Cable Maintains Q2 Broadband Lead as Pandemic Gains Subside

While the large-scale gains seen during the peak of the COVID-19 crisis have subsided, cable MSOs retained their broadband lead in the second quarter.

Kagan, the media research group within S&P Global Market Intelligence, said in its latest report what while “cable subscriber growth in the first half was down from the outsized gains of the pandemic-boosted demand for connectivity,” the segment still fared well.

In the broadband race, cable operators have maintained their lead over telcos, offering up to 1 Gbps and above speeds over their existing hybrid fiber coax (HFC) networks.

In all, cable operators added a total of 1.9 million residential and commercial net subscribers, accounting for 96 percent of broadband customer gains across the U.S. cable, telco and satellite segments in the first six months of 2021.

Look at the table below to get a feel of how the largest cable operators performed in broadband during the second quarter. 

Comcast, Charter Lead Tier 1 Pack
Charter and Comcast continue to lead the pack in cable’s broadband race, adding 400,000 and 354,000 broadband customers during the quarter.

While Charter took the lead over Comcast every quarter, the overall growth illustrates that cable is still the dominant broadband source. Tom Rutledge, chairman and CEO of Charter told investors that broadband market expansion reflects three main factors: housing growth, population growth, and adoption during its second-quarter earnings.

“The big issue in general adoption is more of a digital literacy issue than it is a cost issue,” he said. “It’s continuing to improve in terms of market adoption because of the way people can use the tools on the Internet today. So, I think you have a continuous march of broadband adoption right up to occupied housing over the next five years. And so you have that, and then you have our ability to have a superior service with a capitally efficient ability to upgrade that service continuously.”

Likewise, Brian Roberts, CEO and chairman of Comcast, told investors during the cable MSO’s second-quarter earnings call that as it added more broadband subscribers, the cable MSO saw a reduction in customer churn.  

“Our broadband connect activity is healthy, and churn improved for the 14th quarter in a row,” he said. “We hit the lowest second-quarter churn rate in our company's history. Based on our first-half results, combined with the strength we see in current trends, we now expect total broadband net additions for 2021 to increase mid-teens relative to 2019.”

Looking forward, Roberts told investors about how it has continued with symmetrical speed trials via its DOCSIS network.
“With upstream comprising today less than 10 percent of total broadband usage, even during a peak, we don't have a consumer use case for this technology capability yet, but the strategy for our network is to plan,” he said. “We're investing in architecture that lets us go beyond where consumers are, and we can do all of this in a way that won't affect the capital intensity ratios we currently enjoy.”

Not far behind Charter and Comcast is Cox. Though the cable MSO is now private, it still added more than an estimated 50,000 subscribers.

Another notable cable MSO that’s poised for growth is Altice USA. Unlike Charter and Comcast, Altice has been on a two-part broadband strategy: building out FTTH and upgrading its HFC plant to DOCSIS 3.1.

Altice hit a snag in broadband growth during the second quarter due to what it said was "accelerated move churn" in its New York, New Jersey, and Connecticut markets. Although it did gain 35,000 new customers from its acquisition of Morris Broadband, it only added 200 new customers, down from the 70,000 new broadband customers it added in the second quarter of 2020.  

“We reported an organic net loss of 12,000 residential customer relationships, excluding Morris Broadband's acquisition, which separately added 35,000 unique customers since we closed this acquisition in the quarter,” said Dexter Goei, CEO of Altice USA. “To provide some context, the second quarter is usually seasonally weaker for us. But as I flagged earlier, we did see a noticeable pickup in new churn as markets are reopening more widely. This includes customers leaving our suburban footprint around New York and going back to New York City, which, remember, is outside of our residential footprint.”

Regardless of the setback, Altice USA is moving forward with its FTTH plans. The MSO said it’s on target to reach 500,000 locations with FTTH in 2021. Altice USA equipped 1 million homes, or about 20 percent of its Optimum footprint, with FTTH service at the end of the second quarter.

“We are still on track to pass half a million homes this year with a material pickup right now in the summer months,” Goei said. “Our penetration of fiber passings is now up to 4.3 percent compared to just 1 percent in the second quarter of 2020.”  

He added that more of its customers are signing up for 1 Gbps services. “About two-thirds of new fiber subscribers are taking our symmetric one gig product. We are focused on making multi-gig speeds available as soon as possible and should start marketing fiber more actively in the next few quarters,” Goei said.

Tier 2 Cable Continue Speed, Footprint Transitions

But the Tier 1 cable operators weren’t the only ones that made progress in the second quarter. Regional cable operators Mediacom, Cable One, and WOW! saw sizeable gains during the second quarter.

Mediacom, which reported that it added 14,000 subscribers, ended the quarter with a total of 1.5 million broadband customers.

Cable One reported that residential data revenues rose to $208 million. The cable MSO has enhanced its broadband footprint with targeted acquisitions, including Hargray and earlier ValueNet Fiber. By acquiring Hargray, Cable One gained an additional 110,000 residential data primary service units (PSUs). Most of these PSUs were located in Hargray’s Anniston Exchange.

“With the close of the Hargray transaction, we now compete in approximately 24 percent of our markets with Internet service providers that offer residential broadband download speeds of 100 megs or higher,” said Julie Laulis, president and CEO of Cable One. “While still a relatively low competitive profile, we continue to run our business as if every market is highly competitive, offering award-winning products and services and maintaining a local focus on customer needs.”

At Wide Open West, the strategy is to lead with broadband. The cable MSO increased its broadband subscriber base for the seventh consecutive quarter since launching its broadband-first system in early 2020. HSD Revenue totaled $156.4 million, up to $19.1 million, or 14 percent, compared to the second quarter of 2020.

Teresa Elder, CEO of WOW!, noted that most of its customers are only buying broadband services.  

“Another great indicator for the success of our broadband-first strategy is that we have maintained a high selling rate of 87 percent of new subscribers purchasing our HSD-only service,” she said. “And not only is broadband becoming more important, but customers require higher data speeds.”

She added that during the second quarter, “89 percent of new customers purchased speeds of 200 meg or higher, which increased for the third quarter in a row, reflecting the underlying growth in demand for high-speed data.”

By selling off some of its systems in Cleveland and Columbus, Ohio, WOW! can pursue more "edge-outs, expanding into greenfield areas and exploring additional business services opportunities.

Although WOW!’s network is primarily HFC-based, Edler said, “we may be looking at more fiber just because of the economics of it now.”

Atlantic Broadband, which only raked in nearly 7,000 new broadband customers in the quarter, enhanced its growth targets by purchasing WOW!’s Columbus and Cleveland, Ohio broadband systems. The acquired broadband systems passed approximately 688,000 homes and businesses in Cleveland and Columbus and served around 196,000 Internet, 61,000 video, and 35,000 telephony customers.

“This acquisition significantly advances our market expansion strategy in the United States,” said Philippe Jetté, President and Chief Executive Officer of Cogeco Communications.

To keep up with the first quarter broadband earnings, make sure to check out our complete broadband report: From AT&T to Shentel: Tracking the Top 17 Broadband Service Providers in Q2 2021.