Those still questioning why cable operators need to boost their fiber builds right now should look at the latest financial results reported by the most prominent U.S. cablecos.
In the third quarter of 2023, the seven biggest U.S. cable operators added a combined total of only 4,800 broadband subscribers, one of their poorest showings ever, according to data compiled by Leichtman Research Group, Inc. (LRG). That’s less than one-tenth the already paltry increase of 45,000 subs in 2022’s third quarter and follows a meager gain of just 10,000 data customers in this year’s second quarter.
Perhaps even more concerning for the major cablecos is that only one of the top seven U.S. operators reported a data subscriber increase in the summer quarter. That lone operator, Charter Communications, added a healthy 63,000 broadband subs from July through September. Still, that increase barely offset the combined losses reported by Comcast, Altice USA, Cable One, and Breezeline. LRG also estimated that privately owned Cox Communications and Mediacom, which do not report their results publicly, combined for no gain.
Comcast lost 17,000 residential data subs in the third quarter. As a result, the nation’s largest cableco has shed 34,000 consumer broadband customers over the first nine months of the year, its worst nine-month performance ever.
Craig Moffett, a principal analyst at Moffett Nathanson Research, wrote in a late October report on the company’s third-quarter results, “Comcast’s YoY [year-over-year] broadband subscriber growth has now dropped below zero -- it stands at -0.2%.” Putting a bright face on the loss of subscribers, he argued that “the pattern confirms the slowing-to-zero-ish soft landing that the bulls have hoped for (rather than the falling-through-zero freefall that the bears had predicted).”
As for Charter, it achieved its broadband customer gains in the quarter mainly by focusing on rural areas. The nation’s second-largest cableco aggressively pursues an “edge-out” strategy in those areas, primarily building new fiber networks adjacent to its legacy HFC infrastructure.
“Charter’s still-solid broadband results are a direct result of their footprint expansion strategy,” Moffett wrote in a late October report on the company’s third-quarter earnings. He noted that Charter “added 31,000 new customer relationships in its rural edge-out markets,” ending September with “108,000 total customer relationships and penetration of 34.3% of homes passed.”
Telco’s fiber push
In contrast to most of the big cablecos, AT&T, Verizon, Frontier, and the other four biggest U.S. telcos, they added 525,000 fiber-to-the-premises (FTTP) subscribers in the third quarter, boosting their total to 19 million. Those gains allowed them to counter the loss of 520,000 DSL customers, giving them an overall net increase of 5,000 broadband subs. This compares favorably with a general loss of 100,000 broadband customers in the year-ago period.
“That’s been the story quarter in and quarter out,” said Bruce Leichtman, president and principal analyst of LRG Research. “As a whole, they [the telcos] are not expanding. [But] they are getting higher revenue subscribers.”
AT&T enjoyed another robust quarter, netting 296,000 new fiber customers to beat the estimates of most Wall Street analysts. With these latest gains, the nation’s biggest telco closed September with more than 8 million FTTP customers, double its number less than four years ago.
“Our investments in best-in-class 5G and fiber connectivity fuel our growth engine. We’re gaining profitable customer relationships and becoming more efficient,” boasted AT&T CEO John Stankey, speaking on the company’s third-quarter earnings call in mid-October. “That’s why you see that business scaling so nicely.”
Similarly, Frontier enjoyed a healthy surge in fiber subscribers during the summer quarter. It added 75,000 new fiber subscribers, boosting its total to nearly 1.8 million and fueling substantial revenue gains. That’s up from Frontier’s year-ago pickup of 64,000 FTTP subscribers.
“Everything important is accelerating” at Frontier, Jonathan Chaplin, a research analyst at New Street Research, wrote in a research note last month. “This was the quarter where things were supposed to be moving in the right direction, and they did. Fiber broadband subs accelerated, fiber ARPU [average revenue per user] accelerated, fiber segment and consolidated EBITDA [earnings before interest, taxes, depreciation, and amortization] accelerated.”
As for Verizon, it added 69,000 residential Fios Internet customers in the quarter, up from 58,000 in the year-ago period and higher than the 57,000 expected by financial analysts. As a result, the telco now boasts nearly 7 million fiber subscribers, second only to AT&T.
