SAN FRANCISCO (CNN/Money) -
The flowers may have bloomed this spring, but broadband subscriber numbers sure didn't, according to the recently released second-quarter broadband growth figures for the major cable and DSL providers.
The numbers weren't all bad, however. The leaders in each market showed decent growth and increased the distance between themselves and their closest competitors.
But looking behind the numbers offers a hint at what the players must do to continue growing. Investors can assess their portfolios' prospects by monitoring which companies use the following strategies.
First, here's the raw data: On the DSL side, SBC Communications (SBC: Research, Estimates) reported 304,000 new customers, nearly three times what either BellSouth (BLS: Research, Estimates) or Verizon (VZ: Research, Estimates) added (103,000 and 101,000, respectively).
For cable, the 800-pound gorilla Comcast (CMCSK: Research, Estimates) blew away the competition with 350,900 new cable broadband subscribers. That's more than double the 170,000 that Time Warner Cable signed on. Rounding out the cable market, Cox Communications (COX: Research, Estimates) added 112,452, Cablevision Systems added 82,700, and Charter Communications increased its ranks by 76,700.
| Recently in Tech Biz
|
|
|
|
|
While some of the general slowdown can be attributed to the season (broadband growth typically slows in the second quarter), bigger issues are appearing and some companies are doing a better job of adjusting than others.
"The [early adopter] broadband market is saturating," says Forrester Research (FORR) analyst Charles Golvin. "There are fewer early-adopter customers out there that don't already have broadband. Companies need to make it more appealing to more people."
The benefits of partnering
That's exactly what the players have been doing, although with varying degrees of success. One approach -- and one that's been working well for SBC -- is to partner with a content company. SBC partnered with Yahoo! (YHOO: Research, Estimates) last year, and both companies are successfully marketing the benefits -- beyond just speed -- of broadband.
Verizon signed a partnership with Microsoft's (MSFT: Research, Estimates) MSN service in May, but "they're not nearly as far along in their combined offering and marketing" Golvin says. Not until last week did Microsoft add a broadband promotion to the MSN front page.
On the cable side, Comcast's success can be partially attributed to its enormous size and sales volume. But Comcast has also been very aggressive in marketing broadband to its cable customers.
Broadband serves Comcast's mission in two ways: It generates higher monthly income for the company, and it paves the way for future revenue-generating services like video-on-demand that run only on a digital cable box.
No discounts yet
Earlier this year some DSL providers such as Earthlink (ELNK: Research, Estimates) announced price cuts, trying to beat back cable's continued broadband dominance. There was some concern that cable companies would have to respond with price cuts of their own. As anyone with digital cable service can tell you, it hasn't happened.
"I haven't seen any discounting from Comcast other than the short-term discounts for signing up," Golvin says.
The biggest reason is that cable companies don't have to offer price discounts. Since their broadband offering is tied to the digital cable upgrade, these companies can offer much stronger marketing promotions, tying the promise of 200-plus channels and a clearer picture to the lure of high-speed Internet Access.
A final note: Even though the broadband pickup for the second quarter was overall a little slow, investors shouldn't turn bearish on consumer demand for the service. According to Forrester, about 15 percent of households in the United States currently have broadband. By 2008 that number is expected to grow to 55 percent.
Sign up to receive the Tech Biz column by e-mail.
Plus, see more tech commentary and get the latest tech news.
|
