North American telcos had a tough year in fixed broadband during 2012 – as net additions dropped 60% from the previous year, while cable net additions held steady. Telcos continue to be challenged by cable operators that are – on average- offering significantly faster speeds over their networks.
For 2012, net DSL subscribers declined by nearly 140k – the first decline in annual DSL subscriptions – but unfortunately not likely to be the last. Although a portion of these subs have transitioned to FTTH and FTTH subscriber additions have more than compensated for this loss ; growth in FTTH was slower in 2012 than 2011 – as Verizon’s FTTH annual net additions continue to decline.
The Speed Gap Continues to Grow Wider
The most recent FCC data supports this widening gap between DSL and Cable speeds. According to data published for 2011, 69% of cable subscribers are receiving speeds above 10Mbps compared to only 19% of Telco (DSL + FTTH). It gets worse when you remove FTTH and realize only 6% of DSL subs get above 10Mbps.
Telcos Moving in the Right Direction – But is it Too Little Too Late?
On the plus side Telcos are actively upgrading their networks to support faster speeds by upgrading to VDSL as well as implementing vectoring and bonding. Here are a few recent examples:
AT&T stated back in November that it would be expanding its U-verse (voice, video and data) footprint to 33 million homes by the end of 2015, while an additional 24 million homes are now served by IP-DSLAM. In addition, AT&T stated the following speeds would be enabled:
For U-verse customers, AT&T plans to implement pair bonding, 17MHz, Vectoring and Small Form electronics to achieve the following speeds by 2015:
90 percent of U-verse customers up to 75Mbps
75 percent of U-verse customers up to 100Mbps
For IP-DSLAM customers, AT&T plans to implement pair bonding along with rate adaptive technologies to achieve the following speeds by 2015:
80 percent of IP-DSLAM customers up to 45Mbps
50 percent of IP-DSLAM up to 75Mbps
Frontier Communications has stated by the end of 2013 that through the deployment of Ethernet, ADSL2+ Bonding and VDSL2 technology that 50% of its footprint could receive speeds of 20+Mbps.
CenturyLink, through implementation of FTTN architectures, stated that at the end of 2012, 13% of its access lines could get 40+Mbps; 31% could get 20+Mbps; 59% at 10+Mbps and 72% at 6+Mbps.
The question is whether this will be enough. And while many operators are choosing to skip the DSL upgrades and move directly to FTTH – none of these FTTH deployment are big enough to have a significant impact on cable – even Google Fiber.
At the end of 2011, the FCC stated there were 5.884 million FTTH subscribers – and based on data from 2012 – we believe this number be 6.8 million (despite what the FTTH council states) – representing just 16% of all Telco broadband subscriptions.
“Mind the Gap”
Broadband speeds are important – I am not sure that it means we all need 100Mbps or even 1Gbps – but certainly fast enough so that consumers can take advantage of applications and services such as video, gaming, e-health, e-education, e-business, etc. and have a positive experience- and for this, Telco services need to get better and faster.
Telcos must mind the speed gap – not only with cable but also LTE – as these services become widespread and offer potentially faster speeds than most DSL service.
And while I would be thrilled if FTTH services were available everywhere – the reality is that this will not happen – at least, not quickly.
Until that time, Telcos need to look at making these incremental investments in broadband upgrades and quickly – otherwise they are going to find that despite the fact that consumers might have a choice in broadband operators – there is really no choice at all. And unfortunately, this is going to include the loss of other services – including voice and video.