Author Archives: Doug Dawson, CCG Consulting

A New Spectrum Strategy

The Department of Commerce recently announced a strategy to increase the amount of spectrum available for commercial use. The announcement said that NTIA and the FCC would work together to develop a “trustworthy, predictable, evidence-based process for ensuring spectrum serves its highest and best use”.

The announcement said that the agencies would begin examining the use of five bands of spectrum that altogether include 2,786 MHz of frequency. The examination will consider various spectrum management techniques and strategies for reducing interference. This includes spectrum in the lower 3 GHz band, the 7 GHz band, the 18 GHz band, and the 37 GHz band.

This was welcome news to the wireless industry that has yelled for years that it does not have enough spectrum to keep up with future demands. CTIA and WISPA, the lobbying arm for large and small wireless carriers, both praised the announcement.

While there is always a lot of hyperbole and exaggeration in the industry that told us five years ago that 5G was going to change our lives, the wireless industry is not wrong about this. It seems that when we release new spectrum to the world, it quickly gets gobbled up – at least in urban areas. The growth of cellular data usage has been clipping along at over 20% per year, and it doesn’t take too many years for the demand to catch up with and exceed capacity. The need for spectrum is expanding even faster due to the sudden proliferation of FWA cellular broadband.

However, the wireless industry could do a lot more with existing spectrum. One of the easiest ways to make current spectrum stretch further is to put small cell sites in neighborhoods to handle local demands. Five years ago, we were told that the big wireless carriers were going to be putting small cell sites on every block – but those investments never got made. Cities fretted loudly over the pending proliferation of small cell sites clogging urban vistas, but the flood of new cell sites never came.

There are critics of the new strategy because it relies on cooperation and coordination from the industry to find the best use of spectrum. That has grown more difficult over the last decade as the lobbyists for various wireless groups snipe and battle with each other over any plan to consider new spectrum. I’ve found that the most entertaining reading in the telecom industry is the pleadings at the FCC where various wireless groups call their opponents dirty, rotten scoundrels.

Some of that animosity followed this announcement. An AT&T executive was quoted as lauding the new spectrum policy but hoping that this would bring a new balance by giving more spectrum for mobile uses instead of unlicensed uses.

That raises a serious question. Is there a path that the NTIA and the FCC can take to somehow examine new uses of spectrum in an evidence-based process rather than an all-out lobbying battle? It’s hard to be hopeful about that in a world where industry lobbying groups exist for the sole purpose of pushing for their constituency over everybody else.

Spectrum policy is not easy. All of the spectrum bands being discussed by this announcement are already being used today, and opening spectrum to new uses means somehow finding a new spectrum home for existing users. There is no better example of this than the lower 3 GHz spectrum. This spectrum is ideal for cell phones and for the newly popular FWA fixed wireless. One of the biggest uses of this spectrum today is for military radar, and there are estimates that it could cost well in excess of $100 million dollars to migrate the military to other frequencies. Keeping the military and the carriers both happy while developing a commercial use for this spectrum is a huge and costly challenge.

You have to appreciate an attempt to look at spectrum issues in a way that will tamp down on the vehemence and animosity between various spectrum constituencies. And there is a good chance that nothing will come of the attempt – but we have to try. If the goal is to really find the best use of each spectrum band, then I don’t know if there is an alternative. In a perfect world, the NTIA and FCC will find a way to look at this rationally. If they do, I will miss reading the epic name-calling in FCC dockets, and I can live with that.

BEAD’s Middle Class Affordability Requirement

One of the most perplexing requirements for the BEAD grant program is that State broadband plans must include a middle-class affordability plan to make sure that all consumers have access to affordable broadband. I don’t know anybody who fully understands what this means.

A good place to start is with suggestions made by the NTIA in the Notice of Funding Opportunity (NOFO) for the BEAD grant program. The following has been edited to replace the term Eligible Entity with State Broadband Office (SBO). The NTIA suggests that

Some SBOs might require providers receiving BEAD funds to offer low-cost, high-speed plans to all middle-class households using the BEAD-funded network. Others might provide consumer subsidies to defray subscription costs for households not eligible for the ACP or other federal subsidies. Others may use their regulatory authority to promote structural competition. Some might assign especially high weights to selection criteria relating to affordability and/or open access in selecting BEAD subgrantees. Ultimately, each SBO must submit a plan to ensure that high-quality broadband services are available to all middle-class families in the BEAD-funded network’s service area at reasonable prices.

