Internet, mobile dominate cable's Q1

The cable industry's first quarter results for 2019 are in, and while Internet continues to be a talking point, mobile is showing momentum. During the first quarter, Comcast's (NASDAQ:CMCSA) cable divisions ...

Bullish outlooks from Charter, Rogers
Bullish outlooks from Charter, Rogers

The cable industry's first quarter results for 2019 are in, and while Internet continues to be a talking point, mobile is showing momentum.

Comcast

During the first quarter, Comcast's (NASDAQ:CMCSA) cable divisions delivered the highest EBITDA growth in over a decade. The company stressed the fact that 80% of customer interactions are completed digitally and that during the quarter it achieved its lowest service call rate, highest first call resolution rate and shortest repair times on record.

"These operational achievements are a huge part of the roadmap," said Brian Roberts, Comcast chairman and CEO.

Roberts noted that customer demand for speed and data usage continues to increase with the median broadband home using 200 gigabytes (GB) of data per month. This represents an increase of 34% year-over-year.

The company's residential video subscriber base declined 1.7% year-over-year, including net losses of 107,000 during the quarter.

"Video continues to play an important role in the bundle," Roberts said. "We remain focused on driving video on segments we can serve profitably, leading with our best-in-class X1 platform for customers who want a premium experience and the most content choices."

Xfinity Mobile generated $225 million of revenue compared to $185 million during last year's first quarter. The quarter ended with 1.4 million lines, including 170,000 net additions. Most customers choose the "By the Gig" plan, and the company said there is a significant uptake of "Bring Your Own Device."

Charter

Charter Communications (NASDAQ:CHTR) added 425,000 Internet customers and 176,000 mobile lines during the first quarter. The median monthly residential data usage was more than 200 GB per customer. Comparatively, when looking at the average usage by customers who do not subscribe to Charter's video product, usage climbs to more than 400 GB per month.

80% of Charter's Internet customers are in packages that deliver 100 Mbps of speed or more, and 30% subscribe to packages of 200 Mbps or more.

"We are seeing strong demand for our Ultra product, which delivers 400 megabits, and we have gigabit service available everywhere," said Thomas Rutledge, Charter's president and CEO.

Charter currently only penetrates 50% of its passings with its Internet product. "We view that as low, relative to our potential regardless of market conditions, given the importance of our connectivity services and the way we price and package them, and the fact that we have a faster, better and cost-efficient pathway to offer multi-gigabit wireline and wireless speeds," Rutledge.

Rutledge pointed out that Charter launched DOCSIS 3.1 in 14 months across its footprint at a cost of $9 per passing. Spectrum Mobile is currently sold through Charter's MVNO agreement with Verizon, but Charter is testing the possibility of broadening the mobile capabilities of its network using dual SIM technology with unlicensed and possibly licensed spectrum.

"We are doing experiments with the capability of moving traffic in an efficient way where it's economically viable to do so, which means that whatever capital investment we would make would be offset by a reduction in MVNO cost, and therefore would be a higher return than … we would get by just (MVNO)," Rutledge said.

Charter is investing in other new products, including cloud DVR functionality for streaming, and a security, privacy and control product to accompany its core Internet product. On the business side, Charter launched SD-WAN products nationally which will drive better selling into multisite customers.

On the one hand, Rutledge noted that Charter remains "financially indifferent" to what is going on in the video business. He pointed out the challenges of video, including the price of the big bundle and the prevalence of password sharing, yet in the next breath said that the company will continue to provide video to those who want to buy that service. But then he went back to say that video is going to decline; the question is how fast.

"We think that video is a driver for us in terms of customer creation. But it's prioritized in our internal operational tactics appropriately, based on everything I just said," Rutledge said.

Rogers

Rogers Communications (TSX:RCI.A) in Canada focused a lot on mobile, given that the company just came through a spectrum auction where it acquired 52 of the 64 available blocks of 600 MHz spectrum, for $1.71 per MHz per pop. Rogers is in the process of upgrading network equipment with new radios, so it is prepared to deploy the spectrum when it is available next year, and is trialing smart city applications as part of a partnership with UBC.

With Ericsson (NASDAQ:ERIC), Rogers has completed a 5G connection test in downtown Toronto. Rogers also is in the process of signing agreements with real estate partners to deploy small cells and is implementing a unified fiber plan to power 5G in city centers.

For Rogers, Internet penetration grew for the 15th consecutive quarter. All customers have access to 1 Gbps speeds, and the company's DOCSIS roadmap leads to upload and download speeds of up to 10 Gbps across the footprint.

Rogers says its IPTV platform, Ignite TV, is making "steady progress" and receiving "positive" feedback from customers. The plan is for Ignite to eventually be the platform that connects, monitors and secures everything in the home to enhance the customer ecosystem.

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