The top 12 wireline providers in Q2 2016: AT&T, CenturyLink, Verizon’s results marred by broadband losses

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With the second quarter earnings period nearing an end, FierceTelecom is taking a look at how the top wireline telcos performed in terms of revenue, broadband subscribers and video services.

During the second quarter, one the key trends that took place amongst the largest telcos on the wireline side was a drop in broadband subscribers.

AT&T, CenturyLink and Verizon saw the effects of strong cable competition in their DSL-only markets in the second quarter as the top telcos either lost more subscribers or did not add as many as earlier quarters, particularly in markets where they only offer slower speed DSL services.

Top telco broadband pain
At AT&T, the telco added a paltry 74,000 new broadband subscribers, including 20,000 new business broadband additions. AT&T ended the second quarter with a total of 14.2 million broadband subscribers, down from 14.4 million as it lost 110,000 broadband customers. Despite the dip in subscribers, AT&T maintained that it expects “IP broadband net adds to bounce back in the second half of the year."

Verizon and CenturyLink also saw losses during the quarter.

Verizon’s drop in FiOS broadband subscribers was expected, with the telco racking up a large backlog of orders during the quarter as it dealt with a wireline labor strike. The service provider shed 13,000 FiOS internet connections and 41,000 FiOS video connections, ending the period with a total of 4.9 million and 4.5 million FiOS subscribers. When taking into account DSL, the telco lost a total of 83,000 customers. 

CenturyLink, seeing an opportunity to capitalize on dual and triple play customers, dropped 65,000 subscribers, mainly broadband-only customers. As a result, the service provider reported that its overall broadband customer base declined to 5.9 million subscribers as of the end of the second quarter.

However, the top three weren’t the only service providers that suffered broadband losses during the quarter.

Similar to CenturyLink, Windstream lost over 16,000 broadband subscribers during the quarter. By upgrading its last mile networks with copper-based VDSL2 and vectoring as well as FTTH in select markets, Windstream said it has an opportunity to win back customers and attract newer ones with higher speeds. The telco noted that more of its customers are purchasing 50 and 75 Mbps services in the markets where these options are available.

Cable’s speed, bundling is winning
Bruce Leichtman, president and principal analyst for Leichtman Research Group, told FierceTelecom that the drop in broadband subscribers is related to the fact that cable is winning on the industry's ability to offer higher speeds and bundling. 

“The telcos, particularly AT&T and Verizon, are focused on upgrading their own customers from DSL to higher speed U-verse and FiOS service – this is allowing cable to target DSL subscribers, particularly where higher speeds are not available from the telco provider,” Leichtman said. “Cable is also using the bundle with video effectively to help with internet vs. telcos.”

Jason Blackwell, director of service Provider Strategies for Strategy Analytics, agreed, adding that the telcos’ ongoing FTTP buildouts have not been able to surpass DSL losses yet.

“Cable operators certainly have accelerated the rollout of higher speed tiers across their footprints,” Blackwell said. “At the same time, they have focused on offering bundles with TV, broadband and fixed voice services with competitive pricing offers. As a result, the telcos have been left with diminishing DSL subscriber bases that are not offset by the gains in fiber subscriptions.”

According to LRG Research, the broadband market is at 80 percent penetration, but not at the saturation point yet. Leichtman said that while the downturn is certainly concerning, the second quarter is typically slower than others.

“The second quarter is always the lowest quarter of the year for broadband (over the past 60 quarters the bottom 7 are in the past 7 second quarters), so while the market may be showing signs of slowing overall, the second quarter does not necessarily signal the end of growth,” Leichtman said. “Net adds over the past year are slightly above the prior year. Some the providers that you name could bounce back in the next 3 quarters.”

Blackwell said that telcos have an opportunity to win back more customers by making investments in next-gen technologies, including fiber, vectoring and G.fast, a technology that allows service providers to deliver up to 1 Gbps over existing copper in short distances. CenturyLink and Windstream have been trialing G.fast in multi-dwelling units, for example.

“I think that the telcos can bounce back, but it will take a combination of capital expenditure as well as marketing to do so,” Blackwell said. “Telcos will have to focus on the use of technology to remain competitive with the cable operators who have the speed advantages currently. This could involve additional fiber deployments or the use of vectoring or G.fast technologies, but with moving toward DOCSIS 3.1, it will definitely be a challenge for telcos to catch up.”

Take a look at the chart below to see the service provider metrics. Also, check out our first quarter report here.

Carrier Total revenue Broadband adds / drops Total wireline broadband subs Video adds / drops
1. AT&T $40.5B Added 74K 14.2M Added 25,300*
2. CenturyLink $4.4B Lost 65K 5.9M Added 17,000 Prism video
3. Verizon $30.5B Lost 13K FiOS Internet** 7.01M Lost 41,000 FiOS Video
4. Windstream $1.36B Lost 16K 1.07M Not reported
5. Consolidated Communications $186M   462,559  
6. FairPoint Communications $207M Added 120 311,440 Not reported
7. Frontier $2.61B Added 26K 255,000 Lost 20K***
8. TDS Telecom $1.28B Added 1,000 232,200 Added 13,300
9. Cincinnati Bell $299M Added 11K 175,000  
10. Hawaiian Telcom $99.5M Lost 1.5K 91,800 Added 6,700
11. Shentel $130M   14,100  
12. Lumos Networks $52.4M   7,982  
* IP-based U-verse subs
** lost DSL subs
** Ethernet revenue
*** Fioptics subs (lost DSL)
**** includes wireless backhaul revenue
***** cable subs