Since the economy began its accelerated freefall late last year, many experts have asked whether the cable business—which tends to do just fine when people are unemployed, out of money and looking for cheap entertainment—will indeed prove recession-proof yet again. To be sure, the precipitous decline of cable stocks on both the operator and programmer sides suggests that the industry is far from immune from Wall Street’s woes. But what about Main Street? Is it true that people will start cocooning themselves in their homes, assuming they aren’t getting kicked out of them? And if so, could it be that cable’s significant leap into broadband services over the last decade will actually keep the industry afloat despite unprecedented competition from telcos and DBS?

While basic sub losses continue to vex the industry, the broadband space—including not only blazing Internet access but also VoIP phone service—is also down without a doubt. But it’s still chugging along relatively well considering the current position of the American consumer. In fact, just today Leichtman Research Group unveiled new numbers suggesting that the top 20 cable and telco providers (94% of the market) acquired more than 5.4mln net additional high-speed Internet subs in 2008. Yes, annual net broadband additions were down compared to the 8.5mln in 2007, and the peak of 10.4mln in 2006. And it was the lowest add rate in the seven years that LRG has tracked the broadband industry. But consider the current state of the economy: Despite a housing crisis, eye-popping unemployment and what seems to be a 401K Armageddon, more than 5mln people plunked down an extra $20-60 to ride the broadband wave. And let’s face it: Do they really have a choice? Anyone who uses the Internet to shop, research things (like, uh… jobs), handle their finances or conduct numerous other increasingly vital tasks simply can’t make it with dial-up or even dinky broadband speeds anymore. Sites scream out with video, Flash animations and other flashy photos and graphics. It’s practically impossible to use the Internet these days without broadband speeds. So bad economy or not, people are buying broadband. Yes, they’re buying at lower rates (and the numbers will probably be worse in 2009), but you know what? They’re still buying.

The other good news is that cable still sells more broadband than telcos, although not by a landslide. According to the LRG study, the top cable ops added a 3.2mln broadband subs in 2008 vs 2.2mln for the telcos. But here’s something interesting: Cable’s haul was 77% of its total in 2007 while the telcos pulled in only 50% of the adds they got the year before. That suggests that cable is doing a better job of stopping the bleeding in a bad economy. Of course, this doesn’t mean that the telcos aren’t fierce competitors. In fact, telcos added more broadband subs in the brutal 4Q 2008 than cable ops (570,000 vs 460,000). But that’s still more than 1mln total broadband adds. The competition and all the marketing it fuels has kept consumers’ desire for broadband in the forefront of their minds. The broader economy may have its troubles, but the economy of bits is pretty resilient.

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