It’s a challenge for any State to set BEAD rules related to prices. The original legislation that created BEAD grants prohibited States from requiring specific broadband prices.

BEAD grants have another requirement that States must have a plan to provide affordable rates for low-income homes. Most ISPs plan to meet this requirement by relying on the continuation of the Affordable Connectivity Program (ACP). These ISPs will have to cut rates somehow if the ACP program is not funded by Congress.

In 2016, the FCC suggested that the benchmark for a reasonable middle-class rate should be set at 2% of monthly household income. Pew Charitable Trust did some analysis that showed that the 2% benchmark would equal between $82.79 in the South and $107.64 in the Northeast. Pew estimated that as many as 30% of middle-class households would not be able to afford broadband set at those prices.

The idea of having to push down the rates to win the grants is scary for most ISPs – because most of the customers who aren’t low-income are probably considered to be middle-class. That is the category of broadband that drives the majority of the revenue in a broadband business plan. If ISPs are pressured to have low rates for everybody, it’s that much harder to build a business plan that doesn’t lose money.

The folks who write some of these grant rules don’t seem to appreciate how hard it is to succeed as an ISP in a rural area. For example, it can be a several-hour round trip to just visit some customers  – costs are a lot higher per customer than in more densely populated areas.

ISPs also have very limited ways to control profitability in rural markets. It’s difficult to cut enough expenses to make a difference to the bottom line, so raising basic broadband rates is about the only tool that can be used to keep a rural market in the black.

Luckily, many State Broadband Offices are making the middle-class rate issue into a check box – can a grant applicant demonstrate that rates are affordable? But other SBOS are clearly taking the low middle-class objective to heart by mandating specific rates to win grant points – all prompted by the language in the NOFO.

I’m sure it’s really tempting for a State Broadband Office to mandate affordable rates – it’s a chance through the grant process to try to establish public policy. But I find it really troubling that policy-driven folks who have never operated an ISP try to micromanage how an ISP should operate. The BEAD rules already layer on all sorts of extra costs that are not part of a regular business plan. Additionally requiring specific low rates can be a disaster for ISPs who will, by definition, not have many paths to financial success in rural markets. I can’t think of anybody who benefits if the ISPs that take BEAD money find themselves losing money a few years after the grant networks are built.

Is Broadband Essential?

For many years, I’ve heard people say that broadband is essential. I read it in articles. I hear it on broadband panels and webcasts.  I see it said in comments on social media. It’s obvious that a whole lot of people think broadband is essential.

But what exactly does that mean? Does it mean that broadband is important in a lot of people’s lives, or does it mean that broadband is something that society can’t live without?

A lot of things are important enough in people’s lives that they could be considered to be essential to society. Grocery stores and the whole supply chain of delivering food seem to be essential. Gas stations and auto repair shops that keep our vehicles moving seem to be essential to most people.

I don’t think anybody can deny that these, and similar industries are essential for society. But these industries all have one thing in common – the industries are operated by commercial businesses. These industries are only lightly regulated, mostly to protect the public from harm. There are rules about food safety and mandatory recalls of bad food products. There are safety rules about the transport and storage of gasoline. But these industries are fairly free to operate freely in the market as long as they don’t harm the public.

Nobody forces these industries to serve everybody. There are food and gas station deserts in urban areas. There are plenty of rural counties with no big grocery stores. Nobody protects the companies in these industries from failing – there are plenty of failed grocery stores and gas stations around the country.

There is another set of industries that are so essential that the government regulates them as monopolies. It’s unheard of for somebody to build a second water system to serve homes. It’s rare to have anybody building a second set of electric wires. In some states, the sale of retail electricity is considered to be competitive, but it’s a false kind of competition that is nothing more than a form of arbitrage. These essential industries are heavily regulated.

Where does broadband fit into this spectrum of businesses? When people say broadband is essential, do they mean essential like grocery stores or essential like water companies? The question I always ask people who say that broadband is essential is to ask them what they would do about the industry if they were in charge.

If they say that broadband should be totally regulated like water, I wonder if they know what that means. It’s hard to imagine having a rigidly regulated broadband industry where the government would be involved in choosing market entrants and setting rates. Could a fully regulated industry have real competition? For instance, what would it look like to have a regulated market that has both a regulated fiber company and a regulated cable company? What would stop one of the competitors from getting most of the customers and driving the other out of business?

