DSL Takes Share from Cable; Broadband Stats Negative for Google, eBay, Yahoo Stocks

by: David Jackson

Excerpt from our One Page Annotated Wall Street Journal Summary (receive it by email every morning by signing up here):

U.S. Broadband Subscriptions Rise

  • Summary: The FCC reported that US consumer and business broadband subscriptions rose 33% to 50.2 million lines, with DSL rising by 5.7 million lines and cable model lines rising 4.2 million. The cable industry's market share fall 3.5 percentage points to 57.5% and the telcos' rose by 3.3 percentage points to 40.5%. In 2005, the US ranked 12th in the word for broadband penetration, according to the OECD, behind Iceland, South Korea and Japan. According to the Pew Internet & American Life Project, 42% of American's had high speed Internet access at home in March 2006, up from 30% a year earlier.
  • Comment on related stocks/ETFs: According to the Pew Report, "Adoption of high-speed internet at home grew twice as fast in the year prior to March 2006 than in the same time frame from 2004 to 2005. Middle-income Americans accounted for much of the increase, along with African Americans and new internet users coming online with broadband at home." News of the rise in the rate of broadband adoption is incrementally negative for the bellweather Internet stocks including eBay (NASDAQ:EBAY), Google (NASDAQ:GOOG) and Yahoo (NASDAQ:YHOO), because their revenue growth was relatively tepid despite strongly rising numbers for Internet users and usage. Put differently: if that's how they performed when broadband Internet penetration was accelerating, how will the 'Net stocks perform when the US reaches broadband saturation?