Like Comcast, Charter would have added broadband subs without losses linked to the demise of the Affordable Connectivity Program. The operator has also pushed out its HFC upgrades and confirmed it won't go big on BEAD.
Charter Communications delivered a wave of important updates on broadband subscriber trends, network upgrade plans, rural buildout initiatives and pay-TV strategies in concert with its Q3 2024 results. Here's a snapshot of what was discussed.
ACP impact prevented a broadband gain
Mirroring the situation at Comcast in the third quarter, Charter said it would've gained broadband customers in the period if not for losses attributed to the demise of the FCC's Affordable Connectivity Program (ACP).
"Were it not for the end of the ACP program in June, we would have grown our broadband subscriber base in the quarter," Charter CEO Chris Winfrey said Friday (November 1) on the earnings call.
Charter shed 110,000 residential broadband subs in Q3, compared to a year-ago gain of 63,000. But analysts thought the damage would be about double that amount. Charter estimated that about 200,000 broadband losses were attributable to a mix of non-pay disconnects and voluntary churn related to the ACP.
Winfrey said there's another 100,000 non-pay broadband subs related to the ACP Charter is managing in Q4, along with some customers impacted by the recent hurricanes in the southeast.
With the impact of the ACP largely in the rearview mirror, MoffettNathanson believes cable has finally seen the "bottom" with respect to broadband subscriber adds. "To be sure, that's not to say that broadband subscribers will now start to grow again. But the losses will be smaller going forward now that the worst of the ACP impact has been felt," Craig Moffett, analyst with MoffettNathanson, explained in a research note (registration required).
Charter pushes HFC upgrades to 2027
Charter has again extended the finish line for its multi-phased hybrid fiber/coax (HFC) network upgrade program that will deliver multi-gigabit downstream speeds and 1-Gig upstream speeds. Originally slated for completion by the end of 2025, Charter last year pushed that plan to 2026 as it prioritized rural network buildouts. The operator now expects to wrap its HFC upgrades sometime in 2027 while still keeping the costs at about $100 per home passed.
Charter expects to complete its phase one upgrade by the end of this year to markets that include Reno, St. Louis, Cincinnati, Dallas/Fort Worth, Louisville, Lexington and Rochester (Minnesota and New York). That portion, targeting 15% of its HFC footprint, includes an upgrade to 1.2GHz with upstream-enhancing "high-split" upgrades on traditional, integrated cable modem termination systems (CMTSs).
Phase two, covering half of Charter's HFC plant, involves an upgrade to 1.2GHz with a distributed access architecture (DAA) and a virtual CMTS. The third phase, covering the remaining 35%, is a full DOCSIS 4.0 upgrade, including DAA, 1.8GHz technology and a vCMTS.
Winfrey said Charter is "making progress" on phase two, but he acknowledged the operator has "deliberately slowed these markets to get the software fully certified to our specs." That situation should be remedied as Charter eventually takes advantage of a network orchestration software platform and a test suite that is now in the hands of Vecima Networks.
Not going big on BEAD
Charter confirmed that its participation in the Broadband Equity Access and Deployment (BEAD) will not be as aggressive as its participation in the Rural Digital Opportunity Fund (RDOF) was.
"We now expect our total BEAD spend will be substantially less than our spend in RDOF," Charter CFO Jessica Fischer said, noting that total capital intensity will drop after 2025. "That lower outlook reflects the most recent broadband map updates in terms of available unserved passings near our network and a little less favorable rules framework in BEAD when compared to RDOF and state grants."
Charter remains on a path to complete its RDOF commitments by the end of 2026, roughly two years ahead of schedule.
Charter ended the quarter with 696,000 subsidized rural passings, adding 114,000 during the quarter. The operator expects to activate nearly 400,000 new subsidized rural passings in 2024, about 35% more than its 2023 output.
Wireless still a solid growth engine
Charter tacked on another 545,000 mobile lines in Q2, down a bit from a gain of 594,000 in the year-ago period. Charter ended Q3 with 9.4 million mobile lines.
Charter's wireless average revenue per unit (ARPU) is also on the rise – Moffett said that growth is attributed to more customers starting to roll off of the operator's Spectrum One promo that offered a free line for a year, along with greater uptake for Charter's Unlimited Plus premium plan.
Charter tees up app-aided pay-TV
Charter lost another 281,000 residential pay-TV customers in Q3, much better than the -375,000 expected by Visible Alpha consensus expectations, according to MoffettNathanson.
That improvement enters the picture as Charter starts to move ahead with a video strategy that includes the bundling of several direct-to-consumer streaming services at no additional cost. Charter estimates that its app bundle, which includes the ad-supported versions of Max, Disney+, Peacock, Paramount+, ESPN+ (for its sports package), AMC+, Discovery+, BET+ and Vix, adds $80 per month of retail value to its TV Select package.
Winfrey said Charter plans to operationalize that capability next year as the apps are integrated onto the platform and tucked inside a "video portal" that enables customers to manage their video subscriptions.
"We think we'll have all that placed in the first half of 2025 and be able to present that to customers as part of our pricing and packaging," Winfrey said.
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