The broadband industry experienced growth in 2018, led by cable operators and underpinned by the continued strength of new household formation, according to MoffettNathanson analysts.
Although the year started out with concerns that consumers would begin to substitute terrestrial broadband for wireless, “there were, and are, no signs of wireless substitution (fixed or mobile),” MoffettNathanson’s Craig Moffett wrote in a Wednesday research note.
Verizon introduced its 5G fixed wireless home broadband offering in four cities in October, but Moffett noted that the launch was much smaller than anticipated and “far too small to have any impact whatsoever on market share in 2018.”
AT&T’s fiber-to-the-home buildout, which included adding 4 million new homes in its fiber footprint, also did not steal away market share from cable, Moffett noted. AT&T lost 17,000 broadband subscribers for the year. Telcos collectively lost 458,000 net broadband subscribers in 2018, including 145,000 in the fourth quarter (down 1.3 percent year over year).
Moffett said that the same concerns over FTTH and fixed and mobile wireless substitution still remain in 2019, “albeit with perhaps a bit more skepticism now.”
Cable operators came out on top in 2018, taking 117 percent market share for broadband net additions in the fourth quarter, in line with performance a year ago, according to the firm. Together, cable operators brought in 841,000 net broadband additions during Q4, up 4.9 percent.
For the year, cable operators stacked up about 3.3 million broadband net additions, including full-year gains from Comcast (1.3 million net adds), Charter (1.2 million), and Altice USA (82,000).
Satellite providers counted 28,000 total net broadband additions in the fourth quarter, up 9 percent from the year ago period.
Overall, the broadband industry experienced year over year net subscriber growth of 2.9 percent the fourth quarter of 2018, collectively adding 724,000. It’s new household formation that’s now driving that growth, according to Moffett.
Moffett found that growth in occupied housing accounted for nearly half (44 percent) of the industry’s 2.7 million residential broadband net additions for the year. There were 1.5 million new households in 2018, growing at a higher rate than in previous years.
“With [broadband] penetration standing at 80%, one therefore would have expected 1.2M new residential broadband subscriptions from new household formation alone,” Moffett wrote.
Moffett didn’t argue that this source of broadband growth was good or bad, but noted the industry has become “much more dependent on new household formation,” a measure tied to macroeconomic factors like unemployment.
Comparatively, in 2016 new household formation accounted for only 24 percent of broadband net additions.
“The stronger growth in broadband is not somehow tarnished by the fact that it owes to a macro driver like growth in occupied dwelling units,” Moffett wrote. “But it is important to understand the source of the industry’s growth.”