“Fios remains a coveted high-quality service and we continue to take share and deliver strong numbers, even in a lower mover environment,” said Verizon Chairman and CEO Hans Vestberg, speaking on the company’s third-quarter earnings call in late October. “I love our strategy.”
Due to such hefty subscriber gains, FTTP networks now account for well over half of the seven biggest telcos’ 30.7 million broadband sub count. With their fiber lines passing slightly more than 51 million U.S. homes, the telcos have achieved an FTTP penetration rate of about 37% so far, according to LRG.
Market share shift
These latest developments come after our most recent Fiber Broadband Association study about broadband market share shifts, which showed that FTTP is gaining fast on HFC. While cable’s overall share of the U.S. broadband market is still about double that of fiber, fiber is coming on strong.
Indeed, fiber enjoyed a net gain of 15 market share points among the 17% of consumers changing Internet providers over the past two years, according to the study. In stark contrast, cable suffered a loss of 14 share points over the same period.
Further, when the survey asked respondents which Internet service offered the highest speeds and most excellent reliability, fiber broadband easily topped the charts, swamping second-place cable by a whopping 41% (65% fiber to 24% cable).
“This level of consumer preference represents a strong indicator that fiber will continue to increase in share over time, especially as fiber availability continues to increase,” the study notes. “The loss for cable comes even though cable modems have about twice the current coverage as FTTH, and the fact that many cable companies have been upgrading to DOCSIS 3.1 or beyond and moving fiber deeper into the network.”
It’s no secret why fiber continues to be on such a tear. Most notably, fiber providers keep rolling out faster broadband speeds and better service than their cable rivals.
One prime example is Ziply Fiber, which launched a symmetrical 50-Gig service across its entire fiber footprint in Washington State, Oregon, Idaho, and Montana. The new service represents a huge bump from the balanced 10 Gbps service that the fiber provider introduced in April.
In an interview with Light Reading last month, Ziply Fiber CEO Harold Zeitz acknowledged that most consumers don’t really need or want such blazing-fast data speeds―at least not yet. But, noting that about 15% of Ziply’s new customers each month choose a multi-gig tier, he argued that there’s a growing market for ever-higher speeds.
“It’s not something for everyone, clearly,” Zeitz said. “But some customers want the fastest and best, and they’ll pick 50 [Gig]… They are telling us there’s a demand for more speed.”
To cite another example, Google Fiber is now seeking businesses, non-profit organizations, and educational institutions to test a symmetrical 20 Gbps service in four more markets―Austin, Texas; Huntsville, Alabama; Raleigh-Durham, North Carolina; and Salt Lake City, Utah―after launching a 20 Gbps test in its Kansas City, Missouri home market. The move comes after Google Fiber began deploying a symmetrical 8 Gbps service in several other markets earlier this year.
Another big driver behind FTTP’s surge is that it generates more revenue for operators because they can charge more for fiber-delivered broadband.
“Operators need to look at this as a revenue opportunity,” OpenVault CEO Mark Trudeau told Light Reading in an interview last month. “You’re crazy not to reach out to those customers and try to get them to upgrade. They’ll be happier, and you’ll get more revenue.”
As I noted in my column last month, that explains why CableLabs, at the behest of its members, is now moving forward with two new working groups on FTTP and XGS-PON tech standards for cable. CableLabs also staged a webinar about 25G PON for its members in late October.
“We continue to be focused on DOCSIS 4.0 technology solutions as operators begin deployments, but now we’re also getting laser focused on FTTP,” Curtis Knittle, vice president of wired technologies at CableLabs, explained in a recent blog post. In an interview, Jon Schnoor, lead architect at CableLabs, reiterated that point, calling the FTTP/PON effort “a very high priority going forward for CableLabs and the industry in general.”
The Fiber Broadband Association is excited to witness accelerating momentum toward FTTH by CableLabs and the broader cable industry. It’s an excellent win for subscribers and will help ensure the retention of market share and growth in subscriber adds for these fiber broadband providers. And with that, we wish everybody across this fascinating, fast-changing industry the best as we head into a new year.
Gary Bolton is the president and CEO of the Fiber Broadband Association.