Cable One turns to targeted promos and discounts to protect broadband base

Cable One has updated its game plan by applying promotions and discounts to broadband, with a particular emphasis on a lower end of the market that's been a ripe target for fixed wireless access (FWA) competition.

Rather than solely concentrating on the higher-end of the market, "we've been more willing to do promotional and discounted offers especially targeted at the value-conscious segment," Cable One President and CEO Julie Laulis said Thursday on the company's Q4 2023 earnings call.

Those promos and discounts aren't being offered across the board. Cable One will compete more aggressively on price in "targeted situations" and experiment with various offers, Laulis said.

"This is a pretty big shift for us in that we are not operating our systems in a one-size-fits-all way," she added.

Some of that handiwork emerged last summer and fall when Cable One unleashed a "flash sale" of a 100 Mbit/s cable broadband product at the promotional price of $25 per month designed to compete more directly with FWA rivals.

Cable One is also bundling in unlimited data (regularly an additional $30 per month) to new broadband customers.

"We are going to defend our market and we are going to grow market share," Laulis said.

The tactic appeared to work in Q4 as Cable One gained 1,900 broadband subs (including 1,700 residential customers) in Q4 2023. Comcast, Charter Communications and Altice USA all lost broadband subs in the period.

Promos to pressure ARPU

Laulis acknowledged that a focus on discounts and promos could pressure Cable One's average revenue per user (ARPU), but she views it as a smart near-term move.

"We see this as an acceptable trade-off for defending our markets, expanding our customer base and enhancing long-term value," Laulis said.

Cable One's broadband ARPU of $83.95 at the end of 2023 was the highest in the industry. But the growth rate in Q4 slowed to +2.7% versus +6.5% in the prior quarter, MoffettNathanson analyst Craig Moffett explained in a research note (registration required).

But that doesn't mean Cable One is ignoring the high end of the market. The operator has been rolling out a new multi-gig offering (tiers delivering up to 1.5 Gbit/s and 2 Gbit/s downstream, with 6-Gig speeds "coming soon") via its DOCSIS network.

Cable One has already launched those new, speedier tiers in markets such as Dyersburg, Tennessee; Altus and Duncan, Oklahoma; and Sioux City, Iowa. The company expects to complete the rollout to all markets by summer 2025.

Laulis said about 80% of new customers are taking speeds of 300 Mbit/s or more.

She said nearly a quarter of Cable One's residential broadband subs now consume more than 1 terabyte per month, a 17% jump from the year-ago period. However, network utilization in peak hours remained at just 20% for both downstream and upstream traffic, Laulis added.

Cable One has been indifferent to video losses for years amid its laser-like focus on broadband and commercial services.

Cable One lost another 6,600 video subs in Q4 2023, narrowed from a year-ago loss of 20,900. However, Moffett estimates that Cable One's video base is "declining by an incredible 21.6%."

Falling enterprise value a rising concern

Moffett's bigger concern about Cable One is its falling enterprise value, noting that shares have dipped 32% since the beginning of last year.

After hitting a high of $6,100 per home passed in Q4 2020, Cable One's enterprise value has fallen below $2,000.

Moffett notes that Cable One's current enterprise value of $1,803 is now well below its peers, including Altice USA ($2,668) and Charter Communications ($2,519).

"At a time when telephone companies and private equity are shoveling money into competitive fiber overbuilds – overbuilds that are, by definition, always in competitive markets – a valuation below $2,000 is, well… shocking," Moffett wrote.