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DaVinci Coders
August 8th, 2006 at 11:15 pm

Residential Broadband Grew 22% During 2005

Twice a year the Federal Communications Commission (FCC) reports on the status of the high-speed Internet access sector in the US. The FCC defines a high-speed Internet connection as one greater than 200 kilobytes per second in at least one direction.

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The recent report shows that there were 7.7 million new residential broadband subscribers in 2005, equating to a growth rate of 21.8% from a year earlier. The report reveals there were 4.3 million new ADSL subscribers compared with 3.4 million new cable Internet subscribers.

eMarketer benchmarks its broadband household projections on the FCC so clients can assess the veracity of its forecasts. The table below shows that eMarketer projected there to be 43.7 million broadband households in the US at the end of 2005, which compares to the FCC figure of 43.0 million.

The FCC data reveal a couple of things: First, the telecom companies have been more successful than the cable companies in mopping up the remaining dial-up subscribers with their cheap ADSL offerings. However, I would suggest that the next phase of competition will not solely be centered on price, but on speed and bundled services, and in this respect the cable MSOs have a distinct advantage. The FCC data reveal that 84% of all cable Internet connections exceed 2.5 megabytes per second, compared with only 15% of ADSL connections. So if you want a bundle of telephony, Internet and TV, then the cable MSOs have the bandwidth best suited to the task.

Second, no alternative broadband technology such as fiber-to-the-home (FTTH) or wireless broadband has made any inroads into the residential broadband market to date. While there has been much talk of Verizon’s FTTH rollout and emerging wireless broadband technologies such as WiMAX, there is no evidence to date of any serious growth in this area.

In light of the new FCC data, eMarketer is likely to make some minor adjustments to its forecasts, but is essentially comfortable with the projections it made in May 2006. While ADSL is likely to continue to grow more quickly than cable Internet for the next couple of years, I suspect that the cable MSOs are less worried about the quantity of broadband subscribers they acquire than the quality. That is, if they can acquire a broadband customer that takes two or more of its services (such as digital TV or telephony), it may very well be more valuable to their bottom line than the equivalent of two or more low-priced ADSL subscribers.

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