Telcos’ fiber focus isn’t likely to disrupt cable’s broadband domination, says Kagan

U.S. broadband companies added about 5.5 million new customers in 2020 and will continue to see growth in 2021, according to Kagan, a research unit of S&P Global Market Intelligence. But there will be increased competition for broadband customers as Kagan estimates that the penetration rates for broadband in the U.S. are nearing 90%.

Cable companies, by far, still have a hold on the bulk of the broadband market. Kagan estimates that cable will have about 76.35 million broadband customers by year-end and command a 65% share of the market.

But cable firms shouldn’t rest on their laurels, Kagan warns. Telecom companies are putting a lot of effort into expanding their fiber footprints and have sizeable goals for 2021. Kagan estimates that by year-end telecom providers will have 32.21 million residential broadband customers and 27% market share.

However, Ian Olgeirson, research director at Kagan, said that while he expects the cable companies to feel the pressure from telcos’ fiber investments, he thinks most will be effective at responding to that increased competition. “Cable has been effective in their broadband deployments,” he said. “We continue to attribute the dominant market share to cable providers based upon our expectations, and we see limitations in fiber buildout,” he said.

Olgeirson noted that every year Kagan looks at whether fiber will become more competitive with cable and every year the cable industry seems to maintain or even grow its market share and fiber providers tend to under-deliver on expectations. “When they talk about upgrades, it’s slow and expensive and they run into issues,” he said.

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Of course, the wild card in the U.S. broadband market is the wireless companies and whether firms such as T-Mobile and Verizon will be able to capture a portion of the market. Kagan predicts that wireless will capture about 6% of the U.S. residential broadband market with about 7.19 million subscribers. Olgeirson notes that T-Mobile and Verizon have said they will be covering sizeable footprints and gaining penetration in broadband in a short time. But he believes that ultimately these wireless providers will be the biggest threat to the telcos, not cable providers. “If these companies hit that 30 million to 50 million threshold in coverage with fixed wireless and achieve a 20% penetration rate in three to five years that would put a lot of pressure on fixed wireline,” he said.

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Olgeirson said he envisions existing DSL customers will likely move to fixed wireless because they probably haven’t had a better broadband option. “Part of the fixed wireless growth will come from the telcos existing DSL subscribers,” he said. Verizon has a chunk of DSL that will get cannibalized.”

He adds that Kagan’s subscriber estimates for fixed wireless doesn’t just include the latest 5G fixed wireless offerings but also includes 4G LTE and WISPs that offer service using unlicensed spectrum.

Olgeirson said that Kagan believes that satellite broadband will remain a rather small part of the U.S. residential broadband market despite newcomers like Starlink, the low-Earth orbit satellite broadband service from SpaceX. The company estimates there will be about 1.52 million satellite customers by year-end, accounting for just 1% of the market. “Although Starlink offers better speeds and capacity there is still a $400 startup fee and other issues that position it as an alternative if you don’t have any other broadband options,” he said.