So much for the conventional wisdom that broadband subscriber growth is on a steady downward slope as broadband penetration nears the saturation point.
In its latest study of US broadband market trends Tuesday, MoffettNathanson reported that cable operators and telcos added substantially more data customers in the second quarter than they did a year ago. All told, service providers netted an impressive 595,000 data subs in the spring quarter, well up from 317,000 a year earlier. As a result, the broadband subscriber growth rate climbed sequentially from 2.4% in Q1 to 2.7% in Q2.
These figures lagely jibe with the numbers from last week's market update from Leichtman Research Group, which also found that US broadband providers picked up nearly twice as many data customers as they did in spring 2017. As Bruce Leichtman, president and principal analyst at LRG noted in his report, the quarter marked the first year-to-year quarterly broadband increase in subscribers in two years. (See Cablecos Add 585K New Broadband Subs in Q2.)
Don't get too excited about the Q2 jump in broadband sub gains, though, because they may well prove to be an anomaly. In his report, Craig Moffett, principal and analyst at MoffettNathanson, atrributes the sub surge mainly to a steep jump in new households, as US Census Bureau data indicated that the number of newly occupied households climbed by about 450,000 year-over-year in the quarter.
"But that doesn’t mean the improvement isn’t genuinely good news," Moffett wrote in his blog post Tuesday. "It is."
Like the Leichtman report showed, cable operators scored particularly well in the quarter, accoding to Moffett. Collectively, cablecos added an estimated 676,000 high-speed Internet subscribers, about 25% higher than their 540,000 net additions a year ago; Comcast and Chater led the way with strong performances. (See Comcast Sees Broadband Nirvana and Charter Races to Wrap Up DOCSIS 3.1.)
The telcos also fared better than a year ago, although that's not saying much. Still strugglng to convert their DSL subscriber to fiber customers, telecom providers lost 114,000 broadband subs in the spring quarter, about half the 231,000 subs they shed in the year-ago period.
"Interestingly, the improvement for the telcos in Q2 specifically appears to be largely a product of slightly slower declines for DSL, not from an improvement in growth for fiber," Moffett wrote.
Noting that "above-average new household formation isn't a sustainable source of ongoing growth," Moffett argued that broadband sub growth has to slow down again because penetration rates will peak sooner or later. With nearly 80% of US homes now subscribing to broadband, he said, the broadband saturation point is near. He expects the overall broadband suv growth rate and the growth rate in new households to gradually converge.
“Still," he wrote,"if nothing else, Q2 results show that there is still room for upside surprises.”
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