Broadband duopoly calms cable, telecom battles
By Justin Hyde, Reuters
LAS VEGAS, Oct 15 (Reuters) - The long-promised battle between U.S. cable and telephone companies has so far been more of an uneasy peace. Thanks to their duopoly over broadband Internet access, it may stay that way.
Although the two industries face several competitors for voice and video customers, they now control about 97 percent of the 30 million U.S. broadband Internet lines to homes. Cable companies hold roughly 60 percent, but the dominant local telephone companies have been gaining more users this year.
Both appear reluctant to cut prices on Internet service -- which each considers key to its future -- to chase market share at the expense of profits. After all, competition is expensive, said Rich Nespola, chief executive of the Managing Network Group, an industry consulting firm.
"National marketing buys, high subscriber acquisition costs ... it's like nuclear proliferation," he said. "Why would you want to be disruptive unless you were losing the share game? I think the smartest thing for the duopoly competitors to do is compete on product innovation."
The sense of detente pervaded the annual convention of the U.S. Telecom Association, the local phone industry's trade group, earlier this week. It began with the chief executives of market leader Verizon Communications Inc. and Comcast Corp. , the world's largest cable operator, extolling their shared views on federal regulation.
Throughout the conference, attendees crowded into seminars on how phone companies could deliver video over their lines, while cable executives talked about the prospects for voice service.
PRICE DIFFERENTIAL
Comcast Chairman Brian Roberts said his company would set itself apart from traditional phone companies, rather than match them head-to-head.
"We want to offer phone products that offer more features, push technologies and grow revenues," Roberts said in a speech.
While many cable companies are still ramping up their voice services, so far they have focused on the high end of the market.
According to Wall Street estimates, the average monthly cost of an entry-level voice, video and data package from a Baby Bell is about $115 per month, compared with about $130 for similar packages from cable companies, albeit with faster data speeds. Those prices have remained steady even as more cable companies enter the phone market.
Banc of America Securities analyst David Barden said in a report that the gap between the plans remained even after unadvertised costs, such as equipment fees and taxes, which added about $20 per month to each deal.
The most visible exception has been Cablevision Systems Corp.'s "triple-play" offer for $90 per month with several restrictions, but no competitor has been willing to match it.
In another report, CIBC analyst Tim Moran said the two industries would probably avoid an all-out fight for at least several years, preferring to target new customers and concentrate on building revenue per user rather than chase each other's base.
"As long as there is healthy respect on both sides through a sense of mutually assured destruction, the focus of the industry will be to grow household spending per month," Moran said.
RACE TO THE CONSUMER
Despite the restrained competition so far, the largest telecommunications companies still see cable as a threat to their base.
SBC Communications Inc. Chief Technical Officer Chris Rice said expanding cable networks was one reason the Baby Bell will run fiber optic connections to neighborhoods to launch its own video service and offer faster data speeds.
"It doesn't do me any good if it took me 10 to 15 years to get there and the cable guys took all my customers, because it'll be a very difficult time to win them back," Rice said. "Getting out there in 2 1/2 to 5 years is very important for us."
The idea that U.S. broadband access could freeze into a duopoly market does not sit well with regulators, who have been touting alternatives to the two established players.
The U.S. Federal Communications Commission on Thursday approved technical standards for a new kind of broadband connection that travels over power lines.
While several utilities have tested broadband over power lines, only one has attempted a rollout so far.
Broadband access is "such a nascent market," said FCC Commissioner Kathleen Abernathy, "and there's so many technologies available for delivering it to consumers that a large percentage of the country will have more than two choices of how they would get it." |
