Leichtman Research Group, Inc.

Research Notes
1Q 2013 Actionable Research on the Broadband, Media & Entertainment Industries

The Industry Formerly offerings with distinctly non-cable

names like “Optimum.” (In Prince-like
Known as Cable terms, this could now be called “the
Industry formerly known as Cable.”)
I
n the first quarter of each year, public
companies generally report how they
performed over the prior year. Later in
At the end of 2012, the top nine cable
companies in the US (representing about
these Research Notes, reported results
90% of all cable subscribers in the
are compiled for the top multi-channel
country) had a total of 51.3 million cable
video providers in the US, and the top
TV subscribers. These top providers
broadband Internet providers in
still represent the (slight) majority of
In this issue: the US. These analyses reveal
all multi-channel video subscribers in
that providers combined to
– The Industry the US, but much has changed for
add about 2.7 million
Formerly Known as these companies over the past decade.
broadband subscribers in
Cable 2012, and 170,000 video
The top cable providers lost nearly 7
– Major Multi-channel subscribers last year.
million video subscribers over the past
Video Providers
Added About five years, and more than 8 million over
Looking back one year
170,000 Subscribers the past ten years. These subscribers
shows modest changes
in 2012 generally switched to satellite and Telco
to the markets, while
alternatives. While the cable industry
– 2.7 Million Added looking back over five
as a whole (including smaller
Broadband From and ten years
Top Cable and providers) had about a 77% share of
demonstrates more
Telephone all “pay-TV” subscribers in the US
pronounced shifts. Ten
Companies in 2012 ten years ago, their share decreased to
years ago, cable TV
67% five years ago, and it is now
– HDTV Sets Now in companies had just
down to about 57% overall.
Three-Quarter of begun offering Internet
U.S. Households and phone
– Industry by the services, now
Top Cable Providers’ Year-end Year-end Year-end
Numbers they have nearly Subscribers (in Millions)* 2002 2007 2012
as many Internet
subscribers as video Cable TV – Video 59.5 58.2 51.3
subscribers. And, just three of High-speed Internet 11.1 33.8 46.4
the top cable companies still Phone^ 2.2 13.2 24.1
have cable in their name.
* Pro-forma results for the top nine cable companies in the US
Even companies like ^ Phone does not include Bright House Networks
Cablevision rebrand their

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Yet, while the get phone service
number of cable TV Cable TV companies beat from cable where it
subscribers has is available.
declined, and the
phone companies again on
penetration for cable the broadband battlefield this
The top providers
TV where it is year, and their shares likely now have only
available has will end the year about 5 million
decreased from
57.5% to 42.3% over
outperforming telecom rivals. more cable TV
subscribers than
the past ten years, In the first nine broadband
cable providers have
successfully added months of 2012, U.S. subscribers, and
penetration of
high-speed broadband
Internet, and phone
cable TV firms added these services are
within a few
subscribers. 1.88 million percentage points
The top cable
providers added 12.6
broadband customers of each other. In
addition,
million broadband while phone companies
subscribers over the including Time
past five years, and companies added Warner Cable,
35 million over the
past ten years. While
250,000, says Bruce Charter, and
Mediacom, each
broadband was Leichtman, head of the report that more
available to about market research firm. than 20% of their
82% of those in the residential
major cable customers do not
- Investor’s Business Daily
providers’ footprint subscribe to video
December 24, 2012
ten years ago, service.
availability is now
nearly ubiquitous at 99.6%. Penetration Yet, while video represents a smaller
of broadband, where available, has share of the cable business than it was
increased from 13.1% to 38.5% over in the past, it remains a significant
than past ten years. part of the industry. An analysis of
the top six cable companies reporting
The top cable providers also added revenue for Q4 2012 finds that,
nearly 11 million
phone customers over
Top Cable Providers’ Year-end Year-end Year-end
the past five years, Penetration (where available)* 2002 2007 2012
and about 22 million
over the past ten Cable TV – Video 57.5% 51.0% 42.3%
years. Phone service High-speed Internet 13.1% 29.5% 38.5%
is now available to
Phone^ N/A 13.3% 20.9%
about 96% of the
* Penetration for top providers at the time.
footprint of the top ^ Phone does not include Bright House Networks; availability of phone was low in 2002
providers, and 21%

