Cable Broadband Sub Gains Expected to Last
Most broadband subscribers picked up by cable ISPs during the COVID-19 pandemic are likely to remain, even without Keep America Connected (KAC) pledge conditions and after people return in bigger numbers to workplaces and schools, experts told us. It's less clear whether a subset of those, brought in by KAC, will stay. Comcast and Charter Communications expect a return to growth like they had pre-pandemic.
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"A lot of the customer gains we realized came from former DSL customers who needed faster speeds to handle the work from home and study from home environment," Mediacom said in a statement to us. "Now that these customers have gotten used to these faster speeds, we think it is going to be difficult for them to step backwards in terms of performance." The cable operator is planning future network upgrades "around keeping all these new customers active."
KAC was part of 2020's broadband sub growth, and the main driver was the pandemic itself, said Leichtman Research Group President Bruce Leichtman. COVID-19 created a "pull through" of people adding fixed broadband service who wouldn't otherwise have, due to the need for working or schooling from home, he said. Many mightn't have had any broadband service before or relied on mobile service, he said. He said levels of smartphone-only subscriptions are declining: "Smartphone doesn't suffice for all the needs of online."
New customers that fixed broadband providers gained in the past year "are staying," Leichtman said. Providers industrywide indicated this year will most likely bring growth rates like those in 2019, he noted.
Broadband providers of all stripes saw subs spike due to the pandemic, and growth of demand will moderate somewhat, said wireless consultant Jeff Kagan. The future likely will have people working a mix of from home and at their employer, meaning residential connectivity demand won't decline, he said: "It's just the new level."
What happens with cable ISP sub numbers after KAC depends on how cablers count those numbers and whether low-income customers are in those counts, said CCG Consulting President Doug Dawson. "If those customers are included, then at some point, one has to think the subscriber numbers will drop," he said. "A lot of these temporary products are for students, and those numbers should drop as students return to the classroom."
In Altice's Q4, announced Wednesday evening, it added 142,100 broadband customers for the year. Its broadband numbers were flat for the year minus KAC and New Jersey's executive order prohibiting cable and telecom providers terminating internet and voice service due to nonpayment until after the public health emergency is over. Broadband subscriber numbers were "the weak spot" in Altice's Q4, MoffettNathanson's Craig Moffett wrote investors. The stock closed down 8.4% to $34.65 Thursday.
In a call with analysts late last month, Comcast Cable CEO Dave Watson said his company's broadband growth came from taking market share from DSL, wireless and other providers, and it expects low churn. He said that due to the pandemic, 2020 was "a unique moment," and Comcast's growth should be more comparable to what it had in 2019. CEO Tom Rutledge said in a separate call that Charter Communications has been on an accelerating growth rate for broadband, which should continue this year and "well into 2022." He said Charter expects "a more normal kind of connect and disconnect rate and more normal net adds," consistent with 2019 growth.