COVID-19 stay-at-home rules help push Q1 to 5-year high for broadband signups

broadband subscribers
Consumers swap pay TV for broadband connections... is pay-TV's goose cooked? Stick a fork in it.

Stay-at-home edicts helped fuel the biggest quarter of broadband subscription signups in more than five years in the first quarter, and Q2 is likely to show similar results as Americans cut pay-TV subscriptions in favor of the internet and streaming video services, as well as working and learning remotely.

Cable and telephone company providers in the United States added more than 1.16 million new internet subscribers in Q1, the industry’s biggest quarter since Q1 2015 for broadband adds, as it continued a trend toward focusing their businesses on connectivity, rather than of providing traditional pay-TV service. A year ago, the top providers added 955,000 internet subscribers.

At the same time, they lost more than 2.33 million pay-TV subscribers, with every one of the top 10 services seeing erosion in the quarter.

Cable has 67% of US broadband connections

These top broadband providers now account for about 102.4 million subscribers, said Leichtman Research Group (LRG) with top cable companies having 69.2 million broadband subscribers, and top wireline phone companies having 33.2 million subscribers.

Cable operators added about 1,230,000 subscribers in 1Q 2020, well more than double the net adds for the top cable companies in 1Q 2019, and the biggest increase since 1Q 2007.

Three of the top four telcos had a tougher go. AT&T lost 74,000 wired internet customers, CenturyLink was down 11,000 and Frontier lost 33,000. Only Verizon added internet subscribers in the quarters, about 26,000. Overall, wired telephone operators lost 65,440 internet customers.

Charter, meanwhile, saw the biggest broadband additions among top cable operators (582,000), followed by Comcast (477,000), Cox (60,000) and Altice (50,100). Cable operators now have 69.2 million internet subscribers, about two-thirds of the market in the US.

Over the past 12 months, providers saw net broadband adds top 2.75 million, about 4% higher than the previous 12 months.

For pay-TV, subscriber declines continue

While some pundits may try to explain subscriber losses among pay-TV providers as part of the economic impact to unemployment caused by the COVID-19 pandemic, that’s a red herring. AT&T’s outgoing CEO Randall Stephenson, for example, suggested during the company’s earnings call that COVID-19 could create enough economic stressors to prompt consumers to get rid of pay TV.

And, while Q2 may bring bigger losses that are tied to the economy, the reality is that pay-TV losses have been accelerating for a dozen quarters as subscribers abandon pay TV for streaming services.

In Q1, AT&T lost more than 897,000 subscribers to premium services, as well as 135,000 subscribers to its virtual pay-TV service. DISH Network lost 382,000 subs to its premium service and another 281,000 from Sling TV, another virtual pay-TV service. Comcast was off 388,000 subs, Verizon lost 84,000, Charter 70,000 and another 100,000 in losses were spread among Altice, Frontier and Mediacom. The losses don’t include Cox Communications, which doesn’t report subscriber numbers.

Pay-TV – for an increasing number of subscribers – is a value proposition that just doesn’t make sense. And, virtual pay-TV services that bundle dozens of unrelated channels in a Pay-TV 2.0 charade are equally at risk as consumers become more disenchanted by the bloating of what began as an interesting alternative to 200-plus channel bundles from pay-TV services.

Consumers have decided it makes more sense to create their own mini- or micro-bundles of content they actually want. They’re making them from a growing selection of OTT services.

The bottom line

Obviously, the COVID-19 impact was just part of the surge in broadband subscriptions, as it really just impacted the last couple of weeks in March, after the largest numbers of states set stay-at-home rules.

The other driver? The concerted effort by most operators to begin replacing an eroding pay-TV customer base that also is on a record pace for the year.

Operators are looking for more tie-ins to streaming services as consumers increasingly look to SVOD and AVOD as alternatives to pay TV. The future for cable and telco operators? Connectivity in the form of high-speed broadband, 5G wireless and as a place consumers can go to aggregate their streaming services.

Traditional pay TV? Stick a fork in it… that goose is cooked.

Stay tuned and stay well.

Jim O’Neill is Principal Analyst at Brightcove. You can follow him on Twitter @JimONeillMedia and on LinkedIn