It is perhaps irony that Mark McCormack, a Jefferies analyst, this week began to talk up the “insurmountable lead” that US cable firms had over incumbent telcos in broadband, just a day or so before AT&T launched a barrage of services aimed at 1 Gbps broadband and turning the situation on its head.
He was convinced, as many are, that DOCSIS 3.1 which is so often talked about as delivering gigabit speeds and the arrival of cellular bundles from cablecos meant that cable will win. The unfortunate analyst should have had a subscription to Faultline which has been talking about the arrival of G.fast services for the past 5 years – about the typical gestation time for an incumbent telco to take a risk on a new technology.
But DOCSIS broadband is a function of a sending CCAP server and a receiving cable modem, and both can have limitations – for instance an historical commitment to analog TV channels or a price point that modems need to get under, which often mean that the service which is being provided only reaches 200 Mbps to 300 Mbps. Sure an empty cable with no TV above the 54MHz line, and which will not eclipse MoCA signals for delivery around the house, can deliver 2 Gbps in DOCSIS 3.0 and 10 Gbps in DOCSIS 3.1, but it will cost a cable firm an arm and a leg to offer that to clients in increased device costs. And even then each home has to share that data with anyone on a loop with them.
The other issues he raised are more to do with marketing than technology – pointing out that 0cable firms are better at bundling things – which has always been true – they are better marketers. But today AT&T has bundled broadband with DirecTV, which is a start. How long before it adds fixed telephony and a handful of cellular customers, as a quad play bundle. DirecTV was always a very good marketer, even if AT&T wasn’t.
McCormack said, “In addition to a lack of bundled offerings, the broadband speeds offered by the ILECs is in many cases far inferior to that of competing cable offerings,” McCormack said in a note to investors sent out late last week. Well that’s been true for a dozen years and why has he not noticed that AT&T has been treading water in broadband for 10 years straight. But that all changed today with its next gen broadband services.
McCormack said he expected continued pressures from DOCSIS 3.1 and that is was far too late for ILECs (Incumbent Local Exchange Carriers) to ramp spend to compete – this despite the fact that cablecos carry far more debt than ILECs.
He was in fact watching the Q2 numbers from CenturyLink, which lost 77,000 broadband lines in the quarter, but it might be worth noting that CenturyLink’s pricing is all over the place due to its merger with Level 3, and also worth noting that it is installing virtualized 10G-PON, the first in the US, which will radically change its ability to offer broadband – fixed or otherwise.
He also was looking at Frontier Communications which lost 33,000 broadband customers while the average additions for cablecos were multiple 100s of thousands of broadband additions.
It is worth noting that Frontier has just called upon Nokia to deploy G.fast broadband Connecticut-wide, which will mean that already it has caught up with cable, even if people at first don’t take it seriously. It has also taken some revolutionary WiFi mesh technology onboard recently too which will make its WiFi exceptional.
We are not especial fans of Telcos at Faultline Online Reporter, but they are such a large attack target that equipment vendors will never allow their ability to do broadband to fall below a certain level.