Subs Hang Up on Cable Landlines, But Product Continues
Though cable operators are shedding landline voice subscribers, experts said they don't see disconnecting that offering in the foreseeable future since it drives some revenue and reduces churn. The landline subs losses aren't a cable-only issue, said industry consultant Steve Effros. "Everybody is losing landline customers." Comcast and Charter are gaining sizable wireless subscriber bases, he said.
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Cable "won't cut the phone cord" on the service because a segment of users, usually older, still demand it, but it's no longer the priority that grew Comcast and Charter into the biggest U.S. landline providers, said Leichtman Research Group President Bruce Leichtman. Cable's landline voice sub losses are far smaller than those of telcos, he said. He said landline voice isn't an emphasis for cablers, and it's an overall category in decline. With Comcast and Charter focused on their mobile offerings, "it's a little bit" of a "different prioritization," he said. Landline was never core to cable operators since it generated modest revenue, he said: "It's really glue for the rest of the bundle."
Comcast ended 2020 with 9.6 million residential voice customers, down 900,000 from five years before, while Charter ended the year with 9.2 million, down 1.1 million, per their annual reports (here and here). Altice said it ended 2020 with 2 million residential telephony customers, down 600,000 from five years ago. Meanwhile, Comcast ended 2020 with 2.8 million active wireless lines and Charter with 2.3 million. Comcast didn't comment about long-term plans for their landline businesses.
Charter wants customers to choose it "as their full service connectivity provider and that can include Broadband, video, wireline voice and mobile service. We have over 10 million wireline voice customers." It has "been adding wireline voice customers on the" small and medium-size "side of the business where it is a popular bundle with broadband, and voice service continues to be an important offering for enterprises."
Cable One phone subscriptions declined over time, but it has no plans to discontinue offering the service, said Senior Vice President-Technology Services Ken Johnson in a statement. "We continue to have a number of customers across our footprint who enjoy the convenience and reliability of a landline, so we will continue to provide this service to meet that need."
When northeast Pennsylvania's Adams Cable Service launched VoIP service 15 or so years ago, "people said, 'Why? People aren't using landlines,'" recalled General Manager Wendy Hartman. But the rural, mountainous territory means residents often couldn't rely on cell service, and older residents often prefer landlines, she said. Mobile reliability has improved there, but "I still use my landline," Harman said. She said Adams has had a slow erosion of landline subscribers, but it has no plans to end the service.
Landline voice "still has a long glide path," Armstrong Cable Vice President-Cable Marketing Dave Wittmann told us. "We are nowhere near thinking it could be end of life." He said smaller cablers often have more rural or older customer bases, where wireless isn't as prevalent or doesn't work as well. He said Armstrong's landline voice numbers have been on a slow decline, but the rate of decline has started to level off and could point to a plateau.
Atlantic Broadband, with 148,000 U.S. telephony customers at the end of FY 2020, had some year-over-year growth due to residential and business growth that was somewhat offset by more mobile wireless penetration and some unlimited offers from mobile wireless operators, it said. Leichtman said Atlantic's changing strategy deemphasizing the cable bundle will likely mean the end of its telephony customer growth. Atlantic emailed it introduced internet-focused packaging and a streamlined pricing model as it no longer offers video-only or phone-only packages. “Customers assemble their own packages from available internet, video and phone offerings rather than by subscribing to pre-configured bundles,” it said. “Our 'internet first' approach has already produced significant overall customer growth since it was introduced in January, and we see a continued place for phone in our service offerings.”
Being part of the cable bundle has likely helped slow the loss of landline telephony customers, and when that bundle splits for any reason -- such as people cutting the cord on cable TV -- other services, especially landline telephony, are jeopardized, said Dell’Oro Group Vice President Jeff Heynen. He said landline still boosts cable revenue per subscriber and helps reduce customer churn, though in smaller numbers than in years past, so cable's unlikely to ax it. Maintenance and equipment costs to operators of continuing the service aren't significant since they have already paid for the necessary infrastructure, and most DOCSIS gateways used to supply customers with broadband also include ports to offer landline phone service, he said: "So they might as well continue to offer it until it reaches a point where subscriber numbers and revenue can’t offset any ongoing maintenance or services costs."
The subscriber declines have been mainly driven by wireless substitution, and cable operators pushing triple-play offerings of broadband, video and voice less than they used to, said Pivotal Research Group analyst Jeff Wlodarczak. Cablers instead are more focused on their wireless mobile virtual network operators, he said: "Bottom line, most consumers simply do not want fixed landline phone."