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cumulatively: additional high-speed Internet
subscribers in 2012. Annual net
• Cable TV (video) accounts for
broadband additions in 2012 were 90%
50% of total revenue (including
of the total in 2011.
business services, advertising, and
other revenue, as well as video,
These top broadband providers now
Internet and phone subscriptions)
account for over 81.4 million subscribers
• Video accounts for 60% of consumer – with cable companies having nearly
subscription revenue 46.8 million subscribers, and telephone
companies having 34.6 million
• Consumer revenue from video
subscribers.
subscriptions more than doubles
revenue from high-speed Internet
Other key findings include:
service; and generates five times the
revenue as phone • The top cable
service companies netted
Did you know? 88% of the broadband
The traditional cable
business has additions in 2012
FiOS and U-verse have a
significantly changed combined video penetration • The top cable
over the past decade, of 24.1% of the 38.4 million companies added 2.4
and will continue to potential Passings. million broadband
change going forward. subscribers in 2012 –
While cable TV built 105% of the total net
these businesses, video additions for the top
now represents half of cable companies in
all revenue for these companies. Yet, 2011
video is still a vital part of the business,
and will remain so for many years, • Comcast added over 1.2 million
broadband subscribers in 2012 –
regardless of what the industry is called.
accounting for 45% of the total net
additions for the top providers in the
2.7 Million Added year
Broadband From Top • The top telephone providers added
Cable and Telephone 320,000 broadband subscribers in
Companies in 2012 2012 – 43% of the total net additions
for the top telephone companies in
2011
L eichtman Research Group, Inc.
found that the seventeen largest
cable and telephone providers in the US
• AT&T and Verizon added 3.08
million fiber subscribers (via U-verse
– representing about 93% of the market and FiOS) in 2012, while having a
– acquired over 2.7 million net net loss of 3 million DSL subscribers

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At the end of 2012, the top broadband
providers in the US cumulatively had According to a 2012 press
nearly 81.4 million subscribers, an
increase of about 19 million over the
release from Leichtman
past five years. Even with the high level Research, average
of broadband penetration in the US, the monthly spending on cable
top broadband providers added 90% as
many subscribers in 2012 as in 2011. is $78.63, an increase
of 7 percent over
Major Multi-channel 2011.
Video Providers Added
About 170,000 - Yahoo! Finance
March 22, 2013
Subscribers in 2012
• Satellite TV providers added
L eichtman Research Group, Inc.
found that the thirteen largest multi-
channel video providers in the US –
288,000 video subscribers in 2012 –
compared to 496,000 net additions in
2011
representing about 94% of the market –
lost acquired over 170,000 net additional The overall market for these top multi-
video subscribers in 2012. Annual net channel video providers grew by less
multi-channel video additions in 2012 than 0.2%, adding about 170,000
were about 230,000 fewer than in 2011. subscribers in 2012, with subscriber
losses for cable providers offset by gains
The top multi-channel video providers for Telco and satellite TV providers. In
account for over 94.7 million subscribers this saturated and competitive market, it
– with the top nine cable companies has become a contest over market share.
having 51.3 million video subscribers, Cable providers now have a 54% share
satellite TV companies having over 34.1 of the top multi-channel video
million subscribers, and top telephone subscribers in the US, compared to a
companies having 9.3 million 58% share two years ago.
subscribers.

Other key findings include: HDTV Sets Now in Three-

• The top nine cable companies lost Quarters of U.S.
about 1,415,000 video subscribers in Households
2012 – compared to a loss of about
1,600,000 subscribers in 2011 eichtman Research Group, Inc.
• The top telephone providers added
1,300,000 video subscribers in 2012
L found that 75% of households in the
United States have at least one high
– compared to 1,505,000 net definition television (HDTV) set – up
additions in 2011 from 23% five years ago. Over the past
five years, 52% of US households
adopted HDTV.

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 compared to 73% with household
incomes of $30,000-$50,000, and
Overall, about 38% of all 56% with household incomes under
U.S. households now have $30,000
multiple HDTV sets, up • Among those getting HD
from 26% two years ago programming from a cable, satellite,
or Telco TV provider, the perceived
and 5% of all households mean number of channels of HD
five years ago, LRG said. programming is 77 – up from 63 two
About 59% of TV sets years ago, and 29 five years ago
• About 6% of all US households
in HD households are currently have an HDTV set that is
HDTVs. 3D-capable – 41% of this group do
not watch any content in 3D
- Broadcasting & Cable • Overall, 47% have seen a 3D TV, or
February 8, 2013 have a 3D-capable TV – compared to
24% two years ago
In addition, 51% of HDTV households • 22% of all households purchased a
have more than one HDTV, compared to new TV set in the past 12 months.
22% five years ago. Overall, about 38% The mean reported purchase price
of all US households now have multiple was $680 – about 30% less than five
HDTV sets – up from about 26% of two years ago
years ago, and 5% all households five • 14% of all households plan to
years ago. About 59% of TV sets in HD purchase a new TV set in the next 12
households are HDTVs. months – compared to 19% last year,
and 17% five years ago
These findings are based on a survey of
1,252 households throughout the United
States, and are part of a new LRG study, Over the past five years, HDTV has
HDTV and 3D TV X. This is LRG's tenth grown from one-quarter of all US
annual study related to HDTV. households to three-quarters of all
households, and many more households
Other related findings include: now have multiple HDTV sets. Today,
about 47% of all TV sets in US
• 84% with annual household incomes households are HDTVs, compared to
over $50,000 have an HDTV – 11% just five years ago.

