IGI says DSL will catch cable in ‘06

A new report from IGI Consulting says aggressive marketing of DSL by the telephone companies will enable them to catch up to the once-dominant cable companies in the high-speed access market by mid-2006. The report can be viewed at no charge at www.igigroup.com.

Both cable and telco high-speed services boomed in the third quarter of 2005, as high-speed access growth hit nearly 2.5 million lines, eclipsing all previous quarters, said Clif Holiday, author of IGI’s Lightwave Reports. But price cuts and creative service bundling are enabling the telcos to grow faster – they added more than 1.2 million lines to the cable industry’s more than 900,000 additions.

“We had projected the telcos to catch up by 2007,” Holiday said. “But the current trends are just continuing so strong that it likes that they will definitely catch up by mid-2006, and maybe earlier.”

At one point, cable held a 2 to 1 lead over telcos in high-speed access, but that has shrunk to 58%, Holiday said in the report, and continues to shrink.

The telephone companies are not known for their marketing acumen, but they have done a good job of late both in cutting their prices for DSL and in bundling their services attractively, he added.

The cable industry, meanwhile, has only just begun reducing prices, which for cable modem service still loom in the $40 to $50 a month range, even as DSL becomes more widely available in the $20 to $30 a month range, as the $14.95 offers from companies such as SBC and Verizon begin to wane.

“The early adopters didn’t care what they paid, they just wanted high speed service,” Holiday said. “But people now are buying a commodity service. The cable companies are trying to compete on features and speed, but the services are close enough in speed that mass market consumers don’t want to pay more.”

One possible derailment of the current speeding DSL train would be the migration of voice customers to cable digital phone service, eliminating the telephone company access to the consumer. Holiday believes that cable is not pricing its phone offering, most of which is VoIP-based, to the mass market.

“They still don’t have it priced right,” he said. “They need to get to the low-end consumer.”