Is the Broadband Industry Heading Towards Mutually Assured Destruction?

According to advocates of the Convergence Apocalypse theory, telecommunications companies’ increasingly ambitious fiber deployments pose a big threat to major cable companies at the same time that cable companies’ increasing success in offering mobile service poses a big threat to the major telcos. Both threats are real, researchers argue, but they don’t see the threats as symmetrical. Instead, they see cable companies having the advantage. MoffettNathanson offers several data points to illustrate the threat that telco fiber deployments pose to cable companies. Collectively, the major telcos have targeted 5 million homes for fiber overbuilds 2021, or about 4 percent of the US. Next year the target is 7 million homes or an additional 5 percent. By the researchers’ estimate, that means that the cable plant overbuilt by fiber will rise from about 40 percent or so today to about 55 percent over the next decade or so. While researchers initially thought the cable wireless business had “passable” margins, that business is actually dramatically more profitable. And that means the cable companies are well-positioned to use wireless as a “flanker” offering to retain broadband customers that might be tempted to switch to telco broadband as the telcos build out their fiber networks. That strategy could have the added impact of starving the telcos of cash, and potentially driving them to scale back their fiber deployments, according to MoffettNathanson.