Rigidly regulated industries tend to evolve into monopolies over time because competitors don’t clamor to invest in a market where profits are controlled by the government. A lot of the U.S. broadband markets are near monopolies today for a single ISP – and when I talk to folks in these markets, all I hear about is the desire for competition. I can’t ever recall hearing from somebody who said they only want one choice of ISP.

If broadband is essential, but total heavy regulation isn’t the right answer, then what is? It seems like this is the situation we have today. Some markets have vigorous competition today, while others are served by virtual monopolies. What magic wand can force monopoly markets to suddenly be competitive? This is what made me raise the question.

I’ve spent 25 years as a broadband advocate, so it’s obvious that I think broadband is incredibly important. But I shudder to think of the steps needed to dismantle the current broadband market to put in place a system that would guarantee inexpensive broadband to everybody. That might be possible with a subsidy program far larger and more robust than ACP, but I can’t imagine we’ll ever have the political will to go there.

There are a lot of flaws with our current broadband market – most which can be blamed on having a tiny handful of giant ISPs that serve the vast majority of customers in the country. The best way to improve the broadband market is with real competition, but the lack of capital to build expensive new networks is always going to remain a barrier to entry. New competitors don’t show up in a market because they think broadband is essential but because they think they can do better than the incumbents and make a lot of money. I still don’t know the degree to which broadband is essential and would love to hear what others think about the question.

3Q 2023 Household Broadband Usage

OpenVault just published its Broadband Insights Report for the end of the third quarter of 2023. As usual, OpenVault is documenting the continued growth in broadband usage by U.S. households.

I think one of the most useful statistics from OpenVault is the average household usage of broadband in gigabytes. Below is the trend in average U.S. household broadband usage since 2019. These numbers include combined download and upload usage.

Monthly
Gigabytes
3rd Quarter 2019 275.1
3rd Quarter 2020 383.8
3rd Quarter 2021 433.5
3rd Quarter 2022 495.5
3rd Quarter 2023 550.2

We are getting so used to seeing these kinds of statistics that we forget to put increased usage into context. In the third quarter of this year, the average U.S. household used 54.7 more gigabytes of data than one year earlier. That alone is a pretty amazing statistic – 54 gigabytes is a lot of usage in a month. With roughly 120 million residential broadband subscribers, this equates to over 6.5 billion more gigabytes of data used each month than just a year ago. That’s 11% more usage hitting the Internet backbones, just from residential usage.

The following graph shows the average usage of household broadband by quarter, since the beginning of 2019. The overall growth curve has held steady since early 2019.

Open Vault always includes other interesting statistics in its quarterly reports:

  • The average upload usage per household is 35.9 gigabytes per month. Most homes don’t realize how much data they upload into the cloud every month.
  • Median household broadband usage is 364 gigabytes, up 12.3% from 2022. Half of homes use more than the median, and half use less broadband.
  • OpenVault says the U.S. average download speed is 498 Mbps, and the average upload is 28 Mbps. This is additional proof that the FCC’s proposed 100/20 Mbps definition of broadband is already behind the market.

Remembering Global Crossing

I saw a notice recently that Gary Winnick died. He was the founder of Global Crossing. This is worth a way-back machine look because the Global Crossing story is the perfect metaphor for remembering the craziness of the telecom industry in the late 1990s.

Winnick founded Global Crossing in March 1997 with a $35 million equity investment from himself and the Canadian Imperial Bank of Commerce. 1997 was right after the Telecommunications Act of 1996, and there was huge money pouring into the U.S. telecom industry due to the opportunity to create Competitive Local Exchange Carriers (CLECs) that were suddenly allowed to compete for local telephone service using the networks of the largest telephone companies.

Winnick’s original vision was to build the first privately financed undersea fiber network connecting North America, Latin America, Europe, and Asia.

Winnick and the other executives were highly successful in raising money and raised $800 million in debt by June 1998. Global Crossing went public in August 1998, raising an instant $399 million from the IPO. Like many other telecom stocks at the time, the stock price saw a meteoric rise, and by the end of 1999, the company’s stock had grown to an amazing market capitalization of $47 billion.

