Broadband Stats for 2019

Leichtman Research Group recently released the broadband customer statistics for the end of 2019 for the largest cable and telephone companies. Leichtman compiles most of these numbers from the statistics provided to stockholders other than Cox, which is estimated.

The numbers are lower than broadband customers these same companies report to the FCC, and I think that most of the difference is due to the way many of these companies count broadband to apartment buildings. If they provide a gigabit pipe to serve an apartment building, they might count that as 1 customer, whereas for FCC reporting they are likely to count the number of apartment units served.

4Q 2019 2019 Change % Change
Comcast 28,629,000 1,407,000 5.2%
Charter 26,664,000 1,405,000 5.6%
AT&T 15,389,000 (312,000) -2.0%
Verizon 6,956,000 (5,000) -0.1%
Cox 5,170,000 110,000 2.2%
CenturyLink 4,678,000 (134,000) -2.8%
Altice 4,187,300 71,900 1.7%
Frontier 3,500,000 (235,000) -6.3%
Mediacom 1,328,000 64,000 5.1%
Windstream 1,049,300 28,300 2.8%
Consolidated 784,165 5,195 0.7%
WOW 781,500 21,900 2.9%
Cable ONE 773,000 39,000 5.3%
TDS 455,200 31,800 7.5%
Atlantic Broadband 451,463 25,857 6.1%
Cincinnati Bell 426,700 1,100 0.3%
101,222,628 2,525,052 2.6%

Leichtman says this group of companies represents 96% of all US broadband customers. For the year these large ISPs collectively saw growth that annualizes to 2.6%.

The customer additions for 2019 for these large ISPs are just slightly higher than customers additions for 2018. The cable companies performed a little better in 2019 while the losses continue to accelerate for the big telcos. The big telco losers for the year are Frontier, which lost 6.3% of its customer base, AT&T (lost 2.0 %) and CenturyLink (lost 2.8%). AT&T claims to have added 1.1 million customers to fiber for the year, so they are still losing a lot of customers on DSL. Frontier is a total disaster and there may be no recovery for the company if they keep losing broadband customers at a pace of over 6% annually.

‘                                        2018                 2019

Cable Companies        2,987,721        3,144,657

Telcos                           ( 472,124)        ( 619,605)

Total                             2,425,597        2,525,052

The two best-performing companies were again Comcast and Charter, which each added over 1.4 million customers for the year while the rest of the ISPs, including cable companies, collectively lost half a million customers.

One note on the above numbers – the TDS and Cable One numbers include adjustments due to small acquisitions).

Cable Customers Continue to Plummet – 3Q 2019

The number of traditional cable TV subscribers continued to plummet in the third quarter of 2019. The numbers below come from Leichtman Research Group which compiles these numbers from reports made to investors, except for Cox which is estimated.

The numbers reported are for the largest cable providers and Leichtman estimates that these companies represent 93% of all cable customers in the country.

For the quarter, the large cable companies lost 2.1% of subscribers which would equate to a trend of losing 8.4% for the year. However, that number needs to be put into context. The biggest drop of customers came from AT&T / DirectTV which lost nearly 1.3 million customers in the quarter, and 2.6 million customers so far this year. Much of AT&T’s loss comes from the decision to end discount plans to customers and has been letting customers go who won’t agree to pay full price at the end of previously given discount plans. The company says they are glad to be rid of customers who were not contributing to the bottom line of the company. All of the other providers collectively lost 0.9% of market share for the quarter, or a pace of 3.8% annualized. It appears the many of the lost DirecTV customers didn’t reappear at another cable provider and are gone from the industry, and so AT&T seems to be pushing households to cut the cord perhaps earlier than they might have otherwise. The nearly 1.8 million customer loss for the quarter sets a new record for cord-cutting.

