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Cable One splashes some cash on fixed wireless

Execs at Cable One revealed Monday that the company has made "small" investments in two yet-to-be-named fixed wireless companies tied to a plan by Cable One to deliver services to adjacent areas without having to front the costs of a wired network build.

Cable One recently closed those investments in two wireless ISPs as the company pursues ways to serve rural parts of the country that are in close proximity to the operator's geographic footprint, Steven Cochran, Cable One's SVP and CFO, said Monday on the company's first-quarter earnings call. Cable One started down this path prior to the pandemic, he added.

Cable One, which has rebranded as Sparklight, did not identify those investment targets on Monday's call and declined to name them when Light Reading inquired about them separately.

"We are agnostic on the technology that will delivery broadband into rural America," said Julie Laulis, Cable One's president and CEO, of the company's evolving fixed wireless strategy. "We consider [broadband] our space, so we'll do whatever it takes to bring people the connectivity that they need."

Cable One will be agnostic to a point, as the company has no interest in using satellite broadband or DSL to hit nearby areas, Cochran noted. He said the operator is particularly keen on using point-to-point fixed wireless technology to reach low-density areas where it's not economical to build a wired network.

"That leaves the opportunity to still provide those customers that surround our communities with a technology that still provides a broadband-level service," Cochran said, noting that Cable One has been pursuing this idea by deploying the technology itself in a handful of markets alongside making investments in companies that are already in the wireless ISP game.

Cable One didn't say exactly how much money it is plowing into the two fixed wireless companies, but Cochran said the company defines "small" investments as something in the range of $5 million to $20 million in EBIDTA.

According to a 10-Q filing for the period ended March 31, 2020, Cable One disclosed it made $7.8 million in investments in the first quarter and that, in March, it borrowed $100 million under a revolving credit facility for general corporate purchases, including for potential small acquisitions and investments.

Laulis also signaled that Cable One has an interest in upcoming spectrum auctions. Among those on the near-term horizon, the FCC plans to start one for the 3.5GHz CBRS band on July 23. Its auction for 280MHz of spectrum in the C-Band is still on track for December 2020.

Mulling tweaks to broadband data plans
As part of its response to COVID-19, Cable One has temporarily relaxed data overages for broadband service (Cable One typically charges $10 for each extra bucket of 100 gigabytes when customers exceed their specific data plan) and put all of its high-speed Internet customers on its unlimited data service, which typically sells for an additional $40 per month.

Cable One might change its data plans when it resumes its previous usage-based policies, but didn't indicate what specific changes it is considering.

"Given recent usage patterns we are also evaluating our existing data plans and anticipate adjustments when we resume our standard service," Laulis said, adding later that the vast majority of Cable One broadband customers do not go over the cable op's monthly data plans.

"The majority of people don't even know they exist because they stay comfortably underneath them," she said, adding that suspending data overages temporarily "was the right thing to do."

"We are evaluating our data guidelines every year. We are watching it all the time," Laulis said, noting that Cable One is still modeling how current data usage might influence possible changes to the company's data usage policies. "Clearly, we have a situation now where we don't mean to penalize customers for going over data plans."

Cable One doesn't disclose what percentage of its broadband base typically goes beyond their monthly data plan or are on the unlimited plan. However, about 20% of new broadband customers opt for the company's unlimited plan.

Still, analysts pressed the company about how the current relaxation of data overages has impacted the underlying financials of Cable One's broadband business. Cochran downplayed that impact, holding it's "not a huge amount of lost revenue associated with that" even though data usage on Cable One's network has climbed during the pandemic. He estimated the financial effect to be about $2 million in Q1, noting that effects of the relaxation of the overage policy only covered the second half of March. He said the financial effect would likely be in the $4 million to $5 million range when absorbed over a full quarter.

Q1 results snapshot
Total broadband net additions were 20,000 (with 18,000 coming from its residential service), easily beating MoffettNathanson's forecast of 13,900 adds. Cable One said net broadband additions in May have already exceeded those in all of Q1. Cable One's average revenue per user (ARPU) remained at in industry high of $72.86 among its publicly traded US cable operator peers, aided in part by standalone broadband pricing.

Cable One has largely ignored its pay-TV business as it continues to focus on high-margin broadband. Cable One's video base shrunk by another 11,000 subs, but the rate of loss is continuing to slow.

Total Q1 revenues were $321.2 million, up from $278.6 million from a year ago, boosted in part by $32.1 million coming from Cable One's acquisition of Fidelity Communications. Residential data revenues jumped 19.4%.

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— Jeff Baumgartner, Senior Editor, Light Reading

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