is an average number across a customer base. There is probably 10% of customers who need speeds faster than that and feel choked at 50 Mbps.
3) The reason to offer speeds is customer perception. While customers don’t download much more data if you increase speeds, the faster speeds ‘feel’ faster to customers because things like shopping sites pop onto the screen faster. Sometimes it’s only slightly faster, but the human eye can perceive the difference. That alone is a justification to open up the floodgates. An ISP is in the business of pleasing customers, and if you can give them a better experience by increasing the speeds, while not costing you any extra, then why would you not do it.
4) the cable companies have also found that faster speeds help to offset problems with WiFi. If you pump out 200 Mbps at a WiFi router you’ll get a better result in a remote room than if you pump out 50 Mbps.
There’s a push and there’s also a pull. In Northern Michigan, Charter will no longer let you take less than 40Mbps. Plans start at $50/mo and go up to $80/mo after a year. I think with cord cutting they’ve got a target ARPU they’re going to get by forcing higher levels of service than customers actually prefer. And, of course, there’s almost no competition. If they can’t sell you TV, they’ll get their ~$100/mo some other way.
Obviously, the other end of the connection (and all the links in between) has to cooperate if the “faster” speed is going to mean anything. If 5g gets any kind of a toe hold we’ll be seeing a lot of dirty laundry. Oh, and a lot more interesting DDoS attacks as well…