This is a question that has bounced around for the last five years. But there was still significant growth in broadband over the last few years. In 2019, national broadband subscribers grew by 2.6%. That leaped to 4.5% in the 2020 pandemic year. In 2021, broadband growth slowed to 2.8% but rebounded to 3.3% in 2022.
The 2022 growth rate is likely inflated by rural broadband growth, as practically all the overall industry growth for the year came from cellular FWA broadband provided by T-Mobile and Verizon. We can’t know for sure since those companies haven’t reported on the mix of rural and urban FWA customers.
What would a mature broadband market look like? It would first mean that annual subscriber growth would likely not be greater than the growth of total households. In recent years that has been in the 1% annual range and would mean perhaps 1.2 million new broadband subscribers each year nationally. This is a drastic change for the broadband industry. Consider Comcast and Charter, the two largest ISPs. These two companies represent almost 55% of all broadband subscribers. In 2019 the two companies grew by over 5%. In 2020 that leaped to over 7%. Growth for the two fell to 4% in 2021, but in 2022 was only around 1%. The stock price for these companies for the last decade has been based upon an ever-growing customer base – and annual rate increases.
We already have an idea of what a mature telecom market looks like by looking at the big cellular companies. Practically everybody has a cellphone, and the industry now expends huge marketing dollars in trying to pry market share from competitors.
There is one way that broadband differs from cellular in that cell service in much of the country is a commodity, meaning there is not much real difference between products or performance of the cellular carriers. This isn’t true everywhere, and in some places, one of the cellular companies has a superior network. But in most urban markets where most folks live, there isn’t a lot of difference between cell companies.
The broadband market is different because, in many markets, there is only one fast ISP – usually the cable company. Such markets are effectively broadband monopolies, and the monopoly provider doesn’t have to worry about a competitor taking market penetration. That means that if overall growth permanently slows that all of the wrestling for market share is going to happen in the markets that have both a cable company and a fiber competitor.
But there is another possibility. In markets where Verizon FiOS has competed against a cable company for many years, the two sides have reached a duopoly equilibrium – meaning that neither Verizon nor the cable company won the competition battle. We saw Verizon and the cable companies dukeing it out heavily in the early years of FiOS, but the marketing in these markets today has none of the desperation or vehemence of cellular competition. In a duopoly market, the two big players are happy to maintain a relatively steady market share – and the equilibrium is fine with both competitors as long as it doesn’t get too badly skewed.
If overall broadband growth slows, we’ll see different responses depending on the market. Markets without a major fiber provider will continue to be cable monopolies. This is where prices will go up every year. Markets that settle into a steady duopoly will compete with low-key advertised specials to lure folks back and forth between the two ISPs. The biggest marketing battles and the real competition will come from markets where a cable company is competing against an independent fiber provider other than the big telcos. When broadband growth inevitably slows, the industry will naturally change. But I don’t expect to see a clear-cut national response. A mature broadband market will differ according to the local mix of competitors.