Last week we noted that Verizon lost 165,000 DSL users during the third quarter, the company telling Broadband Reports
than only about 20-25% of those subscribers upgraded to Verizon FiOS. In other words, like AT&T, (which lost 88,000 DSL users on the quarter), users in un-upgraded legacy markets are heading to the faster speeds and triple play of cable broadband. A new report by Credit Suisse
suggests that phone companies could lose half their market share by 2015 by sticking with DSL:
Simple upgrades won't be enough to keep DSL competitive: Anninger says providers may be able to offer 18 mbps in five years -- but cable operators will be able to rev their systems up to 200 mbps. That will give cable a huge advantage in 45% of the country where DSL and cable will be the only two wireline broadband options.
AT&T and Verizon are at least upgrading portions of their markets (Verizon says FiOS now reaches 60% of their footprint), and the report notes that once users upgrade to U-Verse or FiOS they tend to be satisfied and stick around (particularly with TV services).
Bigger issues await companies like Frontier Communications, who just gobbled up most of Verizon's unwanted DSL territories, and has been trying to downplay
the need for next-gen speeds and the landline's demise. Frontier's only saving grace is they face low-quality competition in many markets, though cable service extends to roughly 97% of the country.
Meanwhile, you again have to wonder why Wall Street analysts like Sanford Bernstein's Craig Moffett have spent the last five years arguing that phone companies shouldn't bother to upgrade
networks and that Verizon FiOS is doomed to failure
. That's a brilliant position -- assuming your goal is to help cable dominate phone companies and drive up cable stock value.