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Industry by the Numbers – (as of the end of 4Q 2012)

Top 10 Cable MSOs in the U.S.

Net Adds Net Adds
Passings Subscribers Penetration in 2012 in 2011
Basic Cable 121,150,000 51,300,000 42.3% (1,415,000) (1,600,000)
Digital Cable* 44,500,000 86.7% 735,000 980,000
Broadband Internet** 120,675,000 46,450,000 38.5% 2,420,000 2,300,000
Telephone*** 115,025,000 24,060,000 20.9% 1,170,000 1,225,000

Sources: The Companies and Leichtman Research Group, Inc.

Totals include LRG estimates and pro forma results from system sales and acquisitions.
* Digital penetration of Basic subscribers
** Internet data does not include RCN
*** Telephone data does not include Bright House Networks

DBS
Net Adds Gross Adds Subscriber Average Revenue
Subscribers in 2012 in 2012 Acquisition Cost* Per Sub/Month**
DIRECTV 20,084,000 199,000 3,874,000 $859 $96.98
Dish Network 14,056,000 89,000 2,739,000 $784 $77.10

Total DBS 34,140,000 288,000 6,635,000

Sources: The Companies and Leichtman Research Group, Inc.

* Includes leased equipment and unreturned box costs
** Includes revenue from commercial accounts and other non-consumer spending

Telco Video
Net Adds Net Adds
Subscribers in 2012 in 2011
Verizon FiOS 4,726,000 553,000 701,000
AT&T U-verse 4,536,000 745,000 804,000

Total 9,262,000 1,298,000 1,505,000

Sources: The Companies and Leichtman Research Group, Inc.

Data includes LRG estimates of pro forma results from system sales

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 Top Broadband Internet Providers in the U.S.

Broadband Internet Subscribers Net Adds in

Provider at the end of 2012 2012
Cable Companies
Comcast 19,367,000 1,223,000
Time Warner 11,395,000 486,000
Cox* 4,620,000 120,000
Charter 3,978,000 323,000
Cablevision 3,055,000 90,000
Suddenlink 1,002,100 53,400
Mediacom 915,000 64,000
Cable ONE 459,235 8,153
Other Major Private
Companies** 1,978,000 53,000
Total Top Cable 46,769,335 2,420,553
Telephone Companies
AT&T 16,390,000 (37,000)
Verizon 8,795,000 125,000
CenturyLink^ 5,848,000 192,000
Frontier^ 1,757,000 22,000
Windstream^^ 1,214,500 6,700
FairPoint 326,367 12,232
Cincinnati Bell 259,400 2,100
Total Top Phone 34,590,267 323,032
Total Broadband 81,359,602 2,743,585

Sources: The Companies and Leichtman Research Group, Inc.

* LRG estimate
** Includes LRG estimates for Bright House Networks and RCN
^ LRG estimate does not include wireless subscribers
^^ Windstream no longer includes reporting of the number of non-residential subscribers
Totals reflect pro forma results from system sales and acquisitions
Top cable and telephone companies represent approximately 93% of all subscribers
Company subscriber counts may not represent solely residential households

U.S. Residential Telephone Lines – Gains and Losses

4Q 2011 1Q 2012 2Q 2012 3Q 2012 4Q 2012

Telco Net Adds* (1,027,000) (1,025,000) (1,013,000) (998,000) (884,000)
Cable Net Adds 285,000 420,000 280,000 220,000 250,000

Sources: The Companies and Leichtman Research Group, Inc.

* Retail residential phone lines include both primary and additional lines, but do not include wholesale lines
Includes LRG estimates and some results adjusted from prior reports

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 Top Ten Residential Phone Companies
Residential
Company Phone Lines
1. AT&T 18,614,000
2. Verizon 11,849,000
3. Comcast 9,955,000
4. CenturyLink* 8,525,000
5. Time Warner 5,024,000
6. Cox* 3,225,000
7. Frontier 2,887,100
8. Cablevision 2,443,000
9. Charter 1,914,000
10. Windstream 1,841,900

Sources: The Companies and Leichtman Research Group, Inc.

* LRG Estimate

Leichtman Research Group, Inc.

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