Broadband adoption slows among U.S. providers

Broadband adoption among U.S. consumers seems to be slowing, with the three largest broadband providers in the U.S. posting the lowest subscriber increases in years during the second quarter of 2008.

AT&T and Verizon, in particular, reported increases in broadband subscribers that were a small fraction of numbers in past quarters, with growth in the tens of thousands instead of hundreds of thousands. Comcast reported a less dramatic drop-off. The three providers deliver service to more than half of the broadband subscribers in the U.S.

Providers and analysts blamed the slow growth on a number of factors, including the slumping U.S. economy and a seasonal drop-off due to college students cutting off service and retirees leaving their winter homes in southern states. There was a lot of disagreement on the causes.

Bruce Leichtman, president of Leichtman Research Group, discounted economic concerns, saying the drop-offs appear to be more related to marketing low-end DSL (digital subscriber line) service and to a maturing of the broadband market.

"Sixty-five million people [in the U.S.] have broadband," he said. "It can't go on forever. We've reached our zenith in net additions." The U.S. broadband market can probably grow by an additional 30 million subscribers in the next few years, and broadband grew faster than expected in past years, he added.

In addition, Verizon and AT&T appear to be shifting their focus away from marketing the slower DSL to their faster fiber-based services, Leichtman said. Verizon reported a loss of 133,000 DSL subscribers during the second quarter, coupled with an increase of 187,000 subscribers to its Fios, fiber-based Internet service.

Until recently, the two large telecom carriers had focused on pushing the low-end DSL, but marketing the slower service meant high turnover rates, Leichtman added. The two carriers now seem to be focused more on profitability than on growing their raw broadband numbers, he said.

Verizon this week reported 54,000 new broadband subscribers in the quarter, compared to more than 200,000 new subscribers in each of the previous four quarters, and more than 400,000 new subscribers in each of the six quarters before that.

Last week, AT&T reported an increase of just 34,000 consumer broadband subscribers in the second quarter of 2008, compared to an increase of more than 365,000 in each of the three previous quarters.

On Wednesday, Comcast, the nation's largest provider of cable modem service, also reported slower-than-normal growth, although the drop-off wasn't nearly as pronounced. Comcast reported 278,000 new broadband subscribers in the second quarter of 2008, compared to 492,000 new cable modem subscribers in the first quarter and 330,000 in the second quarter of 2007.

Still, it was Comcast's slowest growth in more than three years.

A Comcast spokeswoman suggested the company's broadband numbers were largely related to a seasonal dip. Comcast has a high number of subscribers in college cities and in Florida, where many retirees spend the winter before returning north to their homes, said D'Arcy Rudnay, senior vice president of corporate communications at Comcast.

The IDG News Service is a Network World affiliate.