Cable companies make a comeback

The cable industry, led by Comcast, made a significant comeback in selling cable modems in the third quarter, according to Information Gatekeepers Inc., an industry analyst firm that has been predicting DSL growth will overtake cable modem deployment.

IGI is sticking by that forecast, said analyst Clifford Holliday, but now believes DSL will achieve a higher penetration than cable modems toward the end of 2007.

Separately, IGI has released a revised forecast of Internet traffic that shows total traffic on the Internet backbone is growing at about 50% per year, Holliday said.

“We are projecting we are going to get to the top of the S curve this decade and we will start leveling off on growth,” he said in a telephone interview. “We will reach penetration of about 80%, and you will see leveling off. We see it growing at 50% a year, or 1.5 times year over year. That is a whole lot less than what people used to talk about and even less that what people are saying now when they say that it is doubling.”

In reality, Holliday added, there is no longer a true, easily definable “Internet backbone” since multiple data network operators own pieces of the networks which carry Internet traffic and interconnect with each other. That makes it harder to define and forecast Internet traffic, he said.

High-speed access lines are much easier to define, and there is no avoiding the conclusion that Comcast made a comeback, after its growth in high-speed cable modems has fallen behind DSL growth for more than a year.

“This is the first big quarter they’ve had at all in two years,” Holliday said of cable modem sales. “They have really been down compared to where they were for a while. They kind of popped back and took the lead. This is the first time that Comcast has been able to be the leader in high-speed growth in a quarter in about two years.”

Comcast added 536,000 cable modem lines in the third quarter, up from 305,000 in the second quarter. Overall the cable industry added 1,026,900 cable modem lines, many in service bundles, compared to the telephone industry’s 1,269,000 DSL lines. Verizon was second to Comcast with 448,000 addition high-speed lines, and AT&T was third with 380,000.

At the end of the third quarter of 2006, DSL lines represent 45% of local High-Speed access, up from 34% in 2002. Penetration of high-speed access is at 47.3% or 51 million access lines.

Both reports are available from IGI’s Web site, www.igigroup.com.