Summary
It appears that the small independent telcos will receive the biggest amount of the broadband stimulus funds. These carriers have dominated the rural telephone lines for over a century and there will be a high comfort level at the government agencies in dealing with them. After this market sector, we expect the cable TV operators (excluding the big MSOs) to be the next biggest service provider segment to receive money.
Analysis
Cable consolidation by the large MSOs tended to be in and around the major metropolitan areas of the US. The rest of the country is apt to still have the same local cable company that has been there since the late 1970s or 1980s. These firms were never attractive enough to get acquired. Like the large MSOs, the small CATV companies have a remarkable amount of coaxial cable in the ground. With digital compression techniques, they are getting back a lot of the RF spectrum back. The analog capacity of coax is much greater than that of twisted pair. Still, we believe that the smaller cable operators will consider going with fiber to the home because 1) they realize that they need to get to that technology eventually and 2) there will be lots of greenfield opportunities in which it makes more sense to go with fiber rather than HFC. In addition, many of the independent telcos, which lean much more in a fiber direction often own the cable TV franchise anyway.
Samuel Greenholtz consults with leading institutions through GLG
Analyses are solely the work of the authors and have not been edited or endorsed by GLG.