Following is a comparison of the second and third quarters of this year:

3Q 2019 2Q 2019 Change % Change
Comcast 21,403,000 21,641,000 (238,000) -1.1%
DirecTV 16,828,000 17,901,000 (1,073,000) -6.0%
Charter 16,245,000 16,320,000 (75,000) -0.5%
Dish TV 9,494,000 9,560,000 (66,000) -0.7%
Verizon 4,280,000 4,346,000 (66,000) -1.5%
Cox 3,900,000 3,940,000 (40,000) -1.0%
AT&T U-verse 3,600,000 3,704,000 (104,000) -2.8%
Altice 3,223,400 3,255,300 (31,900) -1.0%
Mediacom 729,000 747,000 (18,000) -2.4%
Frontier 698,000 738,000 (40,000) -5.4%
Atlantic Broadband 312,555 307,261 5,294 1.7%
Cable ONE 298,063 308,493 (10,430) -3.4%
Total 81,011,018 82,768,054 (1,757,036) -2.1%

Some other observations:

  • Frontier continues to bleed and lost 5.4% of its cable customers along with 71,000 broadband customers in the second quarter.
  • Several other companies – Mediacom, and Cable One lost more than 2% of their cable customer base in the quarter.
  • The rate of loss for Dish Networks continues to shrink, and this might be due to picking up customers that are leaving DirecTV.

I haven’t seen anybody tracking the quarterly performance of all of the online cable equivalent providers – the companies that carry a full line-up online. It seems unlikely from the numbers I have seen that these companies are picking up a lot of the customers leaving traditional cable TV. For example, Leichtman reports that Sling TV picked up 214,000 customers in the third quarter while DirecTV Now lost 195,000 customers.

I have to wonder at what point the cable industry will start to implode? Cord cutting is accelerating. The popular press and social media are full of advice telling people to cut the cord. There are major new online content platforms like Disney+, HBO Plus, and Apple + that are providing additional justification to cut the cord. Advertising revenues are starting to drop along with subscriber revenues.

There must be drastic changes in industry practices if the traditional cable business is to survive. Continued price increases are pushing cable TV out of the range of affordability for most homes. To survive, the cable companies and the programmers would have to get together to reform the industry with affordable products people are willing to buy. At least for now, that possibility seems remote.

Broadband Still Growing – 3Q 2019

Leichtman Research Group recently released the broadband customer statistics for the third quarter of 2019 for the largest cable and telephone companies. Leichtman compiles most of these numbers from the statistics provided to stockholders other than Cox, which is estimated.

The numbers provided to investors are lower than broadband customers these same companies report to the FCC, and I think that most of the difference is due to the way many of these companies count broadband to apartment buildings. If they provide a gigabit pipe to serve an apartment building, they might that as 1 customer, whereas for FCC reporting they likely count the number of apartment units served.

Following are the broadband customer counts for the third quarter and a comparison to the second quarter of this year.

3Q 2019 Added % Change
Comcast 28,186,000 379,000 1.4%
Charter 26,325,000 380,000 1.5%
AT&T 15,575,000 (123,000) -0.8%
Verizon 6,961,000 (7,000) -0.1%
Cox 5,145,000 25,000 0.5%
CenturyLink 4,714,000 (36,000) -0.8%
Altice 4,180,300 14,900 0.4%
Frontier 3,555,000 (71,000) -2.0%
Mediacom 1,316,000 13,000 1.0%
Windstream 1,040,000 5,700 0.6%
Consolidated 784,151 1,143 0.1%
WOW 773,900 10,420 1.3%
Cable ONE 689,138 7,376 1.1%
Atlantic Broadband 446,137 2,441 0.6%
TDS 437,700 4,300 1.0%
Cincinnati Bell 425,100 (400) -0.1%
100,553,426 605,660 0.6%

Leichtman says this group of companies represents 96% of all US broadband customers. I’m not sure how they calculated that percentage. That implies that there are only about 4 million broadband customers for companies not on this list, and that feels a little low to me.

For the quarter, these companies collectively saw growth that annualizes to 2.4%. This is a significant uptick over the second quarter of 2019 that saw an annualized growth rate of 1.7%.

On an annualized basis the third quarter of 2019 added about the same number of customers that were added for the calendar year of 2018. However, the cable companies are performing better this year while the losses continue to accelerate for the big telcos. The big telco losers for the quarter are Frontier, which lost 2% of its customer base, and AT&T and CenturyLink which each lost 0.8% of their customer base. Following are the annualized changes in customers in 2018 and 2019:

‘                                          2018                2019

Cable Companies        2,987,721        3,317,904

Telcos                            ( 472,124)        ( 895,564)

Total                              2,425,597        2,422,640

Both Comcast and Charter had spectacular quarters and continue to account for most of the growth in broadband, as each company added around 380,000 customers for the quarter. It would be interesting to understand what is driving that growth. Some of that comes from providing broadband to new homes. Some comes from customers converting away from DSL. And some comes from expansion – I know of examples where both companies are building new network around the fringes of their service areas.

