US telcos are getting beaten up by cable operators in the broadband market, recent stats show.
AT&T lost 92,000 wireline broadband subs in the second quarter and Verizon added just 28,000. AT&T's total consumer connections for the quarter were down 700,000.
Verizon is in positive territory only because of its FiOS fiber rollout, which clocked up net adds of 196,000 broadband and 174,000 TV customers. The problem is its DSL service is bleeding not just to the fiber business and but also to cable.
The big two cable guys, Comcast and Time Warner, are likely to add at least 150,000 broadband subs between them. The cable sector as a whole took one percentage point of market share off the telcos this year, according to research firm BTIG Research. It predicts they will snatch another two points by the end of 2011.
For their part, telcos have taken 5% market share of the pay-TV business - up from zero six years ago - and over that period cable has fallen ten points to 62%, although most of that has gone to satellite TV.
In other words, telcos are making some gains in TV but cable is eating up slabs of telecom.
Which helps explain the enthusiasm of China's cable ministry, the State Administration of Radio, Film & TV (SARFT), over the latest attempt at converging cable and telecom in the China market.
It's one of those long-running Chinese sagas, known revealingly in the local jargon as "three-network integration," referring to cable, telecom and internet. China is surely the only place in the world that treats the internet - literally the network of networks - as a separate "network."
The sense of merging these networks is obvious even to Beijing apparatchiks, but it is their insistence on vertical control that has turned this issue into a headache for everyone involved.
This renewed effort began with a directive from China's State Council in January. Nothing happened except that an IPTV trial by China Telecom in Guangxi was quickly shut down.
It took several months of banging the heads together of SARFT and the Ministry of Industry and Information Technology (MIIT) until a deal - or more likely half a deal - was reached in which cable operators get to trial data services in 12 cities.
There's no word on how telcos and IPTV fit into this. The curious thing is, Chinese operators are already offering IPTV services, mostly in Shanghai and the eastern seaboard provinces.
There's no official explanation for this of course; it is just one more illustration of how regional governments like to implement national policies in their own unique way.
In order to run IPTV services, a company needs a broadcasting and an IPTV license, says iSuppli China. The Shanghai Media Group, the partner of Shanghai Telecom, the biggest IPTV provider, has both.
iSuppli said the group had racked up one million customers by the end of 2009, a quarter of the total. Another research firm, Analysys International, forecasts 10 million IPTV subs by the end of 2010 and 14.5 million by end-2011.
The problem for the telcos is that IPTV is nowhere as lucrative as voice and data. Broadband operators in China are charging between 120-150 yuan a month - ten times more than the average cable fees, says iSuppli's Kevin Wang.
No differentiation
But the real deal-breaker is that in the SARFT media universe there is no room for differentiation. IPTV providers will offer the same government-approved channels as the cable guys. No wonder the MIIT is dragging its feet.
Just as predictably, a jubilant SARFT is making grand plans. It has announced a "next-generation broadcast" team that aims to run cable past 200 million homes over the next five years.
At a cost of 1,500 yuan per household, that tallies to a cool 300 billion yuan ($44.3b), the Chinese Academy of Engineering has calculated - a sum that would stretch even Beijing's cavernous pockets.
In SARFT's corner will be 420 internet users who will cheer the prospect of choice in broadband. The national cable network plan will test the government's commitment to convergence.
MORE ARTICLES ON CABLE TV, CHINA, MIIT, IPTV, SARFT, TNC