Bourkoff Sees DSL on the Rise

The cable industry needs to begin targeting non-video homes with high-speed data and phone services and use bundled voice-over-Internet protocol offerings to stem the erosion on the high-speed data side of the business, according to Aryeh Bourkoff, managing director, cable and satellite equity and fixed income research at UBS Securities.

At a Cable & Telecommunications Association for Marketing Summit panel session here last week, Bourkoff provided projections that showed digital subscriber line will add 4.7 million net new subscribers in 2004, compared to cable’s 4.2 million additions.

DSL added 1,166,000 subscribers in the first quarter of 2004, edging cable’s 1,131,000 for the first time.

“We expect the slip to continue,” Bourkoff said. “DSL is gaining market share through pricing and greater level of availability.”

SBC will add 1.8 million DSL subscribers in 2004, he predicted, compared to Comcast’s 1.6 million.

“We think the broadband business and growth is really morphing into the voice business,” he said. “The cable modem-DSL battle is really about VoIP.”

The good news for cable is that “cable VoIP will be way ahead of any video offering from the telcos,” he said.

“Cable video penetration is 55% to 60% of homes, but the plant upgrade is to 100% of homes,” Bourkoff continued. “Cable isn’t focused on non-video homes for data or voice only services.”

Bourkoff projects that DSL will beat cable in each quarter this year. But, he said, seasonality will start hitting the Bells. “We think this is a big growth year for DSL.”

Cable held a 62%-38% split at the end of 2003. By the end of this year, that will shrink to 58%-42%, Bourkoff said, with an estimated 13.97 million DSL subscribers and 18.94 million for cable modems. Most broadband growth is coming from former dial-up subscribers, he said.

The analyst also predicted a 4% decline in high speed Internet access revenue as cable reduces prices or bundles products together in the face of phone competition.