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Cable and telecoms in fierce competition for voice and broadband

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Cable and telecom services

In the earlier parts of this series, we looked at key components of the media sector value chain. We also learned that cable companies such as Comcast (CMCSA) and Time Warner Cable (TWC) are prominent pay-TV providers. Now we’ll focus on other services cable companies provide in the United States.

We mentioned earlier that cable companies deliver media content. They also provide voice and data communication and broadband services to consumers and businesses.

Cable companies provide voice services through VoIP (Voice-over-Internet Protocol). They also provide high-speed broadband services. Cable companies often offer bundles of these services to consumers and businesses.

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Competition between cable and telecoms

Cable and telecoms both provide voice and broadband services. Traditionally, telecoms have been the market leader in both these segments. However, cable companies have snatched up a significant portion of the share from telecoms over the years.

As you can see from the above chart, cable companies dominated the US fixed broadband segment in 2013. The companies are capable of providing Internet speeds higher than telecom companies can offer on traditional DSLs (digital subscriber lines).

Telecoms such as Verizon (VZ) and AT&T (T) are upgrading their broadband infrastructures to fiber-based technologies in order to offer their customers speeds comparable to cable companies. You can read Analyzing the wireline telecom network and its evolving structure to learn more.

Despite the popularity of cable companies’ VoIP solutions, telecoms still dominate the residential fixed-voice segment. By the end of 2013, telecoms had ~58% market share compared to cable companies, which catered to ~37% of the residential fixed-voice market.

If you want a diversified exposure to cable companies such as Comcast and Time Warner Cable, you can invest in the Consumer Discretionary Select Sector SPDR Fund (XLY). The ETF held ~8.4% in these companies as of March 2, 2015.

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