Summary
1. Let’s say it is true that “[t]elco video growth should outpace cable telephony growth this year for the first time ever.” 2. That would not be the whole story. 3. It is not an apples-to apples-comparison.
Analysis
There is no question that the MSOs appear to have a bigger uphill fight compared with the telcos. However, the margins for voice and video in the CATV market are not the same. So, even if growth in voice penetration is slowing down (an inevitability with a larger base of customers), it does not take into consideration the overall customer retention rates for the MSOs in offering a triple play service. Also, in adding various tiers of voice services to the package of video and data, it can lead to higher margin generation.
Much more painful and embarrassing is the assertion after all this time that “[i]f U-verse technology continues to improve (through in pair-bonding and compression technology developments), we believe the market share gains could be even more impressive for the telco operators.” Apparently, a memo still needs to be sent out to certain analysts that the true movers and shakers at AT&T understand that copper is a dead-end for video. And that it is only their success in overcoming internal resistance sooner rather than later that will be the biggest determining factor in the RBOC penetrating the video market. One other annoying inclination is to put so much importance on the ability of the telcos “to reach” huge numbers of customers – a stat that is for all intents and purposes irrelevant.
Still, even a broken clock is correct twice a day. It is important to observe that even people insufficiently in the loop are starting to get it -- regarding the telcos not necessarily losing sleep over losing, often unprofitable, residential lines. The analysis points out “that telcos likely don't mind wireless substitution much at all, given the higher [average revenue per user] for their wireless subscriber base.”
