Analysts predict that "while broadband adoption has grown quickly in recent years, there are reasons to believe that it is slowing." Keep in mind that observation was made in 2005, not 2009, by analysts at the Pew (News - Alert) Internet & American Life Project. The point is that it is easy to point to slowing broadband net additions and say "it is the recession" causing the sluggishness.

 

But solving problems means identifying real underlying drivers, not ephemera. And spending caution is ephemera here, as secular growth rates have been slowing since at least 2005, by some estimates, and only since 2006, in the most optimistic view In fact, one can note a sharp break in the U.S. growth rate function in 2004, with a stronger growth rates in 2005, but then a slowing again in 2006.

 

Globally, broadband growth rates have been in steady decline since at least 2003, according to analysts at UBS. To be sure, it is correct to note that "the telco broadband market experienced a significant downturn in new subscriber additions during 2008," as iSuppli Corp notes.

 

"New telco broadband subscriber growth saw a 9.1 percent decline in 2008 following double-digit gains during the prior five years,” says Steve Rago, iSuppli principal analyst.

 

“Hardest hit was North America, with new subscriber additions in 2008 amounting to 3.1 million, down 56.1 percent from 6.5 million in 2007," he says.

 

So what's the point? The danger is attributing the slowdown to the recession, with a possible implicit belief that there will therefore be some uptick in the longer-term growth rate once the recession is over. In fact, broadband is a product like any other, with an "S" shaped adoption curve. We are nearing saturation, so growth is slowing.

 

But there are ample precedents for what we are seeing. Consider the changes in how we evaluate service provider growth today, compared to 1996. In the past, "access lines" or "basic cable subscribers" were fairly accurate measures of telco and cable performance. But that isn't the case anymore. Today, "revenue generating units" are the better measure, reflecting the sale of several key products to a smaller number of customers.

 

Fairly soon, broadband growth will flatten almost to insignficance, but RGU sales and revenue will keep growing, as broadband market performance has to be measured on some basis other than "subscriber growth." For telcos, that means new video accounts and "average revenue per user." For cable companies, that means ARPU and voice customer growth.

 

The key point is keep possible recession effects in perspective. ARPU might slow, while profits do slow, as customers will be cautious about adding new services and features. But the broader point is that the underlying drivers are shifts in market demand and service provider strategy.