What did the Pandemic Hide?

The growth of broadband customers has looked spectacular over the past year during the pandemic. It’s easy to chalk up higher broadband customers nationwide to the need for households to be connected during the pandemic. But as I look back on what’s happened during the last year, I can’t help but wonder if the broadband stats we are seeing are somehow overinflated.

First, look at the broadband performance of the two largest ISPs in the country. Comcast and Charter ended 2020 with 55.3 million broadband customers, which is around 52% of all of the broadband customers in the country. In 2020, Comcast added nearly 2 million new broadband customers. Charter added over 2.2 million. Combined, the companies grew broadband customers by 7.6% for the year. That’s an amazing growth rate when you consider that all of the other ISPs with more than 400,000 broadband customers collectively grew at a rate of less than 1% for last year. That kind of numerical anomaly always makes me curious. What would make these two companies do so well compared to the rest of the industry during a pandemic year?

Part of the difference can be explained by the continued drop in DSL customers. The telcos have been bleeding urban DSL customers for many years. Did that transition accelerate during the pandemic? For all of 2020, AT&T lost a net 5,000 broadband customers, but AT&T says it gained 1 million fiber customers. Verizon gained 173,000 broadband customers. CenturyLink lost 134,000, and Frontier lost 400,000. All of these companies except Frontier announced how well they were doing in getting customers on fiber, so perhaps a couple of million of the new cable customers come from the continued flight from DSL. But that doesn’t seem to explain away all of the differences because we didn’t see a huge migration from DSL in markets served by other big cable companies like Cox and Altice.

I can think of two trends that would have increased broadband connections faster than normal last year, both related to the pandemic. First are homes that added broadband so that people could work from home. It makes sense that some homes purchased a first home broadband connection for this purpose. There is a general belief that many people will continue to work from home, at least part-time, so some percentage of these connections might be permanent.

The second big trend is getting broadband into homes with students during the pandemic. Both giant cable companies had numerous press releases about how they were helping to keep students connected during the pandemic. It’s great that these two companies stepped up during the pandemic. Millions of homes got low-cost broadband for students when it was most needed, and the companies should rightfully be praised for the effort they made.

Nut I’ve been speculating for several months that we’ll see a drop-off in broadband subscriptions this fall when students return to live classes. It seems likely that many of the homes that added broadband for students will drop broadband, especially if the prices are no longer subsidized.

However, just as the pandemic is starting to slow down, we have a new government program that will boost low-income broadband connections. Congress has handed the FCC $3.2 billion for the Emergency Broadband Benefit program. This program will pay up to $50 per month towards a broadband bill for qualifying households. I have to think that Comcast and Charter, with 52% of the broadband market, are going to grab a lot of this funding. For now, this program has a finite end when the money runs out. But until it does, the broadband statistics from the biggest ISPs are likely to remain inflated due to this plan. That probably means we wait until next year to see if some percentage of the 2020 customer increase was a bubble or permanent. If it was a bubble we’ll no doubt see gloom and doom headlines about the broadband industry if subscriber numbers drop, when instead we’d just be seeing the last remnants of the pandemic pass through the industry.

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