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Cable Tech

Cable One video penetration dips to 10.9% as broadband dominates

Broadband again dominated the subscriber landscape at Cable One in the first quarter of 2021, as the company expanded its high-speed Internet base against continued pay-TV losses.

Reflecting that trend, Cable One's video penetration ended the quarter at 10.9%, versus 38.1% for broadband. That latter penetration level is the lowest among Cable One's peers, meaning it still has lots of broadband subscriber runway ahead of it.

Cable One ended Q1 with 734,000 non-video customers, or 74.3% of its total base, up from 617,000, or 67%, in the year-ago period.

Also reflecting Cable One's relative indifference towards pay-TV, the situation for Sparklight TV, the company's new IPTV service, did not come up once on Thursday's earnings call – this despite the fact that its key vendor for that offering, MobiTV, is currently in Chapter 11 bankruptcy and seeking bids from potential suitors.

But broadband remains the primary story at Cable One, as it is at many other US cable operators. WideOpenWest, another midsized MSO that has also adopted a "broadband-first" posture, ended Q1 with a video penetration of just 8.9%. That strategy is helping those operators increase overall margins and boost broadband average revenue per unit (ARPU).

Cable One added 86,000 data "primary service units," or PSUs, in the period, up 12% year-over-year, against a loss of 49,000 video PSUs.

Though there have been fears that strong broadband pull-through from a pandemic-marked 2020 would impact broadband subscriber growth this year, the level of new broadband subscriber activity "has remained resilient," Cable One's chairperson, president and CEO, Julie Laulis, said on Thursday's earnings call. "It has not let up. The same things that have been in play since mid-March, April of last year are continuing to drive growth."

She said residential broadband subscriber additions in April 2021 alone were significantly higher than what Cable One saw in the pre-pandemic full second quarter of 2019. Broadband subs are coming from "everywhere," including those who only took mobile service, DSL or even fiber-the-home services, Laulis said.

Industry best broadband ARPU

Some 78% of new customers in Q1 took tiers of 100 Mbit/s or higher, with 59% of Cable One's total broadband base now taking 100 Mbit/s or more. Average usage jumped 29%, to about 500 gigabytes.

The blend of speed tiers taken by new subs and upgraded tiers taken by existing broadband customers led to a lift in broadband ARPU, which ended Q1 at an industry high of $77.24.

Overall margins are now at 52.9%. "That would be impressive enough on its own, but, perhaps even more remarkably, the 380 bps [basis points] jump from a year ago suggests no deceleration in the rate of increase," Craig Moffett, analyst with MoffettNathanson, wrote in a research note. "Let that sink in for a moment. If you thought Cable One's margins were already about as high as they could get, well, you were wrong. And if you thought their expansion would at least slow down, well, wrong again."

Moffett continues to view Cable One as the cable industry's "best harbinger of what is to come" for cable operators that are earlier into their own strategies that deemphasize video.

Competitively, Cable One's footprint is largely split between the fiber-focused AT&T and CenturyLink. Meanwhile, less than 10% of Cable One's homes passed overlap with Frontier Communications, a telco that is now gearing up for aggressive fiber-to-the-premises upgrades as it exits bankruptcy.

Laulis said Cable One is keeping an eye on fixed wireless activity from the likes of T-Mobile, but isn't overly concerned given the high data needs of today's consumer broadband customers. Cable One likewise views fixed wireless providers as a "half-friend," citing their need for backhaul.

And Cable One, itself, is in the fixed wireless game – it has invested in two fixed wireless service providers: Wisper Internet and NextLink.

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— Jeff Baumgartner, Senior Editor, Light Reading

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