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Cable One isn't feeling T-Mobile's FWA heat yet

Research indicates that T-Mobile's fixed wireless access (FWA) service skews heavily to rural markets. But Cable One, a cable operator with almost exclusively rural coverage, has yet to cross swords in a significant way with the relatively new home broadband service.

"Fixed wireless is certainly something that we have our eye on," Julie Laulis, Cable One's chair and CEO, said late last week on the company's first quarter 2022 earnings call.

The overlap with T-Mobile "is actually quite small," she said. "But it doesn't mean that they won't get [to Cable One] markets over time … It's not a concern right now for us. Quite honestly, my assumption is that [FWA] customers are coming from more urban areas."

Laulis also seems to agree with analysts who believe that both T-Mobile and Verizon will need to be judicious in terms of how many FWA subscribers they allow on the network and where they allow them to ensure they don't overload or bog down the networks serving their core mobile businesses.

Cable One should have a pretty good feel for the impact of FWA in rural markets given its investments in two fixed wireless Internet service providers (ISPs) – Wisper Internet and NextLink.

Fiber focus

Cable One execs were also asked to address the fiber competition they are seeing from telcos, including those that have been launching multi-gigabit services.

Laulis said Cable One has yet to see much fiber-building activity from AT&T or CenturyLink (Lumen) but noted that the operator is seeing some from Frontier Communications. However, Frontier overlaps with only a small part of Cable One's territory compared to AT&T and Lumen.

Steven Cochran, Cable One's CFO (he is set to exit the company later this year), suggested that one reason why Cable One hasn't seen a lot from AT&T is because the telco has focused a portion of its fiber-to-the-premises (FTTP) activity in areas where fiber-to-the-curb was built.

"Those were heavy suburban areas when they did that," reducing the exposure to Cable One's footprint, he said.

But overall, FTTP overlap with Cable One is on the rise. The company estimates the overlap to be about 20%, up from an estimate of 14% about a year ago. Cochran said the increase is due to upgrade activity paired with "a little bit of new market entrance."

Financial snapshot

Cable One posted Q1 2022 revenues of $426.7 million, up 25% year-over-year. When excluding revenues from the acquisitions of Hargray and Cable America operations and the financial impact of the deconsolidation resulting in the new Clearwave Fiber joint venture, total revenue was up 4.2%.

Cable One added 11,000 broadband subs organically in the quarter, beating an expected gain of 2,000. Although Cable One's broadband growth is slowing from the earlier stages of the pandemic, its quarterly year-over-year growth rate of 4.8% is still better than other US cable operators, MoffettNathanson analyst Craig Moffett explained in a research note. Meanwhile, Cable One's broadband penetration rate, at 39.6%, remains the US cable industry's lowest.

However, Moffett noted that he is anxious about Cable One's broadband average revenue per user (ARPU) of $79.96, which remains the highest in the industry compared to Altice USA ($75.01), Comcast ($67.88) and Charter Communications ($64.40).

"While Cable One’s lower broadband penetration portends a longer runway for unit growth, their higher broadband ARPU remains a concern, particularly in light of what is now a widespread bear thesis that cable broadband prices will need to come down," Moffett explained.

Cable One also lost 22,000 video subs, worse than an expected loss of 16,000, with video penetration now down to just 8.9%. Cable One remains indifferent to video – it offers a new streaming service via a deal with MobiTV that's now in TiVo's hands but is laser-focused on its higher-margin broadband business.

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— Jeff Baumgartner, Senior Editor, Light Reading

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