As a group, cable operators appear to be winning the battle for ultra-broadband business.
The 92.9 million broadband subscribers represented by the 14 largest cable and telephone providers in the United States account for about 95% of the country's market, according to a report from Leichtman Research Group. This bloc of service providers acquired 2.7 million net new high-speed Internet subscribers last year, a 15% drop compared with 3.1 million net additions in 2015, the research firm said.
Competition is coming from OTT players, which are nibbling away at market share as service providers replace proprietary infrastructure and enter the content fray.
Top cable companies, including Comcast,
Charter, Altice, Mediacom Communications Corp. ,
WideOpenWest Holdings LLC (WOW) and Cable One Inc. -- held 58.4 million broadband subscribers, up 3.3 million from the prior year. By contrast, leading telephone companies -- such as
Windstream, Fairpoint and Cincinnati Bell Inc. (NYSE: CBB) -- lost approximately 600,000 subscribers compared with a loss of 185,000 customers in 2015, Leichtman Research found.
For the past two years, cable operators have seen three-digit growth in broadband: In 2016, subscriptions increased 122% and in 2015 they increased 106%, Leichtman Research said. On the other hand, the rate of telco broadband subscriber losses grew 69%, with service providers losing about 600,000 customers in 2016 versus 185,000 the prior year, the research firm found.
Content meets customer service
Both AT&T and Frontier suffered losses in their pay TV subscriber bases. And while Verizon added 59,000 subscribers it finds itself in a pricing war at the low-end of packages.
Customers are fickle, too. One fifth of pay TV subscribers in the United States are unhappy with their service, a 100% increase since 2013, according to research from Parks Associates. Today, only one-third are very satisfied with pay TV versus 57% in the 2013 report, the research firm finds.
"Pay TV providers have left the door open for OTT providers or others to capture disaffected customers. OTT players should see this as both an opportunity and a warning," says Brett Sappington, senior director of research at Parks Associates.
The caution comes from OTT providers' extensive investments without any guarantee of success due to the absence of contracts, for example.
"OTT services can capitalize by capturing these consumers but could end up in worse trouble since consumers can leave an OTT service at any time without consequence," Sappington tells UBB2020. "As a result, I suspect that OTT services will be more sensitive to churn and customer feedback since they can go out-of-business virtually overnight if customers become upset."
— Alison Diana, Editor, UBB2020. Follow us on Twitter @UBB2020 or @alisoncdiana.