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More Bad News for Broadband Biz: Verizon's Growth Stalls

Just a week after AT&T dropped a stink bomb -- a pitifully low 46,000 new broadband subscribers added in the second quarter -- Verizon said it grew its subscriber base by a grand total of 54,000 broadband subscribers. (As it turns out, the company lost 133,000 DSL subscribers during the quarter, but added 187,000 FiOS internet subscribers.)

Hey, at least the subscriber base is growing, but that's certainly not brag-worthy growth. To provide a little perspective: The company added 266,000 new subscribers in the first quarter, and added 288,000 in the year-ago period, which makes the 54,000 figure appear outright sickly.

"Although cable will likely benefit from the DSL declines, we're concerned about the overall data broadband growth," said Tom Egan, an analyst at Collins Stewart, in a research note.

Part of the problem is that there are only so many people who can afford broadband service -- especially given the rich monthly subscription fees -- and that market looks like it's been tapped.

And if there is indeed an industry-wide slowdown in the pipeline, the cable operators -- such as Comcast and Time Warner Cable -- could be next to take a hit.

"I don't think this is indicative of the competitive dynamics between cable and DSL," says Peter Rhamey, an analyst with BMO Capital Markets-Canada. "I think this reflects an overall softening of the economy."

So when does Rhamey think growth will pick up steam again?

"I don't know, when do you think the economy will recover?," he says. "I get asked this question a lot. I think maybe by first quarter next year."

In the meantime, if Verizon execs are concerned about a slowdown, they haven't let anyone see them sweat.

"First, hopefully, you got the sense that (Verizon CFO) Doreen and I, and I know (Verizon CEO) Ivan also feels very comfortable with our business plan, despite some of the concerns that others have been expressing about the economy. Although we may see some softening in some of our volumes, we do not expect any significant economic impact on our financial results in the second half of the year," said Denny Strigl, Verizon president and COO, on a conference call with Wall Street analysts this morning.

Of course, we won't know the full extent of the carnage until the cable operators report -- Comcast reports second-quarter results on July 30; and Time Warner Cable releases earnings on Aug. 6.