The sudden success of the stock changed the direction of the company, and Global Crossing went on an acquisition tear based on its increased stock price. In May 1999, GlobalCrossing made the news when the 2-year-old company made an offer to buy US West but was outbid by Qwest. In July 1999 the company paid $885 million for the undersea maintenance business operated by Cable & Wireless. At the end of 1999, the company entered the telephone market by buying Frontier Communications for $9.9 billion and renamed it as Global Crossings North America. It also paid $1.3 billion for SB Submarine Cable and $1.65 billion for Racal Telecom.

Within a relatively short time, the company had trouble meeting monthly debt payments and sold Frontier Communications for $3.65 billion in the summer of 2001. Global Crossing never made a profit. In the fourth quarter of 2001, the company had losses of $3.4 billion on revenues of $792 million. In January 2002, Global Crossing filed for bankruptcy. This is the fourth biggest bankruptcy in history and was huge financial news at the time. But the Global Crossing story was not extraordinary in the telecom sector as the entire CLEC industry was also imploding.

There was instantly a raft of lawsuits accusing the management team of accounting fraud and of not disclosing the real financial position. Between 1998 and 2001, Winnick sold $420 million of company stock while other executives sold $900 million, much of it after internal company reports of impending financial problems. While there were some large settlements by the company, the executive team got off with relatively minor contributions to lawsuit settlements.

Global Crossing emerged from bankruptcy at the end of 2003. The company made a few more acquisitions and eventually sold to Level 3 Communications for $3 billion in 2011. It’s ironic that the remnants of the upstart that tried to buy US West ended up being absorbed by CenturyLink, the US West successor when it merged with Level 3.

Global Crossing came literally out of nowhere after the passage of the Telecom Act and leveraged a relatively small equity investment into many billions of market value. Global Crossing and other new telecom companies were able to go public and see big stock price gains without ever getting close to making a profit. But the bubble didn’t last long, and the CLEC crash was part of the overall dot.com crash, where investors lost huge amounts of money when the two sectors collapsed.

For those working in the industry, the crazy stock valuations at the time made no sense. I can remember half a dozen startup CLECs who raised money, each promising to win a 30% market share of the Atlanta telecom market. Money was thrown at the fledgling industry, including a huge amount of funding provided by telecom vendors.

The Global Crossing story is worth remembering because it demonstrates the excesses that can come quickly when outside capital floods into an industry. I am seeing some of this same craze today, with dozens of venture groups pouring money into the broadband sector. However, it’s not as nearly as superheated today as the late 1990s, but I still have to wonder where these investors expect to find high returns. But we will probably never see another telecom company that will burst onto the scene and then implode as dramatically as Global Crossing.

Big ISPs Hate the FCC’s Digital Discrimination Rules

The big ISPs certainly have their knickers in a knot over the adoption of digital discrimination rules by the FCC. The FCC was required to adopt some version of digital discrimination rules by language included in the Infrastructure Investment and Jobs Act. The IIJA Act says that the FCC needs to prevent discrimination based on income level, race, ethnicity, color, religion, or national origin.

The big controversy that has stirred the big ISPs is the definition of discrimination. The ISPs wanted discrimination to be defined as intentional discrimination where an ISP purposefully decides not to serve somebody. The trouble with that definition is that it would likely require a whistleblower with documentation from inside an ISP to prove intent. The FCC adopted intentional discrimination but also adopted what it calls disparate market impacts, which means the agency can consider discrimination that is obvious in the market without having to prove an ISP’s intent.

The ISPs have been screaming loudly against the FCC decision. Perhaps one of the best summaries of the ISP’s outrage comes from a recent editorial in the Wall Street Journal. I don’t provide links to articles behind paywalls, but a Wall Street Journal editorial warns that the new rules will weaken the Internet by giving the FCC the power to micromanage the industry. They roll out examples of how the FCC might abuse its new power.

“Marketing materials that feature too many white people could be ruled discriminatory. Companies could be forced to scrap credit checks that cause more minorities to be rejected for smartphone leasing plans. Providers could even be punished for charging the same prices to all customers since their rates might have a disparate financial impact on minorities. The FCC could likewise prohibit low-cost wireless plans that include data caps because these are selected more often by people with lower incomes. . . Wireless carriers might also be prohibited from building out 5G networks in suburbs and city downtowns before inner cities and rural areas.”

