Despite its accelerated drive to build fiber lines throughout its regions, Altice USA has no plans to junk its legacy hybrid fiber-coax (HFC) network any time soon.
Altice USA CFO Michael Grau made that point clear last week. Speaking at the JP Morgan Global Technology, Media and Communications Conference in New York, Grau said the nation's third-largest MSO intends to keep its cable plant intact even as it continues to expand fiber-to-the-home (FTTH) aggressively throughout its territories over the next few years.
Grau explained that Altice USA is in no hurry to ditch its legacy HFC plant because it "would take some time" to migrate all its current HFC subscribers over to the new fiber networks. So far, the operator has focused on recruiting new subscribers for its FTTH networks, not switching current subscribers.
No reason why
But there are other reasons not to be too hasty about junking HFC, Grau said. For one thing, the HFC network supports Altice USA's rollout of Wi-Fi 6, the next generation of the home networking technology. For another, operational savings of closing the HFC network would not be all that great.
"There's no point in shutting the HFC network down," he said, noting that it costs the operator the relatively small sum of $60 million a year to power that network. "I don't see a justification for us shutting down the HFC network."
Grau said the real operational savings of switching to fiber FTTH come from slashing customer service costs by reducing the need for truck rolls and other interventions.
He reiterated previous assertions by MSO officials that customer service expenses are 30% to 40% lower for fiber customers than HDC subscribers because they require much fewer repair calls and new consumer premises equipment (CPE).
Breaking down the company's current $1 billion annual capex budget, Grau said Altice USA now spends about $400 million per year on CPE and another $600 million on plant maintenance (including $100 million on its Lightpath network for commercial customers).
He estimated that the company could slice that plant maintenance figure in half by going full fiber and foregoing any additional capacity upgrades on its legacy HFC network.
Even with those projected cost savings, though, Grau doesn't believe it makes sense to junk the HFC network any time soon. "I don't see a path where we shut down the HFC network necessarily," he said.
The CFO's comments come as Altice USA continues ramping up its frenetic drive to install fiber lines throughout its sprawling regions in the Northeast, Southwest and elsewhere throughout the country, and prepares to launch multi-gig speeds over those lines.
The operator, which had built out fiber to more than 1.3 million locations by the end of Q1 2022, aims to boost that total to about 6.5 million locations by the close of 2025.
Grau said Altice USA is now on track to achieve this ambitious goal despite getting off to a sluggish start earlier in the process. He noted the operator has cleared a "logjam" in New York caused by that state's permitting process and has recovered from a COVID-19-induced construction slowdown in 2020 and 2021.
"We're right on plan [now]," he said, noting that the operator responded to the New York permitting snafu by switching construction to the neighboring states of New Jersey and Connecticut until it could resolve matters with New York regulators. "To date, we're very much in trajectory with where we expected to be."
Even while shedding broadband subscribers overall for the third consecutive quarter in Q1, Altice USA has been steadily gaining fiber subscribers. The operator, which closed out the winter quarter with 81,000 fiber subscribers, is seeking to pad that total to 200,000 by the end of the year.
Grau made the case that this total should start climbing faster as Altice USA pivots from simply adding new subscribers to its FTTH lines to more aggressively enticing its current HFC subs to switch to fiber. "We've gotten much more proactive in last three to four weeks," he said. "I think we'll see fiber migration accelerate now."
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— Alan Breznick, Cable/Video Practice Leader, Light Reading