Consumer broadband lifts the ILEC wireline tide

Sean Buckley, FierceTelecomOne of the common themes that continues to be seen in the consumer broadband segment--both telcos and cable operators--is that the first quarter is the best quarter in terms of net additions, and Q1 2013 was no different.

With the Q1 earnings season now over, our new report, Grading the top 13 wireline service providers in Q1 2013, tracks how all of the top ILECs performed during the quarter and how many broadband subscribers they either added or lost. 

According to Leichtman Research Group's latest quarterly broadband report, 17 of the largest U.S.-based cable operators and telecoms acquired 1.1 million net additional broadband subscribers in Q1 2013.

Bruce Leichtman, president and principal analyst for LRG, said that "net broadband additions in 1Q 2013 were about 500,000 more than in 4Q 2012."

As seen in previous quarters, AT&T (NYSE: T) and Verizon (NYSE: VZ) made strong gains, adding 731,000 U-Verse and 188,000 FiOS subscribers, respectively. However, that growth came amidst a collective loss of 696,000 DSL subscribers, most likely in areas where customers migrated to higher speed services and in markets where DSL can't match cable's 50 and 100 Mbps service tiers.

No less impressive was CenturyLink (NYSE: CTL). The third largest telco added 66,700 broadband subscribers, ending the quarter with over 5.9 million broadband customers. But the carrier warned that they "expect broadband subscriber growth to be significantly lower in the second quarter due to normal seasonality in our industry."

While the big three operators' strategies and footprints vary, a common theme was that where TV service was offered, customers would subscribe to either a double or triple play bundle. AT&T and Verizon reported that broadband ARPU rose over 9 and 9.5 percent respectively year over year to $40 a month and $107.15 a month.  

Not everyone saw broadband growth during the quarter. Windstream (Nasdaq: WIN) reported that even though ARPU rose 5 percent, it lost 8,600 broadband subscribers. Jeff Gardner, president and CEO, attributed the loss to cable operators such as Time Warner Cable (NYSE: TWC) and others offering standalone broadband packages.

"What happened in the quarter was the cable companies got very aggressive," Gardner said. "For the first time, we saw an unbundled cable offer with an attractive promotional price."

Time Warner Cable, according to FierceCable, now offers a $19.95 monthly standalone broadband service.

For all of the growth that the telcos saw in Q1, they still trail the cable operators. By comparison, says LRG, they have a "58% share of the overall market, with about 12.7 million more subscribers than the top telephone companies--compared to 10.8 million more a year ago."

With cable getting more aggressive with standalone broadband packages and higher speeds, the traditional wireline operators are finding that broadband and IP-based services have become the savior to offset the ongoing declines in legacy voice and wholesale wireline services. The challenge going forward for them will be to find ways to stay on par or ahead of cable with a mix of bundled and even standalone broadband service packages.--Sean

Check out our new report, Grading the top 13 wireline service providers in Q1 2013.