With billions being poured into fiber builds, cable players face the very real prospect of heightened subscriber competition in the coming years. However, one expert told investors on a call hosted by Wells Fargo Securities the fiercest fights for customers might not be in dense urban areas as one might expect, but instead in the surrounding suburbs.
A summary of comments made by Michael Hollobow, principal at consulting company Winset Group, during Tuesday's call was provided by Wells Fargo analyst Steven Cahall. Hollobow noted that while AT&T, Verizon and Altice USA have announced high-profile fiber expansions, some of the biggest fiber-to-the-home projects are actually being undertaken by Tier 2 and Tier 3 operators.
Accounting for these builds, the rise of 5G and satellite broadband and the fact that dense urban markets are already highly competitive, Hollobow predicted suburban areas will be “the next battleground since many areas only have ~2 true high-speed competitors,” Cahall wrote.
Though 5G isn’t yet a threat due to the limited propagation of mmWave spectrum and the limited bandwidth offered by low-band airwaves, Hollobow said that could soon change as operators deploy prime C-Band spectrum. He also noted satellite broadband may become a threat in the near term as well as it begins offering service that is “good enough” to pick off subscribers in underserved or uncompetitive markets.
Hollobow’s statements echo warnings about cable’s future issued by New Street Research analysts during a presentation in July. At the time, they noted the number of homes passed by fiber is expected to increase from 55 million to 86 million over the next decade while the number of households covered by fixed wireless access broadband is expected to reach 60 million.
Writing about the implications of fiber expansions in June, MoffettNathanson analysts pointed out “typically, the competitive impact from overbuilds is felt with some lag, suggesting the impact on cable operators will peak in 2024/2025.” But they said estimating the impact isn’t a straightforward calculation given “one cannot assume that a subscriber gained by Telco fiber is a subscriber lost to cable.” “All else being equal, higher overlaps with fiber will mean slower unit growth for cable broadband,” they concluded.
Ultimately, New Street Research predicted cable’s overall subscriber count will grow from 73.3 million in 2020 to 85.9 million by 2030, but its share of the residential broadband market will fall from 67% to 64%.