Posted by: Olga Kharif on October 23, 2008
Yesterday, cable service provider Comcast announced it will offer super-fast broadband speeds to Internet access subscribers in Boston and Philadelphia. To become available in 10 major markets in the next few months, the service will offer speeds of up to 50 Megabits per second. Essentially, Comcast will double most subscribers’ speeds at no extra cost.
The announcement deals a blow to telcos, already struggling to keep subscribers using DSL. In the second quarter of 2008, for the first time ever, the Big Three telcos reported cumulative negative net DSL subscriber additions. As Bernstein Research analyst Craig Moffett wrote in a recent note, this could be just the beginning. “The fear for TelCo investors is that DSL is ‘over,’” he wrote. Part of the reason is, because of how their networks are constructed, telcos can’t keep up with cable in connection speed.
One solution that Moffett puts forth is for telcos to make available in more areas so-called “naked DSL,” which is Web access that doesn’t require a subscriber to also buy a phone line. As Moffett notes, such a bundle is increasingly becoming irrelevant as more consumers drop home phone lines altogether and become all-wireless. Today, some 25% of Americans only use wireless phones.
Of course, “naked DSL” offerings could erode telcos’ financials further. It’s a Catch 22, for sure.