Monthly Archives: December 2020

Broadband Growth Continues During the Pandemic

Leichtman Research Group recently released the broadband customer statistics for the end of the third quarter of 2020 for the largest cable and telephone companies. Leichtman compiles most of these numbers from the statistics provided to stockholders other than for Cox, which is estimated. Leichtman says this group of companies represents 96% of all US landline broadband customers.

The second quarter shows big growth in broadband customers with over one and a half million new broadband subscribers customers added by the big ISPs. The following are the statistics for the first and second quarters of 2020.

9/30/20 3Q Change % Change 2Q 20 Adds
Comcast 30,062,000 633,000 2.2% 323,000
Charter 28,633,000 537,000 1.9% 850.000
AT&T 15,375,000 174,000 1.1% (114,000)
Verizon 7,069,000 110,000 1.6% (23,000)
Cox 5,330,000 50,000 0.9% 50,000
CenturyLink 4,563,000 (75,000) -1.6% (29,000)
Altice 4,363,500 26,000 0.6% 70,400
Frontier 3,119,000 (23,000) -0.7% (41,000)
Mediacom 1,425,000 29,000 2.1% 47,000
Windstream 1,102,300 12,900 1.2% 22,100
Cable ONE 865,000 27,000 3.2% 45,000
WOW! 808,900 3,300 0.4% 8,000
Consolidated 792,211 1,008 0.1% 5,078
TDS 487,700 8,200 1.7% 19,500
Atlantic Broadband 492,212 13,523 2.8% 6,000
Cincinnati Bell 434,500 2,500 0.6% 4,500
104,922,323 1,529,431 1.5% 1,243,578
Total Cable 71,979,612 1,318,823 1.9% 1,399,400
Total Telco 32,942,711 210,608 0.6% (115,822)

Going purely by the numbers, the cable companies collectively added 1.3 million customers in the third quarter  – 80,000 less than the second quarter. The telcos made a huge turnaround and adding 210,000 customers in the quarter after having lost 116,000 customers just a quarter earlier.

There are still a few factors that probably make 2020 subscriber numbers a little soft. For example, most of the big ISPs are still not disconnecting customers for non-payment. At some future date that back billing is going to come due, and one might expect that due to widespread unemployment that there will be a significant downside adjustment. Some of the ISPs have also been providing free or low-cost broadband to students working from home – something that will also eventually end. One piece of evidence that subscriber numbers are soft is that the third quarter also saw 1,500,000 homes disconnect traditional cable TV, largely to save money.

Probably the most important thing demonstrated by the growth numbers is the huge and growing demand for broadband during the pandemic – even if the numbers are masking homes that might not be able to afford broadband post-pandemic. We continue to find evidence that broadband has become a necessity for homes.

There is another industry trend that is not reflected in these numbers. OpenVault reported recently that at the end of the third quarter that 5.6% of homes were now subscribed to a gigabit broadband product. That means that just in the third quarter that 875,000 homes upgraded to gigabit. Similar upgrading can be seen for subscribers to bandwidth tiers between 200 Mbps and gigabit speeds. People are clearly finding existing broadband products to be inadequate and are upgrading to faster products.

A Look at the Big Guys

You can’t put the telecom sector into perspective without looking at the performance of the biggest players in the industry. The pandemic has been an interesting year for both big ISPs and telecom vendors. Smaller ISPs should care about big ISP performance for many reasons. For many smaller companies, the big companies are the competition and strength or weakness of the big providers can foretell stiffened competition or increased opportunity. The big ISPs also drive the overall industry and impact the availability of everything from fiber, electronics, and available construction crews.

Comcast. The company’s financial results are interesting. Revenues for the whole corporation for 3Q 2020 dropped 4.8% compared to a year earlier, EBITDA dropped 11.3%, and net income dropped 37.2%. The big drops are due to the entertainment parts of the company and Comcast did well in the telecom space. The company added 323,000 new broadband customers in the third quarter but lost 478,000 cable customers. Telecom EBITDA grew by 10.5%, demonstrating the big difference in margin between broadband and cable customers.

AT&T. Revenues dropped 5.2% compared to the third quarter of 2019. AT&T did a good job of managing expenses and margins dropped from 22.2% to 19.4%. The company added over 1 million net new wireless customers. AT&T reported something that we need to remember about the whole ISP industry this year – it added 357,000 customers to fiber, but only 28,000 are paying customers. AT&T, like other ISPs provided some free connections for students and also is not disconnecting customers for non-pay. The company lost over 800,000 video customers, mostly at DirecTV, but is seeing good growth with AT&T TV and HBO.

Charter. The company weathered COVID better than most other telecom companies. Revenues were up 5.1% compared to a year earlier. This was driven by an increase of 850,000 broadband customers and an increase of 94,000 cable customers. Not all of the broadband customers are paying and the company claims 537,000 net gains in paying customers. Charter also added 363,000 cellular customers during the quarter.

Verizon. Revenues are down 4.1% compared to a year earlier. Overall earnings were down 4.3%. The company added over 400,000 wireless customers. The company added 144,000 net customers to FiOS fiber, the biggest quarterly gain since 2014. Unlike Comcast and AT&T, the company didn’t have a non-telecom business pulling down the bottom line.

Telco Vendors. There were mixed results for worldwide telco vendors. Capital spending by the big telcos dropped, resulting in overall lower revenue for many vendors. However, Huawei and ZTE revenues were up 26%, driven by the Chinese governments spending for 5G. All other vendors collectively saw a 1% drop in revenues for the quarter. Fujitsu revenues were up 12% for the quarter, representing continued big growth for fiber backhaul. Ericsson was up 9%, driven by 5G electronics. Intel was up 4%, driven largely by sales of smartphone chips. But other vendors weren’t so lucky. Corning revenues were down 4%. Cisco sales were down 6%, and CommScope sales were down 11%. Samsung was down almost 15%.

Upcoming Trends. Analysts predict some of the following trends for the big players in the industry:

  • Fiber buildout to small cells should pick up again in 2021 to pre-pandemic levels.
  • Sales of operating software will grow faster than sales of hardware.
  • Most big telcos are likely to reduce staff in 2021.
  • Overall capital spending is likely to grow around 4%, bringing the industry back to pre-pandemic levels.
  • Telcos will pause to investigate before stepping into open RAN.
  • While there will be continued spending on 5G infrastructure, there is no expectation of net revenue increases due to 5G technology.