Cable Winning the Competition for Broadband Access

Implications: The Convergence Group’s two studies imply the strength of TV delivery over online video for advertising revenue, but also show the dominance of cable MSOs over telcos for broadband access.

Analysis: The first study of the Convergence Consulting Group points out that broadcasters and cable providers depend on television delivery over online viewing for three key factors: 1) Threaten the $66 billion in advertising and the $30 billion in programming; 2) Diminish the average 16 minutes per hour of advertising on traditional television for the 2 to 5 minutes per hour of online viewing; 3) Thwart the growth of online videos by loading more advertising.  The Convergence Group also indicates the challenges of ad-skipping by DVR users and the growth trends of viewing clips versus full episodes.  Convergence suggests that TV delivery has to become “smarter” to match consumer behavior with alternatives for on-demand content, targeted advertising and programming sponsorship.
The second study by the Convergence Group shows that the U.S. broadband competition is being won by the cable providers.  Convergence suggests that lower price is attracting 58% of video customers to cable’s Internet access compared to 33% for the telco’s broadband.  For the 2008 first quarter, Verizon had 262,000 additions for FiOS Internet access.  AT&T added 491,000 broadband connections during the quarter.  But in comparison, Comcast’s first quarter included 492,000 subscribers for high speed Internet access and 639,000 for digital voice telephony.   Comcast is exceeding the telco results with a smaller customer base. 
And Comcast commented in the quarterly results that 68% of the Internet access adds switched from telco DSL, and that 80% of the VoIP users bought bundles of services for TV and/or Internet.   Verizon grew in FiOS subscribers but added only 4,000 DSL lines.  The telcos perhaps have introduced consumers to high speed Internet access with DSL, whereas the cable providers are winning on price and bundling for the full home package.