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Cable Tech

Charter wraps buildout of mobile core as CBRS market trial nears

Charter Communications' plans for a CBRS network targeted to high-usage areas is moving forward, with expectations that the operator will launch its first market trial by mid-2022.

With the launch of the trial approaching, Charter completed the buildout of its mobile core network in Q1, Charter CEO Tom Rutledge said Friday on the company's first quarter earnings call.

Charter added 373,000 mobile lines in Q1 2022, extending its total to 3.93 million.  
(Source: Charter Communications)
Charter added 373,000 mobile lines in Q1 2022, extending its total to 3.93 million.
(Source: Charter Communications)

Charter has selected one still-unnamed market for the initial CBRS rollout. The general idea is to use that market as a template for Charter's CBRS strategy, which is to offload traffic in high-usage areas. That, the company reasons, will result in an improved mobile experience while also providing a way to save costs tied to its MVNO agreement with Verizon.

Mobile continues to be a general bright spot for Charter. The company added another 373,000 mobile lines in Q1 2022, beating Wall Street expectations of 328,000 and improving from year-ago additions of 300,000 lines. Charter, which just missed the record 380,000 lines it added in the previous quarter, ended Q1 2022 with 3.93 million mobile lines.

Mobile costs also increased 32.8%, to $760 million, a figure that includes mobile device, customer acquisition and service/operating costs.

Charter still doesn't use handset giveaways and subsidies, but is trying to sweeten the pot with other types of perks. Among them, Rutledge noted that Charter kicked off the market launch of Spectrum Mobile Speed Boost in April. This feature enables Spectrum Mobile customers to receive speeds of 1 Gbit/s on their mobile service devices when they are at home – even if their wireline broadband speed is provisioned to deliver less than 1-Gig.

Per the FAQ, Mobile Speed Boost doesn't allow for device tethering, and is not guaranteed to be available at all times.

Broadband subscriber slowdown continues

Alongside continued growth of its mobile business, Charter, like other cable operators, continued to see broadband growth slow. Charter added 185,000 broadband subs in Q1 (+164,000 residential and +21,000 business customers), versus additions of 355,000 a year ago, for a total of 30.27 million. Analysts were expecting Charter to add about 227,000 total broadband subs in the quarter.

Chris Winfrey, Charter's COO, attributed the slowdown primarily to record low churn and lower-than-usual transaction volume, as well as slower household growth rates. He said competition from fiber and fixed wireless access (FWA) providers have had the smallest impact on the rate of broadband subscriber growth at Charter.

Winfrey acknowledged that FWA might be converting some mobile-only and DSL customers that would normally come to Charter. But he added: "I don't believe fixed wireless access is having any material impact on us today."

Still, slower broadband growth is having a negative impact on cable stocks (Charter shares were down 6% in morning trading Friday). That's due in large part to the fact that cable operators have been adamant that broadband/connectivity now represents the centerpiece of their business.

However, some analysts wonder if perceptions are due for a change as mobile becomes an increasingly important piece of the businesses at Charter and Comcast, and as both move ahead with network strategies to offload data and reduce mobile data costs.

"To be clear, we certainly aren't suggesting that investors should ignore the slowdown in broadband growth rates; broadband is, of course, Cable's core business," MoffettNathanson analyst Craig Moffett said in a research note issued Friday. "But we do believe investors should stop focusing only on broadband. Cable isn't a broadband-only business."

Investors, he suggested, should stop thinking of Charter and Comcast as "only" MVNOs.

"Cable's hybrid MVNO/MNO isn't a poor-man's substitute for an owned-and-operated network, it's actually better," Moffett suggested. "Over time, Charter and Comcast will move more and more traffic onto their own networks, leveraging their existing infrastructure for low-cost backhaul. Their goal is not to be an entirely facilities-based mobile network operator (MNO), but in fact, to optimize at each point in the network."

More pay-TV losses as Comcast JV emerges

Turning to video, Charter shed another 112,000 customers (-123,000 residential against +11,000 business customers), for a total of 15.72 million.

But Rutledge is enthused about the national streaming joint venture with Comcast announced earlier this week. The JV will enable Charter to offer a competitive app store. This will include a new level of navigation, search, content curation, billing and content security, he said.

"It will give consumers new devices and content providers new opportunities to create customer relationships on a platform designed to help them sell video effectively," Rutledge explained. "Comcast has created excellent IP [intellectual property] for this venture and we have high expectations that we can work together to continue its development and distribution."

Under terms of the proposed JV, Charter will contribute $900 million over multiple years (the exact timeframe hasn't been disclosed). Rutledge said the JV will provide opportunities for Charter to generate advertising and transaction revenues.

He also expects the move to play a role in Charter's IP video migration, putting Charter in position to eventually reclaim spectrum used today to deliver legacy QAM/MPEG digital video services.

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— Jeff Baumgartner, Senior Editor, Light Reading

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