A US Broadband Slowdown Ahead?

One of the advantages of watching baseball on MLB.com, is that you get to see many local broadcasts, that expose you to local advertisements. For past few days I have noticed on MLB.com, WGN and other stations, a sharp increase in the number of advertisements for broadband services. In the Bay Area, it is Comcast making fun of puny speeds of DSL. In Atlanta, it is BellSouth pushing its Fast Access service, and touting lower prices. Same is true for Verizon’s budget DSL and Optima Online.

The frenzy of activity tells me that the easy growth in the market is over. The numbers seem to bolster this theory. Leichtman Research Group estimates that at the end of the 2Q 2005, there were 37.59 million broadband subscribers, roughly a third of total homes in America. Cable had 22 million while rest of the market was shared by a sundry of DSL sellers.

These numbers don’t take into account satellite broadband and other non-traditional broadband access services, which even by generous estimates cannot be more than 500,000 homes. The Fiber To The Home Council reports that there are 398 communities in the country that have fiber-based broadband option. Still, it is clear that we have a lot of people with what FCC defines as broadband. (Not nearly enough and not what I think is broadband… but you know that!)

I would like to point out two stats which were sent to me by fine folks at Pike & Fischer.

> Net adds for high-speed Internet service among the top cable operators fell 30% in the second quarter.

> DSL Sub. Growth Down 32% for RBOCs which were unable in Q2 05 to repeat the record DSL customer growth they logged in the first quarter of the year. 6.5% sequential increases in their combined DSL base.

With many millions still reluctant to spend more money for broadband connections, the recent introduction of budget DSL plans by Verizon, BellSouth and SBC indicates that the bells are trying to goose up those numbers. An industry insider recently told me that it is more of a defensive move, an attempt to lock in voice customers before they switch to cable-based voice services.

I suspect, the cable companies will counter with budget plans, and at the same time press their “network advantage” by offering premium higher speed plans. Comcast has been hinting at a 6 megabit connection, while others like Cox and Adelphia are already turning up the speed-crank. That “premium broadband” offering is till not possible with Bells’ current networks which do as fast as 3 megabits per second, though that might change soon enough.

We might be in for a bit of a broadband uptake slowdown — we will find the late-adopters resisting the move to higher speeds, because of the lack of killer applications. For me, its back to my personal killer app – Baseball on Broadband!