Is Broadband Growth Slowing – 2Q 2019?

Leichtman Research Group recently released the broadband customer statistics for the second quarter of 2019 for the largest cable and telephone companies. Leichtman added Atlantic Broadband and TDS to their tracking list for the first time – both companies now have more customers than Cincinnati Bell, the smallest company on the list. Leichtman compiles these numbers from the statistics provided to stockholders. The numbers are lower than broadband customers counted at the FCC, and I think that most of the difference is to due to the way many of these companies count broadband to apartment buildings. If they provide a gigabit pipe to serve an apartment building they count that as 1 customer, whereas the FCC is likely counting the number of apartment units served.

2Q 2019 Added % Change
Comcast 27,807,000 209,000 0.8%
Charter 25,945,000 258,000 1.0%
AT&T 15,698,000 (39,000) -0.2%
Verizon 6,968,000 (5,000) -0.1%
Cox 5,120,000 20,000 0.4%
CenturyLink 4,750,000 (56,000) -1.2%
Altice 4,168,100 13,100 0.3%
Frontier 3,626,000 (71,000) -1.9%
Mediacom 1,303,000 15,000 1.2%
Windstream 1,034,300 1,900 0.2%
Consolidated 783,008 2,288 0.3%
WOW 765,500 (400) -0.1%
Cable ONE 681,762 3,377 0.5%
Atlantic Broadband 443,696 14,134 3.3%
TDS 433,400 5,800 1.4%
Cincinnati Bell 425,500 (1,200) -0.3%
Total 99,952,266 369,999 0.4%

Currently, these companies are seeing a composite annual rate of growth of broadband customers of 1.6% annually. These largest ISPs will surpass 100 million customers during this current quarter. Leichtman notes that these sixteen companies have added 13.5 million broadband customers over the last five years and 28.9 million over the last ten years.

These numbers raise the question if we are finally starting to see overall growth in the broadband market slow down. Consider the comparison of the second quarter of 2018 and 2019 annualized:

‘                                        2018                 2019

Cable Companies        2,987,721        2,128,844

Telcos                           ( 472,124)        ( 648,848)

Annualized Total         2,425,597        1,479,996

According to the FCC, over 85% of homes now have a broadband connection. Adjusting that statistics for rural homes that can’t get broadband, the penetration rate everywhere else is over 90%.

The growth of broadband customers added by cable company customers is slowing, with Comcast and Charter continue to be the only companies adding significant quantities of customers (over 200,000 each for the quarter).

Loss of telco broadband customers has increased over last year, mostly due to Frontier and CenturyLink losing DSL customers.

There are significant implications for cable companies if broadband growth stagnates because cable stock prices have been fueled by revenue growth driven by new broadband customers. As the number of broadband customers levels off, many industry analysts expect the companies to begin regularly raising broadband rates to meet Wall Street earnings expectations. We’ve seen the first signs of broadband rate increases over the last year, and the above slowdown is bound to rachet up the pressure on the cable companies.

Broadband Subscriptions Continue to Grow

According to the Leichtman Research Group, the biggest ISPs added 945,000 broadband customers in the first quarter of 2019. If sustained that would be an annual growth rate of 4% for the year. That contrasts drastically with the largest cable providers that are now losing cable customers at a rate of 6% annually.

The table below shows the changes in broadband customers for the largest ISPs for the quarter.

4Q 2018 Added % Change
Comcast 27,597,000 375,000 1.4%
Charter 25,687,000 428,000 1.7%
AT&T 15,737,000 36,000 0.2%
Verizon 6,973,000 12,000 0.2%
Cox 5,100,000 40,000 0.8%
CenturyLink 4,806,000 (6,000) -0.1%
Altice 4,155,000 36,900 0.9%
Frontier 3,697,000 (38,000) -1.0%
Mediacom 1,288,000 24,000 1.9%
Windstream 1,032,400 11,400 1.1%
Consolidated 780,720 1,750 0.2%
WOW 765,900 6,300 0.8%
Cable ONE 678,385 15,311 2.3%
Cincinnati Bell 426,700 1,100 0.3%
98,724,105 943,761 1.0%

The two biggest cable companies, Charter and Comcast are growing furiously and added 85% of all of the net industry additions, with Charter growing at an annual growth rate of almost 7%. Mediacom and Cable ONE grew even faster for the quarter.

