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Charter tests high-splits, preps CBRS field trial for early 2022

Meanwhile, investors grow concerned as broadband sub growth at Charter slowed in the third quarter amid a decline in sales activity and record low churn. But one analyst believes such concerns are overblown.

Jeff Baumgartner

October 29, 2021

6 Min Read
Charter tests high-splits, preps CBRS field trial for early 2022

Charter Communications execs offered a glimpse at the company's future wired and wireless network strategies on Friday's Q3 earnings call. In addition to testing upstream-enhancing "high-split" upgrades, the operator is pushing forward with a plan to launch a CBRS field trial in one market in early 2022.

Charter is testing a high-split "in-market" on a DOCSIS 3.1 network, company chairman and CEO Tom Rutledge said, but declined to say where it's occurring. A high-split bulks up the amount of spectrum dedicated to the upstream – from a traditional range of 5MHz-42MHz to a beefier swath of 5MHz-204MHz. That will put Charter in position to offer symmetrical 1-Gig speeds via its D3.1 networks.

Figure 1: Company Chairman and CEO Tom Rutledge says Charter's in position to conduct high-split upgrades at a swift pace. Pictured: A Charter technician works on a network node. (Image source: Charter Communications) Company Chairman and CEO Tom Rutledge says Charter's in position to conduct high-split upgrades at a swift pace. Pictured: A Charter technician works on a network node.
(Image source: Charter Communications)

One aim is to help Charter augment capacity and stay ahead of broadband consumption trends. In Q3, Charter broadband customers without pay-TV used more than 600 gigabytes per month, and close to 20% in that group used more than 1 terabyte per month. Overall data demand has stabilized, but remains about 30% higher than pre-pandemic levels, Rutledge said.

Rutledge said Charter likes the capital efficiency afforded by high-split upgrades that can utilize already deployed DOCSIS 3.1 consumer premises equipment (CPE). Those upgrades also reduce the need for Charter to implement more expensive node splits, he said.

"We think it's a very capitally efficient way of upgrading the network and maintaining our superiority from a competitive point of view everywhere we operate," Rutledge said.

Charter's top exec didn't offer much on how soon and how rapidly the operator would deploy high-split upgrades other than to say deployment would be done on an "opportunistic basis." It's effectively an "electronic drop-in and can be done quite rapidly and cover huge swaths of geography in a very short period of time," he explained.

Charter is also developing an architecture for future rollouts of DOCSIS 4.0, but Rutledge didn't elaborate on potential timing.

Turning to CBRS, Charter intends to boot up a field trial involving "thousands" of small cells in a "full market area" early next year, Rutledge said. Charter had previously said it expected to start a CBRS network buildout in one market in 2021.

The general idea is to concentrate deployment in high-traffic areas outside of Wi-Fi coverage and to help offload MVNO traffic and improve the economics of Charter's mobile business.

Rutledge reiterated that Charter could offload about a third of its mobile traffic on CBRS once that piece of the network is fully deployed into areas where the operator can get a quick and full return. "But you're talking years of runway necessary to deploy that and to get it fully utilized," he explained.

Broadband sub slowdown

While those plans offer a view of Charter's future, Wall Street is of course more concerned about the here and now, which includes the current trend of slower broadband subscriber growth.

Charter added 265,000 broadband subs in Q3 2021, well off from an expected 343,000. Charter added 537,000 broadband subs in the pandemic-fueled year-ago quarter, and added 380,000 subs in the corresponding pre-pandemic quarter in 2019.

Charter blamed the slowdown on historically low churn levels that have curtailed transaction and sales activity. It now expects full-year 2021 growth to be similar to 2018, rather than 2019.

Charter shares were down 6.13% in late-day trading Friday on the broadband results and the softer expectations for Q4 2021. Comcast faced a similar reaction on Thursday.

Craig Moffett, analyst with MoffettNathanson, believes the market is overacting due to its obsession with broadband growth. Comcast's "miss" equated to about four-tenths of 1% of its total base of homes passed, and Charter's miss was about the same, he explained.

"To be sure, at a time when wired broadband penetration in the US is closing in on 85% of occupied households, broadband growth is obviously going to slow. But that has been in everyone's models for a decade," Moffett wrote in a research note, noting that household formation, a major growth driver for new broadband subs, has stagnated during the pandemic.

"What we're talking about here are changes in the rate of deceleration that are measured in fractions of a percentage point," the analyst added. "Which, of course, fully explains why, in response to variances of this size, Comcast shares have tumbled by 16%, and Charter, in sympathy by 15%. I mean, it makes sense, right?"

Mobile also misses the mark

Charter's mobile business continued to grow, but the rate of growth also slowed. The company added 244,000 mobile lines in Q3 2021, versus the 309,000 expected by analysts, ending the period with 3.18 million.

Charter mobile revenues climbed 45.4%, to $535 million, aided by a 1.1 million year-over-year increase in mobile lines. Charter's mobile business continues to close in on profitality, as the drag on EBIDTA narrowed to $72 million.

Charter's Q3 mobile results did not benefit much from the company's recent introduction of new, family-focused multi-line pricing that should help to accelerate growth in Q4 and beyond.

But execs are generally bullish that growth will accelerate again once sign-up and sales activities normalize.

"We have a long, robust runway of customer growth ahead of us," Rutledge said, noting that Charter does business with just 32 million of the 54 million homes its network passes. Meanwhile, it serves about 3.2 million of the 120 mobile broadband lines in its footprint. "We are currently very underpenetrated," he said.

"Wireless is emerging as a third significant contributor to growth," Moffett noted. "We continue to believe that there will be a time when wireless, not video, is Charter's second largest revenue stream after broadband."

Speaking of video, subscriber losses accelerated in Q3, as Charter shed another 121,000 customers in the quarter, lowering its total to 15.89 million. Charter added 67,000 video subs in the year-ago period, benefitting from a blow-out quarter of broadband subscriber additions that included batches that bundled in pay-TV.

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— Jeff Baumgartner, Senior Editor, Light Reading

About the Author(s)

Jeff Baumgartner

Senior Editor, Light Reading

Jeff Baumgartner is a Senior Editor for Light Reading and is responsible for the day-to-day news coverage and analysis of the cable and video sectors. Follow him on X and LinkedIn.

Baumgartner also served as Site Editor for Light Reading Cable from 2007-2013. In between his two stints at Light Reading, he led tech coverage for Multichannel News and was a regular contributor to Broadcasting + Cable. Baumgartner was named to the 2018 class of the Cable TV Pioneers.

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