Cable Competitors Increasingly Targeting Lower End of Market

Heavy competition the cable industry faces from fiber and fixed wireless access (FWA) is moving downscale, with multiple cable operators telling Wall Street in recent days that there's more pressure at the lower end of the market. Some anticipate greater pressure on their internet subscriber numbers due to the looming end of the affordable connectivity program. Moreover, Charter Communications said it's already seeing effects from February's freeze on new ACP enrollments (see 2402010075).

FWA competitors increasingly are "targeting value-conscious customers, a segment we have not previously targeted," Cable One CEO Julie Laulis told analysts last week during an earnings call. That comes atop an increased number of fiber competitors in some markets, Laulis said.

Verizon is "go[ing] hard after the lower end of the market" with its FWA offering, posing strong competition for Altice in its Northeast markets, CEO Dennis Mathew said last week. He said in Altice's Western markets competition is coming more from fiber overbuilders. "We ... see [overbuilders] coming in and taking some share upon initial launch, which is not surprising, but our ability to compete is really improving."

While Comcast has experienced "an intense competitive environment" for several years due to fiber and FWA, currently there's "more intense competitive focus" around the lower end of the market, Comcast Cable CEO Dave Watson told analysts last month. In response, Comcast is segmenting its offerings more, including the Now set of prepaid mobile, streaming and TV products. Charter Communications saw some wireline overbuilders "go a little bit downstream" in Q1, CEO Chris Winfrey said last month.

Cable One, once seen as enjoying protection by skewing rural, now sees itself "in the crosshairs of FWA," MoffettNathanson's Craig Moffett wrote in a note last week. In a note about Altice, he said fiber competitors are raising rates and T-Mobile notably has increased the price of its FWA offering.

Altice has dedicated retention agents attempting to keep its 130,000 ACP subs, Chief Financial Officer Marc Sirota said. Less than 3% of its subscriber base is on ACP, and most of those accounts were customers before the program, he said. Cable One CFO Todd Koetje expects the company will lose "some" of its 48,000 ACP subs post-program. Laulis said Cable One's broadband gains didn't come from ACP and were likely subs FWA competitors lost. Cable One ended Q1 with 967,000 residential data subs, up 1,000 year over year. Charter ended Q1 with 28.5 million residential internet subs, flat year over year. Comcast ended the quarter with 29.7 million, down 100,000. Altice ended with 4.1 million, down 125,000 year over year.

Winfrey said ACP's February freeze atop FWA competition contributed to Charter's 70,000 internet subs lost during Q1. He said Charter's revenue was relatively flat for the quarter in part because of fewer low income connections due to discontinued ACP availability. With an ACP renewal looking unlikely, Charter "will do everything" it can to retain ACP subs "and we expect to keep the vast majority of them," CFO Jenna Fischer said. She said Charter expects a one-time hit to its internet average revenue per user and bad debt expenses in Q2 and Q3 due to ACP discontinuation. The company said it has 5 million ACP subs.

The internet subscriber losses trend Comcast is seeing won't improve in the near term, and churn could elevate due to ACP's end, Watson said. The company is focused on its prepaid Now offerings and low-cost Internet Essentials program as routes for retaining its 1.4 million ACP subs.