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US cable is on a path to re-stabilize its broadband sub base and generate some growth in 2026 as the impact of the ACP is cleared and growth from rural builds offsets losses in legacy markets, according to MoffettNathanson.
Cable execs have been adamant that their broadband businesses will return to subscriber growth eventually. But they haven't pinpointed exactly when they expect to turn that corner as they grapple with the demise of the Affordable Connectivity Program (ACP) and a one-two punch of fiber and fixed wireless access (FWA) competition.
A new study (registration required) from MoffettNathanson suggests that cable should see the tide start to turn in 2026 as the smoke from the ACP clears and losses in legacy markets are offset by subscriber gains coming way of network edge-outs alongside government-subsidized rural buildouts.
Those gains are expected to be relatively small and flattish when compared to the days when US cable was solidly in the catbird seat during and prior to the pandemic. But they will represent a much-needed re-stabilization of the category.
MoffettNathanson's composite US cable subscriber forecast, which combines losses in legacy areas and gains in rural areas, indicates the cable industry will see their fortunes turn for the better by the end of 2026 with an estimated gain of 116,000 net broadband adds.
Still, US cable is expected to continue to shed broadband subs in its legacy markets in the coming months and years. TD Cowen, for example, expects US cable to lose a record 427,000 broadband customers in Q3 2024 alone.
MoffettNathanson expects US cable to lose 2.03 million subs in legacy areas in 2024 followed by a slowdown in losses: -1.05 million in 2025, -734,000 in 2026, and -547,000 in 2027.
Those legacy losses will be offset in part by gains coming way of rural expansions and edge-out builds in adjacent markets. MoffettNathanson sees cable adding 750,000 broadband subs in those areas in 2024, followed by a gain of 800,000 in 2025; 850,000 in 2026; and 900,000 in 2027.
And the expected composite gains will vary by operator.
Charter Communications, the most aggressive rural builder in the cable arena, is expected to add 240,000 broadband subs in 2028, compared to Comcast (+90,000), Altice USA (+18,000) and Cable One (+9,000).
It's not clear how investors will react. MoffettNathanson analyst Craig Moffett argues that US cable ops don't necessarily need to grow broadband units to carry favor with investors.
"We've long argued that Cable broadband units don’t need to grow; they just need to stop falling faster," Moffett explained. "We believe that's enough to give investors the headroom to focus on what is growing rapidly for Cable: their wireless business."
Meanwhile, he does expect broadband average revenue per unit (ARPU) growth in the 3% to 4% range for Comcast and Charter.
Loss of ACP about to hit harder
Moffett noted that US broadband is growing by 2%, the slowest growth rate on record.
In Q2, the analyst estimates the industry added just 365,000 broadband subscribers, with most of those gains going to FWA. The wired portion of the market lost 522,000 subs in the period, which includes a loss of 386,000 among US cable operators.
Churn tied to the loss of the ACP (it ran out of funds in May and enrollments into the program were halted in February) will become more pronounced in the second half of 2024.
Charter, which had about 5 million customers participating in the ACP, will see the greatest impact from the demise of the program. Charter attributed about 100,000 of the 149,000 broadband subs lost in Q2 to the wind-down of the ACP.
A broader view on broadband
Across other segments, fiber net adds of 456,000 in Q2 were similar to a gain of 450,000 in the year-ago period. The growth rate of fiber subs in the US, at 10.4% year-over-year, was the lowest since early 2016, according to MoffettNathanson. The study also estimated that telcos shed 610,000 DSL subs in the period, worse than a loss of 567,000 a year earlier.
The pace of FWA sub growth is slowing, though operators still added 933,000 in Q2 alone.
T-Mobile, the most aggressive in the FWA segment, added 400,000 in Q2 versus a year-ago gain of 550,000. However, T-Mobile recently reset its subscriber target to 12 million, up from a prior target of 7 million to 8 million.
"By 2026, we expect modestly less pressure from FWA, and we expect pressure from FTTH to slow starting in 2027, as attractive fiber overbuilding opportunities are by then largely depleted," Moffett said.
Satellite broadband "is not much more than a rounding error," with Starlink's growth barely outpacing losses from the market for geosynchronous Earth orbit (GEO) satellite broadband providers, Moffett noted.
Editor's note: TD Cowen expects US cable to lose a record 427,000 broadband customers in Q3 2024, not Q2 2024. The story has been altered to reflect that change.
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