Cable companies could soon find themselves in a difficult position as the fight for subscribers intensifies with fiber-to-the-home (FTTH) providers, said analysts at Cowen Equity Research.
Cowen reviewed the key points of private fiber providers at its recent FTTH seminar, noting that cable's standard response to competition from these players is to lock in subscribers through promotional rates. But Cowen conference participants noted that these rates apply only to new customers, and that "existing cable subscribers face much higher broadband rates." Analysts asserted that "given the national customer base that the large cable companies have, significant price cuts are highly unlikely, so cable is in a bind and will have to decide whether to give up share or cut ARPU." The company added two companies - Allo and Ziply Fiber - that reported significantly faster-than-expected penetration, reaching 20-30% in the first year. "As the industry matures and private FTTH operators see terminal market share approaching the natural 50/50 split with Cable, the better operator and customer experience could win by a few percentage points," Cowen's team wrote.
While cable operators have repeatedly downplayed the threat of fiber-optic competitors, the broadband landscape is poised to change significantly in the coming years. Cable also faces pressure from fixed wireless broadband, which will add a net 2.4 million and fiber 1.9 million in 2022 compared to cable's 1.5 million. That said, NSR, which recently held its own fiber-focused conference, estimates that wireline ARPU will continue to rise, albeit at a slower pace, through 2025. Specifically, it forecasts ARPU to increase from $65.51 in 2021 to $76.41 over the forecast period, although year-over-year growth is expected to decline from 6 percent in 2021 to 3.6 percent in 2025.
NSR's analysis concludes that broadband pricing will remain strong in markets with one or two gigabit providers, but warns that "when a third gigabit provider enters the market, it will pose a threat to pricing." The forecast is that by 2030, 83 percent of markets will have one or two gigabit providers, while 15 percent will have three or more. It adds higher build-out costs due to inflation and supply chain constraints, which also help ensure that ARPU remains resilient across the broadband industry.
