In a move that intrigues me, Charter (Spectrum) announced another rate increase this month. The company plans to raise the cost of basic broadband by $3, or for legacy broadband by $4. The company also will raise the rate on cable TV by $3 in some states.

The company has raised rates twice in the last year. Charter raised broadband rates by $5 in July 2023. The company then raised cable TV rates in January 2024. The company also raised the price of its low-income product by $5 per month.

I’ve been wondering if we’d continue to see big cable company rate increases, and I guess we now have our answer. There are a lot of reasons why Charter might have considered not raising rates. The company lost 72,000 broadband customers in the first quarter of this year. That’s a tiny proportional loss, only one-fourth of one percent of the company’s 29.8 million broadband customers, but analysts all predict that losses will accelerate.

Charter also has more pending risk from the end of the ACP plan than any other large ISP since the company enrolled over 4 million customers in the ACP discount plan that provided a $30 subsidy for broadband, and that recently ended. Charter is hoping to keep many of these customers and will try to move customers to the company’s Spectrum Internet Assist plan that offers 50 Mbps download speed for $24.99 per month or 100 Mbps for $29.99. It’s likely the company will still see a lot of households drop service when they can’t afford those rates.

Charter and other cable companies are seeing a lot of competition from FWA cellular broadband from T-Mobile and Verizon. Those two companies have added 8.6 million customers nationwide with a product that just launched in 2021.

The Fiber Broadband Association predicted that over 12 million homes will be newly passed with fiber in 2024, and most of that fiber will be competing against the big cable companies. It looks like that forecast was a little optimistic, but even if the final number is nine or ten million homes, Charter and the other big cable companies are under pressure to cut rates in newly competitive markets since most of the fiber providers have lower prices than cable ISPs.

But I guess the upside from a rate increase is just too hard to pass on. Nobody outside of Charter knows how many Charter customers pay the full rate. Many customers are on discounted and temporary rate plans. Charter also still sells a lot of product bundles, and customers within those bundles don’t know the cost of each component product in the bundle.

Charter has had aggressive rate increases over the last five years and has raised rates $5 per year until this smaller increase in 2024. Charter’s rates have always been significantly below Comcast broadband rates, and it’s always looked like Charter was trying to catch up.

A rate increase on basic service eventually catches up to most customers as special rates expire or bundled prices are increased. If only half of Charter’s customers pay list rates, then a $3 rate increase would add over $500 million to Charter’s bottom line in a year. The math says that even if the rate increase drives away some customers, the company will be far ahead after this rate case. Big cable companies can still rely on the fact that they are the only ISP with fast speeds in many markets.

Rate increases seem to be the new growth strategy for cable companies. For well over a decade, the Charter and Comcast customer bases grew significantly every year as broadband became more popular and more homes subscribed. The economy has also been adding over two million new living units per year, and Comcast and Charter snagged most of those new households. The stock prices of the two companies have been propped up by that reliable and never-ending growth. But we’re in an economy that will likely only add one million new living units this year. Both Charter and Comcast are now losing customers, and industry analysts all predict the rate of losses will increase significantly. An annual rate increases might be the only tool left for Charter and the other big cable companies to improve the bottom line. It will be interesting to see how many other cable companies also raise rate by the end of the year.