Cable Operators Cutting Back on Capital Spending

The stocks of cable and telephone companies have largely missed out on the rally. A relative shelter from the recent stock-market storm, they have suffered from a perception that telecommunications won't benefit from an economic upturn. The fact that cable and phone companies provide the infrastructure underpinning Internet use seems to be underappreciated. Cable's long-term growth prospects are brighter than the phone sector's. Growth at both AT&T and Verizon is being driven by wireless, but that market is near saturation. Price cutting is likely to be a fact of life. Future growth will come from persuading subscribers to pay more for data services. And while cable's video dominance has been eroded by competition from phone and satellite companies, cable has offset that by selling phone and Internet services. The value of cable's broadband networks won't likely be undermined by the growing popularity of wireless Internet use. The limits of wireless capacity suggest cellphone networks won't be able to handle smoothly the expanding volume of downloads from the Internet as smart phones and netbook computers proliferate. As Sanford C. Bernstein analyst Craig Moffett has argued, services such as video, which use lots of bandwidth, are likely "to remain the province" of wired networks. Wireless carriers already are putting some of their traffic onto them through Wi-Fi networks. What is more, cable operators are cutting back on capital spending. The pressure on wireless networks means that capital-expenditure requirements for wireless businesses won't diminish any time soon.