Cable's HSD Market Share Hit 57%

Cable operators controlled 57 percent of the high-speed-data market as of June 30, 2002, according to data released last Tuesday by the Federal Communications Commission.

The agency, which issued its semiannual report on broadband Internet penetration, said the number of high-speed connections increased by 27 percent during the first half, from 12.8 million to 16.2 million.

For the first six months of 2002, cable operators controlled 9.2 million broadband lines, while telephone companies controlled 5.1 million, the FCC said.

At the end of 2001, cable had 7.1 million high-speed lines, or a 55 percent share of the market. Phone companies had 3.9 million lines, or a 30 percent market share.

Promoting the deployment and consumer adoption of broadband is the chief goal of FCC chairman Michael Powell. By next March, the agency is expected to draft new broadband policies that would tilt the regulatory playing field more toward the liking of incumbent cable operators and phone companies.

Phone companies are especially miffed that they must comply with heavy broadband regulations for their digital subscriber line (DSL) service, while market-leading cable operators do not.

"Unfortunately, uneconomic regulations that penalize DSL providers have only increased the disparity between cable and DSL," said Allison Remsen, spokeswoman for the United States Telecom Association, which represents three Baby Bell phone companies and hundred of small carriers. "While cable companies continue to actively compete for high-speed Internet customers, DSL providers are heavily regulated and have to compete with one hand tied behind their backs."

The FCC said every high-speed connection included in the report offered minimum data rates of 200 kilobits per second in at least one direction. At least 10.4 million connections offered at least 200 kbps in both directions, the agency said.

In percentage terms, the FCC report gave evidence that the growth rate of both cable-modem service and DSL has slowed down.

In the second half of 2001, the overall market grew by 33 percent, compared with 27 percent in the first half of 2002.

Cable's broadband growth rate was 30 percent in the first half of 2002, compared with 36 percent in second half of 2001. Despite the slowing growth rate, cable added 200,000 more data subscribers in first half of 2002 than in the second half of 2001 — 2.1 million compared with 1.9 million.

Cable's 30 percent growth rate in the first half of 2002 was also faster than the overall market.

"The FCC's data demonstrates the continued and steady growth in popularity of cable-modem service," said National Cable & Telecommunications Association senior vice president of communications Rob Stoddard.

The percentages reported by phone companies fell off more sharply. In the second half of 2001, DSL grew by 47 percent, compared to 29 percent in the first half of 2002.

Companies such as Covad Communications Group Inc., which provides DSL service by leasing phone company lines at rates set by the FCC, said the overall expansion of the broadband market could be attributed to the competitive pressure it exerts on incumbent phone carriers.

"The stats that came out support unbundled line sharing," said Covad general counsel Jason Oxman.