Charter Chief Shrugs Off 5G Threat
Despite Wall Street's concerns, Charter Communications chief Tom Rutledge is not staying up late at night worrying about the competitive threat that 5G technology might pose to large cable companies like his.
Speaking at the Goldman Sachs Communacopia Conference in New York on Thursday, Rutledge, chairman and CEO of Charter Communications Inc. , poohpoohed the notion that 5G fixed-wireless systems will dent the cable industry's booming broadband business. Echoing comments made by Charter CFO Chris Winfrey at a similar financial conference last week, Rutledge argued that cable's new Full Duplex DOCSIS spec will more than counter any tech advances that the telcos might achieve with 5G. (See 5G Speeds Can't Match DOCSIS 3.1, Charter CFO Says and 5G Fixin' to Become 'Largest Existential Threat' to Broadband Providers – Analysts.)
"I think ten years from now, we'll have 10-Gig symmetrical [service] everywhere," he said. "We'll have a superior network everywhere."
Besides delivering faster data speeds than 5G, Rutledge argued that cable industry's HFC networks will also offer better economics than the telco industry's planned fixed-wireless systems. Citing Verizon Communications Inc. (NYSE: VZ) as an example, he said the carrier's plan to bring 5G service to 30 million homes outside its fiber footprint over the next few years basically calls for a costly overbuild of incumbent cable systems.
Verizon's planned fixed-wireless network is "essentially a cable TV system or fiber network [running] to a radio on a pole," he said. "It really is a cable system with a more expensive drop."
As has been previously reported, Charter, the second-largest US cable operator and broadband provider, is ramping up deployment of DOCSIS 3.1 to deliver 1-Gig downstream speeds throughout its 50-million-home service territories by the end of this year. Similar to Comcast and several other large US MSOs, Charter is also looking to leverage the new Full Duplex annex of D3.1 that will support symmetrical speeds of up to 10 Gig over cable's widely deployed HFC networks. (See Charter Goes on Big Gig Spree .)
Like Winfrey did last week, Rutledge also made the case that cable is well positioned to support telco 5G networks as a network partner, given the industry's access to fiber (for backhaul), rights-of-way, power and spectrum. He noted that Charter alone already has "25 million small cells out there in the form of WiFi radios" in customer locations and could easily turn those radios into hotspots. "We are in the small cell business today," he said.
Fresh off Charter's nationwide launch last week of its Spectrum Mobile service supported by an MVNO deal with Verizon Wireless, Rutledge expounded a bit on the MSO's wireless ambitions. He said Charter, which is selling Spectrum Mobile in two tiers -- Unlimited (at $45 per line) and By the Gig ($14 per gigabyte) -- aims to undercut the incumbent players' pricing by up to 50% while still making a profit. "So consumers will get significant savings and we will still have margins in the wireless business," he said. (See Charter's Spectrum Mobile Goes Full Market.)
Acknowledging that Charter also tried to strike an MVNO deal with Sprint earlier, Rutledge said the cableco remains open to similar arrangements with other carriers. "There's nothing exclusive about our deal [with Verizon] to do MVNOs," he said. "There's no reason why that couldn't be a good deal."
Questioned about the company's product profit margins, especially in the fiercely contested pay-TV business, Rutledge said that's not his paramount concern. He said Charter cares more about making a profit on its "customer connection relationships," not any particular type of product. Nevertheless, he predicted that the video business will keep producing returns for Charter for years to come even as OTT video rivals keep encroaching on its turf.
"I think we'll continue to make margins on video content for a long time," he said. Even though "the traditional [business] model is gradually declining," he noted, Charter will cope by constantly finding new ways to hawk content to its customers, whether it's through distribution deals with the OTT players, its own streaming packages, mobile video services or other means.
— Alan Breznick, Cable/Video Practice Leader, Light Reading