Cable, Fiber, and Fixed Wireless Revenue: What to Look for

• Operators prepare to report Q2 profits
• No wonder cable TV is still struggling, and the end of the American Affordable Communications Program (ACP) doesn’t help matters
• However, AT&T, T-Mobile and Verizon are expected to announce the addition of fiber and wireless networks

Analysts say that as they approach the release of their second-quarter earnings reports, cable providers are likely to face headwinds, while fiber providers, and in particular fixed wireless access (FWA), are faring well.

Analysts at Wolfe Research say the shaky cable industry “remains depressed” as cable company valuation multiples are “near all-time lows.”

Charter and Comcast, for example, have valuation multiples that are 25% and 28% lower than their five-year averages, the company noted. The companies lost 72,000 and 65,000 broadband subscribers in Q1, respectively.

The end of the government’s Affordable Connectivity Program (ACP) does not provide any benefits to operators on the subscriber front. Charter had one of the largest ACP subscriber bases, with around 5 million customers signed up for the program.

According to Roger Entner of Recon Analytics, the demise of ACP will lead to a decline in cable subscriber numbers, partially offset by increasing greenfield expansion under the US Rural Digital Opportunity Fund (RDOF) and providers expanding their network reach (so-called “edge out”).

Charter has often praised the pace of its rural investments. WOW! is another cable operator that has increased its greenfield rollouts despite losing broadband subscribers.

“Cable beats DSL, while FWA and fiber beat cable. The more cable fights DSL, the better off they are,” Entner told Fierce.

It’s hard to tell how many cable customers will churn because of the ACP termination, Dell’Oro analyst Jeff Heynen said. But he predicts Q2 will be “another tough quarter” for the largest cable companies in terms of net broadband additions, and ACP churn “could be larger” in Q3 than in Q2.

Charter’s prospects after leaving ACP may not be so bad, according to Wolfe Research.

The company’s analysts noted that the company “delivered better-than-expected results” and that recently announced price hikes “reinforce the optimistic case for positive EBITDA growth,” “while early signs regarding ACP subscriber churn rates are not bad.”

Flat broadband average revenue per user (ARPU) is one of the “bright spots” for cable companies and their investors, Heynen said. Some of that ARPU growth will come from ACP subscribers churn out services, as well as rising broadband prices.

“When it comes to ARPU growth, the most important thing for me is how long we can sustain it in the face of increasing competition,” Heynen said.

“Competitive fiber-optic offers are typically more expensive, so further growth is possible without jeopardizing subscriber relationships,” he added.

Fiber optic, wireless network in motion

Wolfe Research analysts say that AT&T, T-Mobile, and Verizon will “raise their targets (for fixed wireless access (FWA) and fiber to the home (FTTH)) to varying degrees in the coming months.”

Entner predicts that among traditional MNOs, T-Mobile will add the most customers, followed by AT&T and Verizon. In terms of adding FWAs, T-Mobile and Verizon should approach their 7 million and 5 million goals and hit them by the end of the year.

“They will likely go further, especially in rural America,” Entner said.

AT&T will likely see “solid” fiber subscriber gains, Heynen noted, and potentially raise its 2025 fiber transition goals, “although that comes at the cost of lower overall net gains due to the loss of DSL customers.”

The operator’s long-term goal is to cover 30 million locations with fiber by the end of 2025. In the first quarter, that number was over 27 million.

Heynen also believes T-Mobile and Verizon will see growth in FWA subscribers this quarter, “partly due to former ACP cable customers switching to these lower-cost FWA services.”

But that’s not so bad for cable companies, especially mobile virtual network operators (MVNOs). Entner estimates that the combined cable companies “should acquire more mobile customers than traditional MNOs.”

However, ISPs have a lot of work to do to convince all their internet-using customers to add a wireless plan, TD Cowen noted.