(Bloomberg) — Cable companies have long had to contend with consumers ditching their TV bundles in favor of streaming. But Comcast Corp. and Charter Communications Inc. are also losing subscribers on another front: broadband.
Most read from Bloomberg
Cable providers could lose up to 481,000 internet customers in the third quarter, according to estimates from SNL Kagan and Bloomberg Intelligence, the worst decline ever for the industry. The expiration of a government subsidy program and phone companies signing up home Internet customers for wireless connections help explain the losses.
“Cable risk is unlikely to subside anytime soon,” Bloomberg Intelligence analyst Geetha Ranganathan wrote in an Oct. 10 note. According to Bloomberg estimates, Verizon Communications Inc., T-Mobile US Inc. and AT&T Inc. expected to report adding more than 900,000 broadband customers, including home wireless and fiber, in the third quarter.
The winners are phone companies selling fiber optic connections and wireless home services powered by their 5G networks. T-Mobile is selling wireless home Internet plans for $50 a month, compared to the average cable Internet bill of $65 to $70 — an attractive proposition that will buoy the carriers when they report third-quarter results next week.
T-Mobile added 406,000 home broadband subscribers last quarter and is expected to add another 401,000 subscribers in the third quarter, the average of Bloomberg estimates. Analysts predict Verizon will add 223,000 home wireless customers. AT&T, which started the fixed wireless network a little later, is expected to add 147,000 fixed wireless subscribers in the third quarter.
Cable companies such as Charter, the largest pay-TV provider, depend on three major industries for revenue: video services, Internet access and wireless telephone services. Subscribers to two of these businesses, video and broadband, are shrinking. Comcast also gets revenue from NBCUniversal, its film, TV and theme park businesses.
Charter is most vulnerable to the end of the government’s Affordable Connectivity Program, which offered subsidized internet access during the pandemic. The Stamford, Connecticut-based company had about 5 million such subscribers, according to Bloomberg Intelligence. It is forecast to lose 248,000 internet customers when it reports quarterly results on November 1, its fourth straight decline. Philadelphia-based Comcast is expected to shrink by about 128,000 customers, a year-and-a-half loss.
The good news for cable providers is that their broadband losses are expected to start leveling off next year, alongside slowing growth for fixed wireless networks. Wireless carriers know that they will eventually face capacity limits on their networks. Some, like AT&T, are focusing on building a temporary subscriber base with fixed wireless networks while investing in fiber optic lines.
Speaking at Mobile World Congress in Las Vegas last week, Laurent Therivel, CEO of US Cellular Corp., said residential wireless offerings themselves will not be profitable in the long term unless carriers change their business models and use their networks more efficiently . That’s because home wired and wireless users use more than 20 times as much data as the average mobile customer, he said.
Acquiring more spectrum could give carriers room to grow fixed-wireless businesses, but availability is scarce. They have already secured as many licenses as possible in several spectrum auctions between 2020 and 2022, and no more can be sold until Congress renews the Federal Communications Commission’s authority to hold spectrum auctions.
Spectrum access will keep Dish Network from joining the fight against wired and wireless Internet, but it has a proposal that doesn’t require an auction: The company already has access to the bandwidth it uses to provide satellite TV services. The company is seeking regulatory approval to also use these frequencies for broadband internet at home.
“We really hope that the FCC will initiate this process and hopefully address the growing demand for fixed wireless networks,” Svetlana Matt, director of public policy at Dish Network, said at Mobile World Congress. “Fixed broadband is one of the solutions” to fill service gaps, she said.
While the major carriers are all expanding their fiber footprints, infrastructure remains far behind what their cable counterparts offer. AT&T reaches roughly a third of the country with fiber, while T-Mobile is barely 2%, according to MoffettNathanson analyst Craig Moffett.
“The only conceivable way you can achieve meaningful scale is to buy Charter,” he said of the wireless companies. “They seem to be leading the market in a direction that is a dead end for them.”
Cable companies now say they are well prepared for more competition from carriers.
“We have the most connected broadband customers in the country,” Comcast CEO Brian Roberts said at the Bloomberg Screentime conference last week. “We are going to have a great year this year, according to all the analysts. Perhaps even the best year in the company’s history.”
Most read from Bloomberg Businessweek
©2024 BloombergLP
