Is the Cable Guy having his way the the Telcos?

Here’s a very clear indication that the US broadband market is so dysfunctional that it’s time to go back to the drawing board. The telcos, who with the single exception of Verizon’s FIOS, have allowed their service levels to stagnate while investing in the flat lining pay TV business. At the same time, their subscribers are leaving. In a flat market, it’s a battle for market share, and the cable guy is currently winning by taking the telco’s broadband subscribers. How can a Comcast steal subscribers with customer care that is something akin to resident care in Stalin’s gulags ? In most cases, it’s all about speed. While the cable guys haven’t done much upgrading either, in most markets they still are the speed leader. Yes, that’s the very same speed that AT&T’s Randall Stevenson has repeatedly told us we don’t need. Admin to Randall: we can get our reruns of The A Team online any time we want them. We don’t need no stinkin’ Pay TV. We want more speed in a big dumb pipe!

Contrast the second-quarter results at Verizon and AT&T with the numbers reported last week by Comcast (CMCSA) and Cablevision (CVC). Comcast had a remarkably solid quarter, given both economic headwinds and the aggressive push by the telcos into the video business. In the quarter, Comcast added a net 499,000 new phone customers, 278,000 high-speed Internet accounts and 320,000 digital cable lines. (It did lose 138,000 basic cable subs.) It provides broadband to 29% of homes in its area and phone service to 12.5%; it is putting up big numbers in both categories, and they will get even bigger.

Cablevision, meanwhile, showed a similar pattern: growth in every category. It added 120,000 digital video subs, 52,000 broadband lines and 81,000 voice lines; it even added 7,000 basic video subscribers. That’s particularly impressive, given that Verizon offers video service on more than 30% of Cablevision’s turf. (Barron’s)