I have always enjoyed a good lobbying rant, and the above is a classic. We saw a lot of the same kind of overblown rhetoric from both sides during the process leading up to the net neutrality decision a few years ago.

It’s obvious that the Wall Street Journal has fully adopted the arguments being made by the giant ISPs. The reality is that big ISPs don’t want any regulatory rules or oversight. It’s laughable to think the FCC would be upset that an ISP charges everybody the same rates. That’s the very definition of non-discrimination. Discrimination is more likely going to be claimed due to practices like the study last year that uncovered that Charter was offering the highest prices in the poorest neighborhoods of Los Angeles.

The big ISPs are particularly distraught over the idea of the FCC monitoring digital discrimination since it is coupled with a likely vote to reintroduce Title II regulation of broadband. They are worried that the combination of the two sets of regulations will mean they won’t be free to do anything they like in the market. The unspoken worry that the big ISPs don’t want to talk about is the fear that regulators will put pressure on them to stop big annual rate increases. It’s hard to fathom the FCC ever deciding to directly regulate broadband rates, but it’s not hard to picture them putting public pressure on ISPs to keep rates affordable.

The Wall Street Journal is using the rhetorical trick of pointing out the most extreme ways that the new regulations could be used. But it’s rare for regulators to go to the extremes. The new regulations do not mean that the FCC is going to come down on the big ISPs with a hammer. The FCC didn’t do that the last time when Title II was the regulatory framework. But it does mean that the FCC is likely to call out some of the most obvious abuses by the big ISPs and possibly force them to cease the worst practices.

That’s what regulation is supposed to do. A handful of large ISPs have near-monopoly power in the broadband market, and the job of regulators is to balance that power by making sure that the general public still gets a fair shake. You’ll not hear the big ISPs talking about that.

My Predictions for 2024

BEAD Predictions. It’s clear that most state broadband offices are going to try to award all of the BEAD grants in 2024. There will be barely any BEAD construction completed in 2024, but there will be big hoopla over the handful of customers that get connected before the end of the year.

A lot of pundits have been predicting that a large majority of the funding will go to the largest ISPs to build fiber. But after reading the grant rules in numerous states, I’m not so sure. In some states, the big companies will win it all. States that emphasize the cost of the grant per passing might end up giving all of the money to WISPs. A few state rules are so obtuse that even the big ISPs might decide to take their money to a neighboring state.

RDOF Troubles. I’ve talked with a lot of local governments that haven’t heard a peep from RDOF winners. Most winners will be required to have completed 40% of the RDOF construction by the end of 2024, so this is the year that will flush out ISPs that are going to default. Defaults will probably be too late to attract any BEAD funding.

Wireless Technology Improvements Shake up the Market. 6 GHz radios will change the WISP landscape. New radios that include the giant 6 GHz channels will deliver much faster speeds. More WISPs will begin advertising gigabit speeds in 2024, but most will not deliver what they advertise – but speeds will still be fast.

Big cellular companies will use C-Band spectrum to boost speeds on FWA broadband. But a lot of rural counties that are hoping to get faster speeds will not see the new technology deployed in 2024.

The Beginning of Consolidation. We’re going to see some interesting acquisitions in 2024. I don’t know who, but some of them will be big names. There is a huge amount of venture capital suddenly interested in broadband, and as it becomes clear that these companies will not win as much BEAD grants as they hoped, they’ll turn their attention to acquisitions.

Cable Companies Will Lose Broadband Customers. The large cable companies collectively gained only 4,700 customers in the third quarter of this year, and the only one that grew was Charter. In 2024, customer losses will increase each quarter, and the cable industry is going to panic. Cable company board rooms are at a loss on how to stem the losses. They are now banking that the public will be happy with faster upload speeds with mid-split upgrades, but that isn’t going to impress customers who are offered a fiber alternative or a much cheaper FWA alternative.

Little Impact from FCC Broadband Regulation. If you listen to the rhetoric from the big ISPs, the double whammy of Title II regulation and the new digital discrimination rules will devastate ISPs and kill innovation and new investments. The reality is that there will barely be a peep from regulators concerning the new regulations in 2024. Some minor investigations will be undertaken, but the new regulation will have almost no impact on the market or investments.

