Comcast focuses on market segmentation as broadband sub losses continue

Comcast shed another 65,000 broadband subscribers in the first quarter of 2024 and expects those losses to continue in the short-term.

But the cable operator is also trying to curtail that trend by segmenting the market with offers tailored to the premium and lower ends of the market. Of late, Comcast has emphasized products and promotions focused on the lower end, a segment that has been going to fixed wireless access (FWA) competitors in droves.

Comcast's latest and biggest initiative focused on that segment of the market is its new set of prepaid services – covering video, broadband and mobile – under a "Now" brand that was first used by Comcast-owned Sky in the UK.

Comcast has been in the prepaid Internet business since late 2012, and introduced its Now-branded pay-TV product about a year ago. The Now-branded mobile prepaid product is completely new.

'Now' billed as a flanker brand strategy

Comcast's revised approach to segmentation and greater emphasis on a range of prepaid services represents a "dedicated…flanker brand strategy," Jason Armstrong, Comcast's chief financial officer, said Thursday on the company's Q1 2024 earnings call.

"We needed to refresh [our prepaid strategy], needed to update it and put it into a more competitive position," added Comcast Cable President and CEO Dave Watson. "In the prepaid area, in particular, we think there's an opportunity to improve our effectiveness there … When you look at our long-standing approach to pricing and packaging, we're going to compete for every segment."

The revised Now-branded broadband services, which do not require a contract or a credit check, offer a 100Mbit/s (downstream) service for about $30 and a 200Mbit/s tier for $45. Those offers "are very competitive versus fixed wireless," Armstrong said.

Comcast views its new Now Mobile offering ($25 per month per line, plus access to Comcast's 23 million Wi-Fi hotspots) as another weapon it can wield against FWA.

Comcast's Q1 loss of 65,000 broadband subs (-55,000 residential and -10,000 business) compared to a year-ago gain of 5,000 broadband subs. Analysts were expecting Comcast to shed 48,000 broadband subs in Q1. Comcast ended the period with 32.18 million broadband customers (29.69 million residential and 2.49 million business).

No near-term remedy for broadband sub trends

Comcast doesn't expect the situation to improve right away. "As we sit here right now, we do not see this trend improving in the near-term," Armstrong said.

He warned that broadband churn could be "elevated" amid the likely demise of the Affordable Connectivity Program (ACP). Comcast has about 1.4 million ACP recipients, and has brought forth several remedies, including its Internet Essentials program and its new Now-branded prepaid offerings, to help those customers manage the potential loss of the benefit.

That trend is also taking shape as the slowing pace of broadband subscriber growth hits all segments of the market, a situation that could provide cable with some relief on the competitive front.

MoffettNathanson analyst Craig Moffett pointed out in a research note (registration required) that Verizon's FWA net adds slowed again in Q1, and that T-Mobile is also expected to post "sharply lower FWA net additions" when it announces Q1 results later today.

Broader broadband market slowing down

"It's not crazy to suggest that the competitive pressures on the broadband business have peaked," Moffett noted.

Though Comcast has been dealing with broadband sub losses in recent quarters, broadband average revenue per unit (ARPU), a metric the operator views as critical to how its broadband business is measured, continues to rise. Its residential broadband ARPU in Q1 reached $73.92, up 4.2% year-over-year.

The cable op is also looking to gain subs by expanding its network footprint. Comcast built its new network to about 272,000 new locations in Q1, putting it on pace to add more than 1 million new passings for all of 2024.

Comcast also provided a small update on its hybrid fiber/coax (HFC) upgrade, noting that it has deployed "mid-split" upgrades to about 40% of its footprint. Those upgrades enable Comcast to deliver faster upstream speeds by dedicating more spectrum to the upstream. Comcast has also deployed DOCSIS 4.0 upgrades to parts of three markets: Philadelphia, Atlanta and Colorado Springs.

Data demand continues to rise. Execs said more than 70% of Comcast's residential broadband customers now get speeds of 500 Mbit/s or more, and about one-third are getting speeds of 1 Gbit/s or more.

Mobile growth slows

Comcast continues to grow its Xfinity Mobile business, though the rate of growth is slowing. Comcast added 289,000 mobile lines in Q1 2024 (down from a gain of 355,000 a year earlier), extending its total to 6.87 million. Analysts were expecting Comcast to add 307,000 mobile lines in Q1.

The good news is that Comcast's mobile lines now represent 11% penetration of its broadband base, suggesting that there's still plenty of runway left.

In addition to the new Now-branded prepaid mobile product, Comcast has been trying to accelerate mobile growth with new, lower pricing plans for customers who take multiple lines, as well as a buy one/get one mobile line promo.

Comcast has also gone wide with "WiFi Boost," a feature that enables Xfinity Mobile customers to get speeds up to 1 Gbit/s when they are connected to one of Comcast's 23 million Wi-Fi hotspots. Comcast has enabled that feature via its introduction of Wi-Fi 6 and Wi-Fi 6E along with updated software for its hotspot network and Xfinity Mobile devices, an official said.

Among other segments, Comcast posted Q1 business service revenues of $2.40 billion, up 5.4% year-over-year. Comcast acknowledged that the small and midsized portion of the market is seeing more competitive pressure from FWA. Verizon and T-Mobile have been targeting that part of the market with their respective FWA offerings, and AT&T also is starting to focus on the SMB segment with its relatively new "Internet Air" product.

"The SMB market has become a bit more competitive and fixed wireless is a part of that," Watson said. Comcast is combating that with offers that appeal to that segment while playing up attributes such as network reliability and wide market coverage, he said.

Comcast lost 478,000 pay-TV subs, improving on a year-ago loss of 614,000. Comcast ended the quarter with 13.61 million domestic video subs.