The cable companies continue to dominate the telcos. As a whole, the big cable companies added over 925,000 customers at an annual growth rate of 5.75%. By contrast, the big telcos collectively added 18,250 customers, an annual growth rate of only 0.2%. We know that telcos are continuing to lose DSL customers, so a slight gain as a group means they are finding new customers to replace lost DSL connections.

The overall net gains for the first quarter of 2018 was 815,000. The increases are larger this year due to smaller losses by the telcos rather than faster growth for the cable companies. Perhaps a few of the telcos are finally seeing some upside by the rural CAF II builds.

The surprising statistic is how much Comcast and Charter continue to grow. They are obviously winning the broadband battle in the major cities and continue to take customers away from telco DSL on copper.

There has to be something else behind this kind of growth. A few years ago, there were analysts that predicted that the broadband market was topping out. It seemed like everybody who wanted broadband had it and that there were not a lot of potential customers left in the market. In the last two years we’ve seen continued growth similar to this last quarter.

It’s always hard to identify trends when looking at a nationwide trend, but one of the few ways to explain this continued growth is that more households are deciding that they must have broadband. That might mean homes with occupants older than 65, since that demographic always trailed other demographics in broadband acceptance. It might mean more houses with low incomes are finding a way to buy broadband because they’ve decided it is a necessity. At least some of this growth is coming by the effort to extend broadband into rural America, although that effort is largely being done by ISPs that are not on the above list.

Cord Cutting Picking Up Pace

Leichtman Research Group has published the cable TV customer counts for the first quarter of 2019 and it’s apparent that the rate of cord cutting is accelerating. These large companies represent roughly 95% of the traditional cable market.

1Q 2019 2,018
Customers Change % Change Losses
DirecTV / AT&T 22,383,000 (543,000) -2.4% (1,189,000)
Comcast 21,866,000 (120,000) -0.5% (371,000)
Charter 16,431,000 (145,000) -0.9% (244,000)
Dish TV 9,639,000 (266,000) -2.7% (1,125,000)
Verizon 4,398,000 (53,000) -1.2% (168,000)
Cox 3,980,000 (35,000) -0.9% (115,000)
Altice 3,297,300 (10,200) -0.3% (98,000)
Frontier 784,000 (54,000) -6.4% (123,000)
Mediacom 764,000 (12,000) -1.5% (45,000)
Cable One 320,611 (11,500) -3.5% (37,465)
83,862,911 (1,249,700) -1.5% (3,515,465)

A few things strike me about this table. First, the annual rate of loss is now 6%. That’s faster than we ever saw for telephone landlines which lost 5% annually at the peak of the market losses. We are only into the third real year of cord cutting and already the rate of customer growth has leaped to a 6% annual loss.

The other big striking number is that the overall traditional cable penetration rate has now dropped to 70%. According to the Census, there are 127.59 million households and adding in the customers of smaller providers shows a 70% market penetration. That’s still a lot of homes with traditional cable TV, but obviously the conversation about cutting the cord is happening in huge numbers of homes.

Another interesting observation is that AT&T is now at the top of the list. They’ve stopped reporting customers separately for DirecTV and for AT&T U-verse, which combined makes them the large cable provider in the country. However, at the rate the company is bleeding traditional cable customers, Comcast is likely to be number one again by the end of this year. AT&T has been encouraging customers to shift to DirecTV Now, delivered only online. However, that service also lost 83,000 customers in the first quarter, so the overall AT&T losses are staggering, at an annual rate of loss of over 8%.

The big losers in total customers are still the satellite companies. As those companies have gotten more realistic about pricing they’ve seen customer flee. There have been numerous articles in the press in publications like Forbes wondering if Dish Networks is even a viable company after these kinds of losses. There is also recent speculation that AT&T might spin off DirecTV and perhaps even merge it with Dish Networks.

The biggest percentage loser is Frontier, losing 6.4% of their customers in just the first quarter. It’s been obvious that the wheels are coming off of Frontier and the company just sold off properties in western states last month in order to raise cash.

