Market Insight

US IPTV continues growing in Q4 2012 at a reduced pace

January 25, 2013

Harold Vargas Harold Vargas Senior Analyst, Television Media

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US IPTV growth continued to decelerate in the last quarter of 2012, with the two major IPTV players, Verizon and AT&T, reporting a combined gain of 326,000 video subscribers, down 14 per cent from the 402,000 gained in the same prior year period.

Verizon's FiOS accounted for the majority of the slowdown as the fibre-to-the-home (FTTH)  service added 134,000 subscribers in Q4 2012, down from the 194,000 gained in Q4 2011. The disruption due to Hurricane Sandy may have reduced some gains, but the telco did authorise overtime to reduce some service backlogs. For the year 2012, FiOS saw an increase of 553,000 video subscribers pushing its total video subscribers to 4.72m. The yearly net gain is a 21 per cent reduction from the 701,000 gained in 2011 and video penetration now stands at 33.3 per cent compared to 31.5 at the end of 2011. That being said, the largest US IPTV provider grew its video subscriber base 13.3 per cent this past year.

AT&T continues to maintain its growth in its U-verse video services, as 192,000 subscribers joined in, only 8,000 less than the prior year period. U-verse video subscribers grew 19.6 per cent for the year and now stand at 4.53m, closing in on FiOS total video subscribers. With a much broader rollout of U-verse, the fibre-to-the-node service passes 72 per cent more eligible video homes than FiOS. With a much larger reach and low video penetration of 18.7 per cent, AT&T is able to maintain steady growth gains in its IPTV services, as it added 745,000 subscribers in 2012, down just 7.3 per cent from 2011's net gain of 804,000 subscribers.

In terms of revenue, both IPTV services continue to see double digit growths. FiOS quarterly revenue jumped 17.2 per cent to reach 2.5b with U-verse matching the same amount as it recorded a 36 per cent increase over the prior year period.

IPTV growth continues in the US although at a reduced pace. But there is still plenty of room for growth with FiOS focusing on penetration levels and U-verse focusing on marketing to its lightly penetrated footprint. Unfortunately for Verizon, FiOS is largely done expanding its footprint into new markets, and its penetration is significantly higher than that of U-verse.

Verizon plans to introduce a TV package in an attempt to alleviate the burden of rising programming costs. The sports free package will likely appeal to cost conscious consumers who do not need the glut of sport channels and RSNs. IHS Screen Digest believes that Verizon is taking the first steps down a long road in which pay TV operators are going to stand toe-to-toe with their programming partners.

In the current year AT&T plans to dramatically expand its U-verse footprint, and overall quality of its network. The company plans to offer internet speeds which nearly match the offerings in place by cable. This upgrade to their IP network will have the knock-on effect of expanding their video footprint which is already underpenetrated. U-verse is expected to pass FiOS in terms of total video subscribers in 2013, with the pass likely to occur near the end of the year.

Through 2017 both major US IPTV players will continue to see their subscriber gains moderate as they become more mature, and the overall pay TV business continues to see the gap between pay TV households and TV households grow yearly. By 2017 IHS Screen Digest expects that IPTV in the US will account for 13.4m pay TV households, or 10.8 per cent of all pay TV subscribers.

North America USA
AT&T Verizon
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