Best Communication Services Sector ETFs
Internet platforms, telecom, and entertainment in one sector
ETFs tracked
22
Avg TER
0.48%
Median CAGR 3Y
+23.9%
Communication services sector ETFs hold a mixed bag: internet platforms (Meta, Alphabet), telecom (Verizon, AT&T, T-Mobile), entertainment (Netflix, Disney), and video gaming. The category was re-created in the 2018 GICS revision to separate platform businesses from traditional telecom. The result is a hybrid sector where dominant tech platforms sit alongside regulated utilities-like telecoms.
Concentration is extreme. XLC's top 2 holdings (Meta and Alphabet) typically make up around 45% of the fund. Including Netflix, Disney, and T-Mobile, the top 5 exceeds 60%. This is one of the most concentrated broad sector ETFs in the US market. The sector's performance is dominated by Meta and Alphabet's earnings trajectory, not the telecom or entertainment sub-segments.
Platform economics dominate. Alphabet and Meta together capture the majority of global digital advertising, with margins that look nothing like traditional media companies. Their earnings have grown at 15–25% annually over the past decade, which has driven the sector's overall returns. Excluding them, the sector would be a slow-growth telecom and media bucket.
Traditional telecom is the opposite story. Verizon and AT&T together make up around 15% of XLC. These are high-yield (5–7%), slow-growth businesses with heavy debt loads tied to 5G capex. They behave more like bond proxies than growth equities. Investors buying XLC for "telecom yield" end up with mostly platform growth exposure — a misalignment worth understanding.
Who this is for
- Investors with a constructive view on digital advertising and platform economics
- Thematic allocators betting on Meta and Alphabet specifically
- Not suitable as broad telecom or media exposure — the sector is dominated by two platforms
Top 10 ETFs
Browse all 22 communication services ETFs
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Open screenerFrequently asked questions
- What is in a communication services ETF?
- Broad communication services ETFs (XLC, VOX) hold internet platforms (Meta, Alphabet), telecom carriers (Verizon, AT&T, T-Mobile), entertainment (Netflix, Disney), and gaming companies. The sector was re-created in 2018 to separate platform businesses from traditional telecom. Result: a hybrid sector dominated by a few megacaps.
- How concentrated is XLC?
- Extremely. Meta and Alphabet together are typically 45% of XLC. The top 5 holdings exceed 60%. This makes XLC one of the most concentrated broad sector ETFs in the US market. Performance is dominated by those 2–5 names rather than reflecting broad telecom or media dynamics.
- Why did the communication services sector change in 2018?
- Index providers reclassified companies to better reflect business models. Meta, Alphabet, and Netflix moved from technology and consumer discretionary into a newly expanded communication services sector. The old telecom-only sector became too narrow, while tech had grown unusually large. The 2018 GICS revision created the modern mixed sector.
- Do telecom stocks in XLC provide dividend yield?
- Verizon and AT&T yield 5–7%, but they're only 15% of XLC combined. The fund's overall yield is pulled down by low-yielding platforms like Alphabet (around 0.5%) and Meta. For pure telecom yield, dedicated funds (IYZ) or individual stocks provide more targeted exposure.
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