For the last few years, Comcast and Charter were still holding on to overall cable customers. This was mostly buoyed by new cable customers that came from big increases in broadband customers – these two companies have added the bulk of new nationwide broadband customers over the last two years. But even with continued broadband growth, these companies are now seeing cable counts drop, and it’s likely that their rate of cord cutting among customers they’ve had for many years is probably as high as the rest of the industry.

It’s still hard to predict the trajectory of cable TV. In just two years the industry as a whole has gone from minor customer losses to losing customers at a rate of 6% per year. I don’t see any analysts predicting where this will bottom out – will it level off or will losses continue to accelerate? In any event, any industry losing 6% of customers annually is in trouble. It’s not going to take many years of losses at this rate for the industry to become irrelevant.

The National Broadband Penetration Rate

My firm CCG Cinsulting recently completed residential surveys in three cities where I found broadband penetration rates of between 92% and 93%. Those are the highest broadband take rates I’ve ever seen. If I only encountered one city with a penetration rate that high, I would assume that there is some reason why more people in that city have broadband. But now that I’ve seen three cities with the same high penetration rate I started to ask myself different questions. How unusual is it for cities to have penetration rates at that level? What penetration rates should I expect to see today in cities?

I first thought through the survey process. I’ve always found a well-designed survey to produce reliable results for questions like quantifying the market share of the major ISPs. I’ve worked with a few cities that had detailed customer penetration data from franchise fee reporting and in those cities our surveys closely matched that data. I’ve also worked in a few cities where we’ve done several surveys in a relatively short period of time and got nearly the same results from multiple surveys. I’ve come to trust survey results – as long as you follow good practices to make sure the survey is conducted randomly the results seem to be reliable.

I then turned to published industry statistics on the number of broadband customers to see what those told me. The two most cited statistics come from USTelecom and Leichtman Research Group (LRG). As of the end of 2017 US Telecom claimed that 79% of homes had a wired broadband connection, defined as any connection that is faster than 200 kbps, which eliminates dial-up. Leichtman Research Group claimed that 84% of homes had a wired broadband connection at the end of 2017 based upon a nationwide survey. Those numbers are significantly different. Luckily both groups also publish counts of national broadband subscribers, providing a second way to compare the two.

In the USTelecom Industry Metrics and Trends report from March 2018, US Telecom said there was 100 million residential broadband ‘connections’ at the end of 2017. They claim total broadband connections of 109 million when adding businesses.

Leichtman Research Group counts broadband ‘subscribers’ every quarter by gathering the statistics from the financial reports from the largest ISPs. LRG includes all of the big ISPs from Comcast down to Cincinnati Bell with 300,000 broadband customers. LRG claims these large companies represent about 95% of the whole broadband market. LRG counted 95.8 million total broadband customers at the end of 2017 – a count that includes businesses. Adjusting to add the remaining 5% of the market, LRG shows 100.8 million total broadband subscribers, including businesses – over 8 million less than what USTelecom counts.

That’s an astounding difference, and it’s obvious the two groups aren’t counting broadband customers the same way. There must be a difference between ‘subscribers’ and ‘connections’.

I’ve only come up with one reason why the counts would be that different. A lot of apartment complexes and business high rises today are served by a big data pipe provided to the landlord, who then provides broadband to tenants. I’m guessing that the LRG numbers considers the big data pipe to be one broadband customer. In most cases the LRG numbers come from quarterly financial reports to shareholders, and my guess is that ISPs consider a subscriber to be an entity that recieves a bill for broadband service.

I further postulate that USTelecom counts the number of tenants in those same buildings as ‘connections’. We know that big ISPs often do that. For example, AT&T agreed with regulators to pass 12.5 million new residences and businesses with fiber as part of their merger with DirecTV. It’s been clear that one of the big components of those new passings comes from units in apartment complexes. If AT&T was to build a fiber past an apartment complex they could count them as passings to satisfy the FCC without having had to get them as a customer.

The other component of the penetration rate equation is the number of US households. That number is just as confusing. I found a lot of different estimates of the number of US households. For example, the US Census says there was 137.4 million total living units at the end of 2017, with 118.8 million occupied living units. Statistica estimates 127.6 million households at the end of 2018. YCharts shows there are 122.6 million households at the end of 2018. That’s a wide range of ways to count potential residential customers in the country.

