Telecosm - Ike Elliott

Who's Winning the Telco-Cable High-Speed Internet War?

This week, we've been looking at who is winning the most subscribers, cable companies or telephone companies, in the race for phone and video subscribers.  Today, we'll look at the same question for high speed Internet subscribers.  Who's winning?

While there were clear winners in the video and phone categories, the Internet category is very close.  Here's the data for the year ending on March 31st, 2008:

High Speed Internet Subscribers	1Q07	2Q07	3Q07	4Q07	1Q08
AT&T	12,861,000	13,300,000	13,800,000	14,109,000	14,600,000
Verizon	7,412,000	7,700,000	7,936,000	8,200,000	8,500,000
Comcast	12,100,000	12,400,000	12,900,000	13,200,000	13,692,000
Time Warner Cable	7,254,000	7,451,000	7,684,000	7,900,000	8,204,000
Cablevision	2,118,000	2,168,000	2,220,000	2,282,000	2,343,000
Charter	2,517,300	2,639,200	2,586,200	2,682,500	2,768,200

...and here is the summarized data for the telcos and the cablecos:

High Speed Internet Subscriber Growth	1Q07	1Q08	YOY Growth	YOY % Growth
Telcos	20,273,000	23,100,000	2,827,000	13.9%
Cablecos	23,989,300	27,007,200	3,017,900	12.6%

The cablecos barely win, having added over 3 million subscribers, while the telcos have added about 2.8 million subscribers.  In percentage terms, though, the telcos are growing at a faster rate since they are growing from a smaller base.

To recap the past few posts:  Telcos are winning in video, Cablecos are winning in phone services, and Cablecos are barely winning in high speed Internet access.   

Skype's 2nd Quarter Growth In-Line

EBay announced 2nd quarter earnings yesterday, and with the earnings they announced that Skype had achieved $136M in 2nd quarter revenue, right in line with the "realistic case" revenue forecast I put out back on March 8th.  Skype's subscriber growth is slightly behind my forecast, but their revenue-per-user is slightly ahead of forecast.  Here is how Skype has done the past three quarters:

SKYPE STATS	Q4 2007	Q1 2008	Q2 2008
Borderless Communicator "Real Users"*	27,206,646	31,741,318	32,225,000
Quarterly Revenue ($millions)	$         115	$         126	$         136
Quarterly Revenue Per User	$        4.23	$        3.97	$        4.22

The Borderless Communicator "Real Users" stat comes from Hudson Barton's Borderless Communicator blog, here.  Mr. Barton tracks how many of Skype's reported registered users really used the service on a regular basis, so his "Real Users" stat is a much more reliable indicator of how many people really use the service.  If I have one gripe with Skype, it's that they subbornly cling to reporting "registered users", when everybody knows that a good number of those registrations are dormant.  I myself have three Skype accounts, and only one of them ever gets used.

Overall, Skype's revenue and subscriber growth are slowing down in the 2nd quarter.  The same thing happened last summer, though, so I factored that into the forecast since this could just be a seasonal pattern.

Here's the March 8th forecast for 2008 for Skype:

	Q1 2008	Q2 2008	Q3 2008	Q4 2008
Quarterly Revenue per "Real User"	$        3.97	$        4.18	$        4.18	$        4.18
Total "Real Users"	31,741,318	32,608,275	33,110,482	36,410,482
Quarterly Skype Revenue ($M)	$         126	$         136	$         138	$         152

If the rest of they year plays out according to this forecast, with big jump in 4th quarter users, then Skype will be at about $553M in revenue for 2008.

Who's Winning the Cable-Telco Phone Wars?

For the past couple of days, we've seen how the big telcos are kicking cable's tail in the video market, with the telcos achieving organic growth at about five times the rate of cable.  So, cable is clearly losing the TV subscriber war. However, in the battle for phone subscribers, cable is taking the telcos to the cleaners.

In the year ending March 31, 2008, the two largest telcos, AT&T and Verizon, lost over 8 million access lines, while the four largest cable companies, Comcast, Time Warner Cable, Charter, and Cablevision, added over 4.5 million phone subscribers.  The table below tells the tale of woe for the telcos:

Phone Subscriber Additions/Contractions	Year Ending March 31, 2008
Telco Access Line Losses	(8,647,000)
Cable Phone Subscriber Growth	4,508,400

Of course, the telcos are replacing some of their losses with growth in wireless subscriptions, which is a point of strategic vulnerability for the cable companies.  However, it lookes like over half of the line losses experienced by the telcos are going to the cable companies.

Here's the detail of line losses and phone subscriber gains, by company:

Phone Subscribers	1Q07	2Q07	3Q07	4Q07	1Q08
AT&T Access Lines	65,429,000	64,078,000	62,871,000	61,582,000	60,415,000
Verizon Access Lines	44,154,000	43,293,000	42,410,000	41,441,000	40,521,000
Comcast Phone Subscribers	2,471,000	3,142,000	3,804,000	4,377,000	5,016,000
Time Warner Cable Phone Subscribers	2,094,000	2,335,000	2,610,000	2,900,000	3,180,000
Cablevision Subscribers	1,320,000	1,399,000	1,490,000	1,592,000	1,685,000
Charter Phone Subscribers	572,600	700,300	802,600	959,300	1,085,000

So, the cable companies are winning far more phone subscribers (4.5 million) than the telcos are winning TV subscribers (nearly 2 million), at the moment.  The cable companies would be happy to continue losing TV market share to the telcos at this rate, so long as they are gaining phone market share at this much greater rate. 

