A new analysis from New Street Research revealed that the telecom industry collectively increased fiber locations by 1.8 million in the third quarter of this year, with “most of the increase driven by AT&T.”
The broadband trends report from analyst Jonathan Chaplin highlighted that over the past year, AT&T has passed 2.2 million new consumer locations with fiber, although he wrote that pace is “slightly below expectations based on management guidance.”
AT&T added 1.1 million fiber subscribers during the past year. Despite its growth in fiber locations, AT&T's fiber subscriber adds were slightly below its pace in 2022 and 2019.
“AT&T isn’t growing penetration as quickly as we think they should,” said Chaplin, although he expects penetration will reach the low-to-mid 40s “eventually.”
Verizon's fiber penetration has remained relatively stable at 42% for the last two years, with growth slowing in the last six quarters. The company continues to build fiber at 400-500k locations per year, focusing on markets with DSL infrastructure that could be upgraded.
”We estimate that AT&T also had a higher take rate compared to Verizon, though this is hardly surprising given penetration of 39% compared to Verizon at 42%,” said Chaplin.
However, it’s notable that AT&T’s fiber footprint has expanded by about 12% over the last year, whereas New Street Research gauged that Verizon’s fiber footprint has expanded only by approximately 3%.
AT&T's DSL losses have slightly improved over the last two quarters, while Verizon's DSL losses have continued to decrease steadily. The shift from DSL to fiber is a contributing factor, with AT&T experiencing more significant impacts due to its extensive fiber expansion.
“Verizon isn’t expanding their addressable market nearly as fast as AT&T,” said Chaplin. “The Company still has markets with DSL infrastructure that they could upgrade with good economics –we would love to see them push this more aggressively.”
Eventually, DSL losses will gradually improve “as the base dwindles towards zero.”
Frontier and Lumen: Mixed fiber fortunes
As for other fiber players, Frontier Communications's fiber net adds have accelerated alongside the expansion of its fiber passings, adding approximately 0.3 million fiber subscribers over the past year. In contrast, Lumen has witnessed a deceleration in fiber net adds, despite increasing fiber locations.
According to the broadband report, Frontier boasts a higher Net Promoter Score (NPS) for its fiber product compared to its competitors like AT&T, Verizon and Lumen – marking an “astonishing improvement” from once being the lowest in the group to now, being double the average.
Frontier's broadband net adds have also accelerated, driven by higher fiber gains offsetting copper losses.
Meanwhile, Lumen's broadband losses have grown, with “lackluster” fiber adds overwhelmed by worsening copper losses, particularly in urban areas impacted by fixed wireless access (FWA).
DSL locations are declining for both Frontier and Lumen as they prioritize expanding fiber locations.
Comcast and Charter: Navigating a changing landscape
Comcast and Charter, two major players in the broadband space, are experiencing shifts in their net adds trajectories, the New Street Research report showed. Both companies are facing challenges with broadband adds "well below historical levels," primarily influenced by the rise of fixed wireless access (FWA).
“Fiber has had a small impact; most of the pressure has come from FWA. The trends between the two companies have diverged slightly over the last five quarters,” wrote Chaplin. “Comcast has lost a small number of subs with trends worsening, while Charter has managed to grow adds with stable trends.”
Charter has benefitted from rapid footprint expansion into rural markets and showed a higher take rate. The analysis suggested the company may also be capitalizing on a more aggressive push into the wireless market.