Finally, when trying to estimate the broadband penetration rates to be expected in cities, you have to back out the rural homes that can’t get broadband from the equation. That’s also a difficult number to pin down and I can find estimates that range from 6 million to 12 million homes with no broadband alternative.

The bottom line is that I don’t really know what I should expect as an urban broadband penetration rate. I can do math that supports a typical urban penetration rate of 92%. Mostly what I learned from this exercise is how careful I need to be when citing national broadband statistics – if you play it loose you can get almost any answer you want.

Broadband Statistics 4Q 2018

The Leichtman Research Group has published the statistics of broadband subscribers for the largest ISPs for the year ending December 31, 2018. Following compares the end of 2018 to the end of 2017.

 4Q 2018 4Q 2017 Change
Comcast 27,222,000 25,869,000 1,353,000 5.2%
Charter 25,259,000 23,988,000 1,271,000 5.3%
AT&T 15,701,000 15,719,000 (18,000) -0.1%
Verizon 6,961,000 6,959,000  2,000 0.0%
CenturyLink 5,400,000 5,662,000 (262,000) -4.6%
Cox 5,060,000 4,960,000 100,000 2.0%
Altice 4,118,100 4,046,000 71,900 1.8%
Frontier 3,735,000 3,938,000 (203,000) -5.2%
Mediacom 1,260,000 1,209,000 55,000 4.5%
Windstream 1,015,000 1,006,600 8,400 0.8%
Consolidated 778,970 780,794 (1,824) -0.2%
WOW! 759,600 732,700 26,900 3.7%
Cable ONE 663,074 643,153 19,921 3.1%
Cincinnati Bell 311,000 308,700 2,300 0.7%
98,247,744 95,822,147 2,425,597 2.5%

The large ISPs in the table control over 95% of the broadband market in the country. Not included in these numbers are the broadband customers served by the smaller ISPs – the telcos, WISPs, fiber overbuilders and municipalities.

The biggest cable companies continue to dominate the broadband market and now have 64.3 million customers compared to 33.9 million customers for the big telcos. During 2018 the big cable companies collectively added 2.9 million customers while the big telcos collectively lost 472,000 customers.

What is perhaps most astounding is that Comcast and Charter added 2.6 million customers for the year while the total broadband market for the biggest ISPs grew by only 2.5 million. For years it’s been obvious that the big cable companies are approaching monopoly status in metropolitan areas and these statistics demonstrate how Comcast and Charter, in particular, have a stranglehold over competition in their markets.

CenturyLink and Frontier are continuing to bleed DSL customers. Together the two companies lost 465,000 broadband customers in 2018, up from a loss for the two of 343,000 in 2017.

It’s always hard to understand all of the market forces behind these changes. For example, all of the big cable companies are seeing at least some competition from fiber overbuilders in some of their markets. It would be interesting to know how many customers each is losing to fiber competition.

I’d also love to know more about how the big companies are faring in different markets. I suspect that the trends for urban areas are significantly different than in smaller markets. I know that deep data analysis of the FCC’s 477 data might tell that story. (hint, hint in case anybody out there wants to do that analysis!)

I’m also curious if the cable companies are seeing enough bottom-line improvement to justify the expensive upgrades to DOCSIS 3.1. Aside from Comcast and Charter I wonder how companies like Cox, Mediacom and Cable ONE justify the upgrade costs. While those companies are seeing modest growth in broadband customers, each is also losing cable customers, and I’d love to understand if the upgrades are cost-justified.

If there is any one takeaway from these statistics it’s that we still haven’t reached the top of the broadband market. I see articles from time to time that predict that younger households are going to bail on landline broadband in favor of cellular broadband. But seeing that over 2.4 million households added broadband in the last year seems to be telling a different story.

4Q 2017 National Broadband Statistics

As a nation we are approaching an 85% overall penetration of residential broadband. The following statistics come from the latest report from the Leichtman Group and compares broadband customers at the end of 2017 to the end of 2016.