 

More on the TV Subscriber Wars

Yesterday, we looked how the big telcos are invading the cable TV stronghold of Big Cable (Comcast, Time Warner Cable, Cablevision, and Charter).  Over the the year ending on March 31, 2008, AT&T and Verizion have added nearly 2 million TV subscribers, while the cable companies have added less than 1.2 million subscribers.  Clearly, the telcos are beating the cable companies at their own game, but if you dig a little deeper, the picture looks even worse for the cable companies.

I think it makes a difference whether the new video subscribers were gained through organic growth or through acquisition.   If a subscribers is added because you bought a cable system in Illinois and Indiana and New Jersey, as Comcast did last year, then those subscriber additions should be excluded from a measure of organic growth.  The table below summarizes the number of subscribers added through acquisition versus organic growth by the telcos versus the cablecos, in the year ending March 31, 2008:

Video Subscriber Additions	Telcos	Cablecos
Organic Growth	1,995,000	412,900
Growth by Acquisition	0	777,000
Total	1,995,000	1,189,900

The cable companies added nearly 800,000 of their new subscribers by acquisition, rather than by organic growth, so the telcos are growing TV subscribers at an organic rate that is nearly five times the rate of the cable companies.  Not good for folks in cable-land.

Of course, cable is counter-attacking by stealing voice subscribers from the telcos.  We'll have a look at that tomorrow.   

Who's Winning the TV Subscriber Wars?

With the launch of Verizon's FiOS service and AT&T's uVerse service a couple of years ago, the big telcos served notice that they were coming after Big Cable's TV subscriber base.  How well are the Big Bells doing against the big cable companies in the video arena?

It turns out that cable companies are holding their own, at least for the time being.  I compared AT&T and Verizon's video subscriber counts to the big four public cable companies, Comcast, Time Warner Cable, Cablevision, and Charter, and found that while the phone companies have added more video subscribers than cable companies in the past year, the cable companies are still adding video subscribers.

Video Subscribers	1Q07	2Q07	3Q07	4Q07	1Q08
AT&T	1,697,000	1,900,000	2,115,000	2,336,000	2,600,000
Verizon	1,008,000	1,300,000	1,511,000	1,800,000	2,100,000
Comcast	24,200,000	24,100,000	24,200,000	24,100,000	24,700,000
Time Warner Cable	20,996,000	21,123,000	21,168,000	21,273,000	21,589,000
Cablevision	5,650,000	5,689,000	5,707,000	5,751,000	5,794,000
Charter	8,278,300	8,242,800	8,230,700	8,140,300	8,231,200
Total Telco Video Subscribers	2,705,000	3,200,000	3,626,000	4,136,000	4,700,000
Total Cable Video Subscribers	59,124,300	59,154,800	59,305,700	59,264,300	60,314,200
Total Telco Change from Prior Quarter		495,000	426,000	510,000	564,000
Total Cable Change from Prior Quarter		30,500	150,900	(41,400)	1,049,900

In the year-ending March 31, 2008, the cable companies added 1,189,900 video subscribers while the telcos added 1,995,000 subscribers.  The telcos are certainly eating into cable's potential growth in video subscribers, but it's not like the telcos are the only ones winning new video subscribers these days. 

It will be interesting to watch how video subscriber growth continues to change as the AT&T and Verizon subscriber footprint expands.   

A Message From The Bandwidth Council

The following bandwidth-demand-enhancing message is brought to you by the Bandwidth Council:

(Just click the play button to enjoy.  Rob Powell comments that if you are using Firefox, you may have to right click and select play after clicking on it.)

Obsessive Blogging Disorder

For those of my colleagues who, like myself, sometimes suffer from Obsessive Blogging Disorder (OBD), today's Pearls Before Swine strip is a classic. 

I don't think I'm the only one with OBD out there.  About 6 months ago I got so obsessed with blogging, only three months after starting my blog, that I found myself spending 2 hours a day, then 3 hours a day, and then sometimes even more than that, reading and writing blogs.  I certainly learned a lot by doing that but to be honest I didn't really have three for four extra hours a day to devote to it, so I decided I needed to "let the blog know who was boss,"  and I imposed a discipline of no more than an hour a day. 

Unexpectedly, once I scaled back, I think my blog writing got better, and I certainly enjoyed it more.  Yes, there are days when I break the cardinal rule of "blog every day or you lose your readers," because some days I simply can't finish a post in the allotted hour.  So be it.  Frankly, I think the readers of this blog prefer quality of quantity.  And, the stats back that up.  Readership has continued to grow steadily for the last several months, to a recent peak of over 350 Feedburner subscribers.   And, I am deeply grateful for all of the regular readers of the blog...hopefully we are learning a lot from each other.  I know I learn a lot from you.

So, for my fellow bloggers: don't let the blog run your life, and show the blog that you are the boss.  Maybe your blog will even improve!

David Bryan Does A P2P SIP Interview on SquawkBox

Regular readers of this blog will know of my interest in peer-to-peer Session Initiation Protocol (P2P SIP), and my optimism that the developing technology will form the next leg in the evolution of Voice over IP.  I did a print interview with David Bryan, CEO of SIPeerior Technologies and co-chair of the IETF P2P SIP working group, earlier this year to explore the technology.

Now, Mr. Bryan has done a great audio interview on Alec Saunders' regular SquawkBox feature, spending the better part of an hour talking with Dan York about peer-to-peer SIP and its applications.  It's a great interview, covering a lot of ground, including P2P security and how a P2P endpoint joins a P2P cloud.  If you are interested in learning more about what may become the next thing for VoIP, it's an interview worth your time.