Congress Will Let ACP Lapse. There seems to be a big consensus in Congress that the ACP program should continue., But I can’t picture the currently dysfunctional Congress approving new funding for the subsidy program before ACP runs dry. I think ACP will get renewed later in 2024, but only after first lapsing, which will create chaos for ISPs and customers. When ACP is renewed, the number of eligible households will be greatly pared down.

The FCC Will Launch the 5G Fund. This is intended to bring more rural cell towers. The industry says that $9 billion is not nearly enough to reach all of the places that need better cellular coverage, so counties and states will lobby fiercely to get included in the funding.

Big ISPs Will Continue to Buy Back Stocks Rather than Invest in Networks or Maintenance. This may be the least bold prediction I have ever made.

In-kind Contributions for BEAD Grants

The process of winning BEAD grants is expensive, and grant applicants should do everything possible to lower out-of-pocket costs for winning the grant. Of the most interesting ways to lower the cost of accepting a grant is through the use of in-kind matches. In-kind contributions recognize non-cash benefits of property, goods, or services that will benefit a BEAD project. In-kind matches can be used as part of the process of calculating the matching funds being provided by a BEAD grant applicant, and many other grant programs also allow for in-kind matches.

To use a simple example, if a grant applicant must provide a 25% grant match, then any approved in-kind matches can be used to satisfy a portion of that match requirement. If a grant applicant can justify 5% of the cost of the project as in-kind contributions, then the cash matching in this example would be reduced to 20%.

The BEAD grant process explicitly allows for in-kind matches. The use of in-kind matches for any federal program is described in federal regulation § 200.306 – Cost Sharing or Matching. I must warn you that the federal rules for in-kind matches are confusing, even for accountants.

In-kind matches can be contributed by the grant applicant or by a third party like the local government. The Frequently Asked Questions for BEAD provides a list of examples of costs that might be considered as an in-kind match:

  • Employee or volunteer services
  • Equipment
  • Supplies
  • Indirect costs (this one has me scratching my head)
  • Computer hardware and software
  • Use of facilities
  • Access to rights-of-way
  • Pole attachments
  • Conduits
  • Easements
  • Access to other types of infrastructure

How might an in-kind match work? Here are a few examples.

  • There might already be empty conduits in the BEAD grant area that can be used by the BEAD grant winner to save money on construction. If the BEAD grant winner or some other owner of the conduit, like a local government, doesn’t charge for the use of the conduit, a value can be calculated for the benefit from the conduit and used as an in-kind match.
  • A grant applicant might have already obtained rights-of-ways inside the BEAD grant area. Or perhaps a local government is willing to provide the rights-of-ways for free to encourage the construction of fiber. Some of that past or current value of contributed rights-of-way can be recognized as an in-kind contribution.
  • A grant applicant might have made a significant investment in mapping or engineering software in the past. If it can use that software for the BEAD process without a new large charge, then some portion of the value of the software might be considered as an in-kind contribution.
  • A local government might provide free permitting, location services, or traffic control as a way to encourage the construction of a fiber network. The imputed value of those services at market rates can be an in-kind contribution.
  • An ISP might have multiple reels of fiber already in inventory. The cost of that fiber can be used as an in-kind contribution as long as it is not also billed as material for the construction process.

I must note that these examples are all subject to being approved by the State Broadband Office that will be administering a given BEAD grant. No in-kind contribution is automatic, and the normal process is to negotiate the use and the value of each in-kind contribution with the party awarding the grant. But since it looks like State Broadband Offices are going to be rushing the grant application process, it’s worth claiming as many legitimate in-kind matches as possible to help with the initial grant scoring.

Calculating in-kind contributions is worth pursuing because almost every BEAD grant project will benefit from some existing assets or services that can be classified as in-kind contributions. Every dollar recognized as an in-kind contribution reduces the cash contribution needed for the grant matching.

I’ve also note that there are a number of states that are giving extra grant scoring points for applicants who have local contributions towards a BEAd project. Many local governments will be unable to make cash contributions towards BEAD projects, but it’s well worth talking to them now about contributing in-kind matches.

Traditional Cable Continues to Plummet

Leichtman Research Group recently released the cable customer counts for the largest providers of traditional cable service in the third quarter of 2023. LRG compiles most of these numbers from the statistics provided to stockholders, except for Cox and Mediacom – they now combine an estimate for both companies. Leichtman says this group of companies represents 96% of all traditional U.S. cable customers.