 4Q 2017 4Q 2016 Change
Comcast 25,869,000 24,701,000 1,168,000 4.7%
Charter 23,903,000 22,593,000 1,310,000 5.8%
AT&T 15,719,000 15,605,000 114,000 0.7%
Verizon 6,959,000 7,038,000 (79,000) -1.1%
CenturyLink 5,662,000 5,945,000 (283,000) -4.8%
Cox 4,880,000 4,790,000 90,000 1.9%
Altice 4,046,200 3,962,500 83,700 2.1%
Frontier 3,938,000 4,271,000 (333,000) -7.8%
Mediacom 1,209,000 1,162,000 47,000 4.0%
Windstream 1,006,600 1,051,100 (44,500) -4.2%
WOW! 730,000 718,900 11,100 1.5%
Cable ONE 524,935 513,908 11,027 2.1%
Cincinnati Bell 308,700 303,200 5,500 1.8%
Fairpoint 301,000 306,624 (5,624) -1.8%
95,056,435 92,961,232 2,095,203 2.3%

These large ISPs control over 95% of the broadband market in the country – so looking at them provides a good snapshot 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 61.2 million customers compared to 33.9 million customers for the big telcos.

These overall numbers don’t tell the whole story since there is a lot of broadband upgrades happening around the country. Cable companies are starting to upgrade to DOCSIS 3.1 which will mean even faster download speeds. A number of telcos are building fiber to replace DSL, which they are hoping will stop the erosion of DSL customers fleeing to cable companies. There also is continued mergers in the industry, but Leichtman numbers include the impact from mergers into the prior year’s numbers – which is why the table of 2016 customer won’t match up with the same Leichtman table from a year ago.

It’s obvious that the cable companies are still taking DSL customers away from telcos in the cities of America. The cable companies added 2.7 million customers last year, and a significant percentage of these are from DSL customers converting to cable modems. But the telcos as a whole lost only 626,000 customers as a group. What accounts for this difference?

Part of the answer has to be the FCC’s CAF II program. The telcos were give money to bring broadband to over 4 million rural households and the telcos all report that they’ve finished some portion of that buildout by the end of 2017. But 2017 was only the second of a six year program and we should be seeing more broadband customers for AT&T, CenturyLink, Frontier and the other big telcos starting with the 2018 statistics.

The company that surprises me the most is AT&T. They told the FCC and stockholders that they had built fiber to reach 4 million new customers by the end of 2017, out of their goal of 12 million new potential new customers. This goal of 12 million new fiber passings was a condition of their merger with DirecTV. Perhaps they lost a mountain of DSL customers – but you would expect between CAF II and the new fiber builds to see an increase in AT&T broadband subscribers.

CenturyLink is also a bit of a puzzle. They say that they built fiber past 900,000 passings last year and I would have expected to see some benefit from that effort. Granted, they would have converted a lot of DSL customers to fiber, but you would expect them to finally have a competitive advantage with fiber compared to cable networks. And they also claim a substantial rural build from CAF II.

Probably the most important thing about broadband growth in 2017 is that is 30% less than the growth in 2016. We are finally seeing broadband reach it’s peak, and if the rate of growth continues on that curve we are only a few years away from reaching broadband equilibrium where the only broadband growth will come from new housing units entering the market. That will be the point when we will see the big ISPs panic and start struggling to find ways to satisfy Wall Street’s demand for ever-continuing profits.

3Q 2017 Broadband Growth

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
Comcast 25,306,000 25,519,000 213,000 0.8%
Charter 23,318,000 23,603,000 285,000 1.2%
AT&T 15,686,000 15,715,000 29,000 0.2%
Verizon 6,988,000 6,978,000 (10,000) -0.1%
CenturyLink 5,868,000 5,767,000 (101,000) -1.7%
Cox 4,845,000 4,860,000 15,000 0.3%
Frontier 4,063,000 4,000,000 (63,000) -1.6%
Altice 4,004,000 4,020,900 16,500 0.4%
Mediacom 1,185,000 1,194,000 9,000 0.8%
Windstream 1,025,800 1,017,400 (8,400) -0.8%
WOW 727,600 730,000 2,400 0.3%
Cable ONE 521,724 519,062 (2,662) -0.5%
Fairpoint 307,100 301,000 (6,100) -2.0%
Cincinnati Bell 304,193 307,900 3,707 1.2%
94,149,417 94,532,262 382,845 0.4%

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.