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TheStreet Open House

The Simple Lesson in Broadband Numbers: People Want Speed

Stocks in this article: CMCSA TWC T VZ CTL GOOGL

NEW YORK (TheStreet) -- The latest figures on wired broadband are out from Leichtman Research covering the second quarter of the year, and most analysts are going to miss the story.

They're going to write that there are now more Internet subscribers than there are cable subscribers. 

Read More: 10 Stocks Carl Icahn Loves in 2014

That is not the story. The story is people want speed and cable has it. Cable is killing the phone companies because cable wires are thicker and deliver more bits for less capital investment. I first wrote about cable's plans to take over the broadband world for the National Cable Television Association back in 1997, and the plan has succeeded beautifully.

Comcast (CMCSA) is now America's dominant broadband supplier, and Time Warner Cable (TWC) is second. Should their merger be approved Comcast will have nearly 39% of the entire U.S. broadband market. That's more subscribers than all the old regional Bells -- AT&T (T) , Verizon (VZ)   and CenturyLink (CTL) -- combined.

Taken together the cable operators now have 59% of the market, according to Leichtman, and the disparity is growing. During the last quarter cable added 381,657 subscribers. Phone companies added just 2,083.

If you are looking for change in this status quo, the place to look is with fiber build-outs that deliver gigabit-per-second speeds. But don't hold your breath. A decade ago the major phone companies were saying they would spend over $53 billion to deliver fiber to 36.1 million homes. They haven't done it. Instead they have been lobbying, often successfully, to keep municipalities from making such investments. 

After four years Google (GOOGL) has yet to go beyond Kansas City with its Google Fiber, although it bought a municipal fiber system in Provo, Utah, and has said it will launch in Austin, Texas, later this year. 

Mostly companies are delivering what reporters call "fiber to the press release." Google put nine markets in competition with one another for fiber early this year, including Atlanta, where I live, demanding detailed concessions from local governments. Since then no firm decisions have been made. 

Read More: Google Fires Latest Laptop Missile Into Microsoft’s and Apple’s Hull

Meanwhile, other large Internet service providers have been claiming to deliver gigabit speeds real soon now. But, curiously, they're mainly building where such speeds already exist, or are coming. If this were a good business, wouldn't they build where there's no competition?

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