The traditional cable providers continue to lose customers at a torrid pace, losing almost 1.8 million customers in the second quarter, even faster than the second quarter. Overall, the traditional cable providers lost over 19,700 customers every day during the quarter. The overall penetration of traditional cable TV is now around 43% of all households, down from 73% at the end of 2017.

3Q 2022 Change Change
Comcast 14,495,000 (490,000) -3.3%
Charter 14,379,000 (327,000) -2.2%
DirecTV 11,850,000 (500,000) -4.0%
Dish Network 6,720,000 (181,000) -2.6%
Cox & Mediacom 3,340,000 (100,000) -3.0%
Verizon 3,076,000 (79,000) -2.5%
Altice 2,326,500 (79,400) -3.3%
Breezeline 288,881 (8,071) -2.7%
Frontier 248,000 (19,000) -7.1%
Cable ONE 148,900 (9,200) -5.8%
   Total 56,772,281 (1,792,671) -3.1%
YouTube 6,500,000 600,000 10.2%
Hulu Live 4,600,000 300,000 7.0%
Sling TV 2,120,000 117,000 5.8%
FuboTV 1,477,000 310,000 26.6%
Total Cable Company 34,729,381 (1,013,671) -2.8%
Total Telco / Satellite 21,894,000 (799,000) -3.4%
Total vMvPD 13,370,000 1,327,000 9.9%

Losses were big across the board for both cable companies, satellite companies, and telcos.

In the third quarter, the alternative programming options like YouTube and Hulu Live picked up a lot of the customers that were lost by traditional cable providers.

Broadband Subscribers 3Q 2023

Leichtman Research Group recently released broadband customer statistics for the end of the third quarter of 2023 for the largest cable and telephone companies. Leichtman compiles most of these numbers from the statistics provided to stockholders other than for Cox and Mediacom, which are estimated and now reported together. Leichtman says this group of companies represents 96% of all US landline broadband customers.

The first quarter of the year shows a continuation of the trend where all of the growth in broadband is coming from T-Mobile and Verizon FWA fixed cellular wireless. Those two companies added 941,000 customers, while the rest of the ISPs collectively added only 8,000 customers.

3Q 2023

2Q 2023

Change

Change
Comcast

32,287,000

32,305,000

-18,000

-0.10%
Charter

30,649,000

30,586,000

63,000

0.20%
AT&T

15,296,000

15,304,000

-8,000

-0.10%
Verizon

7,612,000

7,562,000

50,000

0.70%
Cox & Mediacom

7,035,000

7,035,000

0

0.00%
Altice

4,545,400

4,576,100

-30,700

-0.70%
T-Mobile FWA

4,235,000

3,678,000

557,000

15.10%
Frontier

2,881,000

2,865,000

16,000

0.60%
Lumen

2,836,000

2,909,000

-73,000

-2.50%
Verizon FWA

2,679,000

2,295,000

384,000

16.70%
Windstream

1,175,000

1,175,000

0

0.00%
Cable ONE

1,057,400

1,057,900

-500

0.00%
Breezeline

671,762

680,785

-9,023

-1.30%
TDS

532,600

523,600

9,000

1.70%
Consolidated

386,221

376,829

9,392

2.50%
Total

113,878,383

112,929,214

949,169

0.80%
Cable

76,245,562

76,240,785

4,777

0.00%
Telco

30,718,821

30,715,429

3,392

0.00%
FWA

6,914,000

5,973,000

941,000

15.80%

In the telco sector, the big loser was Lumen, which lost 2.5% of its broadband customers in the quarter. AT&T had a tiny loss, and all other telcos saw growth. Leichtman is not yet separately tracking AT&T’s FWA customers, but AT&T reported recently that it is adding 2,000 FWA customers per week. I assume those are included in the AT&T totals. During this quarter, Frontier grew to have more broadband customers than Lumen – a big turnaround after Frontier lost customers for years.

For the second quarter in a row, the only cable company with positive growth was Charter – its strategy of expanding its footprint into rural areas is clearly covering for losses elsewhere.

FWA cellular companies added more customers than the previous quarter and experienced an enormous 15.8% growth for the quarter. If similar growth happens in the fourth quarter, T-Mobile will pass Altice in size, and Verizon will pass both Frontier and Lumen.