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U.S. Cable Companies Win Telco Customers

The top eleven U.S. cable operators continue to grab share of the residential phone markets, a move that will cost the incumbent phone companies nearly eight billion dollars over the next five years, according to the latest market assessment from Insight Research.

The incumbent phone companies are expected to lose more than three million residential phone lines to cable competitors by the close of 2007 alone, and nearly 17 million residential phone lines over the next five years.

According to Insight's newly-released market analysis report entitled "Residential Telephony, 2007-2012," competition between phone companies and cable operators has accelerated in the last year, entering a highly competitive phase.

While the telephone service offered by cable companies is relatively new to the market, a large number of customers -- more than ten million -- have already been enticed by the cost savings and highly attractive bundles of video, voice and data service.

"The top cable operators are adding new phone line customers at a very rapid rate because they are pricing their introductory bundles very aggressively," says Robert Rosenberg, President of Insight.

"Insight Research overlaid the footprints of the 11 largest cable operators onto the operating areas of the 12 largest phone companies, analyzed the bundles offered by the cable companies, and estimated the line and revenue losses to the phone companies. The resulting data did not paint a pretty picture for the phone companies," Rosenberg concludes.

Without strong competition from the ILECs or satellite service providers for video, subscriptions to cable service have been steady and have ranged from 65 to 66 million over the last seven years.

The population of cable video subscribers is expected to remain fairly flat through 2012. In the absence of greater competition, the digital cable portion of the cable services subscriber base is, however, expected to continue to grow at a substantial rate. Insight forecasts that digital cable subscribers will grow from 32 million to 50 million by 2012.

Although the competition for the residential broadband market is entering a more mature market phase, residential broadband households are still expected to grow from 46.6 million to more than 72 million households by 2012. Telco DSL subscriber growth will outpace cable broadband connections through this period as more middle and lower income households subscribe to higher speed Internet services.

The phone companies detailed in this study include Alaska Communications Systems (ACS), AT&T (with BellSouth), CenturyTel, Cincinnati Bell, Citizens, Embarq, Hawaiian Telecom, Iowa Telecomm Services, Qwest, TDS, Verizon, and Windstream.

The cable companies detailed in this study include Bright House, CableOne, Cablevision, Charter, Comcast, Cox, GCI, Insight, Mediacom, Suddenlink, and Time Warner.

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