Charter, Like Comcast, Sees Sputtering Broadband Growth

Charter Communications, like Comcast (see 2207280035), saw its broadband growth slow to a halt between Q1 and Q2. Charter ended Q2 with 28.26 million residential broadband subscribers -- up 54,000 year over year but roughly flat from the previous quarter. The sputtering growth had some analysts bearish. The two companies' broadband news "had a decidedly 'end of an era' feel," MoffettNathanson's Craig Moffett wrote investors.

Charter grew 38,000 broadband subscribers in the quarter, if you don't count losses from it discontinuing the emergency broadband benefit program and a spurt of people not transferring over to the affordable connectivity program, CEO Tom Rutledge told analysts. Chief Financial Officer Jessica Fischer said those ACP transfers, with different requirements than EBB, should have a smaller impact on the company's broadband results going forward. Rutledge said with Charter capturing less than 30% of wireline and mobile spending in its footprint, it has a big growth opportunity.

Competition from fiber isn't notably higher than pre-COVID-19 pandemic, Rutledge said. He said fixed wireless competition is "relatively small" and didn't have a big impact on Charter's results. Ramping up Rural Digital Opportunity Fund construction is a route to growth, he said. Rutledge said while new housing construction is lower because of supply chain issues, it "will get fixed in time" and Charter will have more growth opportunities. Charter was won about 1.5 million passings so far in RDOF and state programs, with a lot of bids remaining outstanding at the state level, he said, and will take part in the $42 billion broadband equity, access and deployment program bidding.

Near term, Charter is doing spectrum split upgrades that will let it dedicate more upstream bandwidth, Rutledge said. Long term, its testing of DOCSIS 4.0 let it hit speeds of 8 Gb/5 Gb, he said. He said data usage is growing quickly, and internet customers without a video subscription average more than 650 Gb a month. Downstream usage to upstream is 14:1, Rutledge said, noting that demand for more upstream capacity will continue isn't growing faster than downstream use.

The company's Q2 ended with it having 4.3 million mobile lines, up from 2.9 million the same quarter a year earlier, Charter said Friday. It said it ended the quarter with 8.2 million residential voice subscribers, down from 9 million; and 14.9 million residential video customers, down from 15.4 million. Revenues for the quarter were $13.6 billion, up from $12.8 billion year over year.

"Debate still rages" about the reasons for low cable broadband unit growth, and whether it's about looming saturation and low new household information or fixed wireless competition and losing market share to fiber, Moffett said. He said in the fight of cable-offering-wireless and wireless-carriers-offering-broadband, "cable is winning" as the mobility market is vastly bigger than fixed wireless. While fixed wireless is capacity-constrained, "cable's runway in wireless is not," he said.