Loss of ACP would be 'barely material' for Comcast – study

New Street Research took a deeper dive into the risks faced by wireline broadband operators if the government fails to refund the Affordable Connectivity Program (ACP) and it were to be shut down this spring.

New Street's latest study confirms that Charter Communications faces the greatest risk – by far. Charter's peers face much less financial exposure if a chunk of those ACP recipients, which have been getting a $30 subsidy each month, end up disconnecting or taking their business elsewhere.

The bottom line from an earnings standpoint: "The loss of ACP is barely material for Comcast and not material for Altice [USA], Frontier, Lumen, and others," New Street Research analyst Jonathan Chaplin explained in a new report that followed up his recent Charter-focused study of the ACP issue.

Charter's exposure to the ACP is greater based on the mere fact that it has many more program recipients (5.4 million) than wireline peers such as Comcast (1.38 million), Cox Communications (737,000), Altice USA (84,000), Frontier (71,000), Lumen (27,000), Consolidated Communications (6,000) and TDS (3,000).

According to the study, here's how those operator numbers stack up when broken down into four key ACP-related use cases: subs who are new to broadband; existing subs that opted for more product (such as pay-TV); existing subs that used ACP to upgrade to higher speeds; and existing subs that pocketed savings and used it for other products and services, such as a Netflix subscription or toward utilities, rent or food:

Related:Study weighs the risk Charter faces from ACP's possible demise

New Street's model assumes 50% of subs new to broadband through the ACP will retain a low-income broadband tier offered by the operator (such as Comcast's Internet Essentials); 25% will keep the additional products without the ACP subsidy, with the remainder dropping them; and 25% will keep their higher-speed tier, while others down-shift to the tier and price point they had before the program.

The model ignores the last category – pocketed savings – since it has negligible impact on operator-delivered services.

Update: As a caveat, New Street has a "very low conviction in how any of these categories will react if ACP is terminated," Chaplin explained in a follow up note today. "We assumed that 50% of those who are new would drop service, but it could easily be half the amount."

New Street's latest analysis found that Charter has about 549,000 subscribers at risk – or 2.1% of its current subs – of disconnecting or going elsewhere if the ACP goes away. That compares to:

Related:Nearly half of ACP households are using it for fixed broadband – FCC

On the financial end, New Street estimates that 3% of Charter's EBITDA is at risk from an ACP shutdown, compared to less than 1% for all other operators in the study.

ACP's impact on subscriber growth rate

The loss of the ACP could also have an impact on the rate of broadband subscriber growth.

Preliminary inputs suggest that Charter's faster subscriber growth "could all be attributable to ACP," Chaplin noted. "If this analysis proves correct, it will raise questions about the benefits Charter should be seeing from faster footprint expansion and from a more aggressive push in wireless."

Chaplin noted that New Street is reserving judgement on that point until it gets access to a new set of survey results that will be used to update its model.

Confidence, Chaplin added, is low that the loss of ACP will "wipe out Charter's revenue and EBITDA growth in 2024. "We will have greater conviction in all inputs and the conclusions we draw from the framework once we see the survey results."

Related:New ACP extension bill would fund program with $7B

New Street intends shortly to publish a similar report on the potential impact on wireless carriers should the ACP be shut down.

That analysis will help to provide a fuller picture of ACP-related risks. Of the 22 million ACP recipients, 9.9 million (45%) are for fixed/wireline services, 12.1 million (54%) are for mobile and 200,000 (1%) are tied to fixed wireless access or satellite.