Tag: Lumen

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The Industry

Broadband Customers 2Q 2023

Leichtman Research Group recently released broadband customer statistics for the end of the second 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 903,000 customers, while the rest of the ISPs collectively lost over 52,000 customers.

2Q 2023 1Q 2023 1Q Change % Change
Comcast 32,305,000 32,324,000 (19,000) -0.1%
Charter 30,586,000 30,509,000 77,000 0.3%
AT&T 15,304,000 15,345,000 (41,000) -0.3%
Verizon 7,562,000 7,528,000 34,000 0.5%
Cox & Mediacom 7,035,000 7,035,000 0 0.0%
Altice 4,576,100 4,612,700 (36,600) -0.8%
T-Mobile FWA 3,678,000 3,169,000 509,000 16.1%
Lumen 2,909,000 2,981,000 (72,000) -2.4%
Frontier 2,865,000 2,863,000 2,000 0.1%
Verizon FWA 2,260,000 1,866,000 394,000 21.1%
Windstream 1,175,000 1,175,000 0 0.0%
Cable ONE 1,057,900 1,063,000 (5,100) -0.5%
Breezeline 680,785 687,519 (6,734) -1.0%
TDS 523,600 515,400 8,200 1.6%
Consolidated 376,829 369,862 6,967 1.9%
Total 112,894,214 112,043,481 850,733 0.8%
Cable 76,240,785 76,231,219 9,566 0.0%
Telco 30,715,429 30,777,262 (61,833) -0.2%
FWA 5,938,000 5,035,000 903,000 17.9%

The telcos collectively lost almost 62,000 customers in the quarter despite gains from Verizon FiOS, TDS, and Consolidated of 49,000 customers for the quarter. The biggest loser was Lumen, losing 72,000 broadband customers.

The only cable company with positive growth was Charter – its strategy of expanding its footprint into rural areas is clearly paying off.

It’s hard to see from these numbers where the huge growth of FWA wireless broadband is coming from. Much of the FWA growth is coming in rural markets where the competition is fixed wireless and satellite service. But FWA pricing seems to be aimed squarely at competing with DSL and probably counts for the overall losses for AT&T and Lumen. Both companies are adding fiber customers and are losing DSL customers more quickly than indicated by the overall numbers. I’m sure AT&T hates the loss of DSL revenue, but competition from FWA makes it that much easier for the company to eventually walk away from rural copper.

 

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The Industry

Another Lumen Reinvention?

Lumen has been the hardest large big telco to figure out. Verizon, AT&T, Frontier, Windstream, and others have clearly decided that building fiber is the future path to survival. Consequently, the other telcos are far ahead of Lucent in terms of fiber passings. In the recent investor webcast, CEO Kate Johnson talked about Lumen’s upcoming fiber plans. In doing so, she mentioned that Lumen only covers 12% of its passings with fiber – far behind the other telcos.

CenturyLink was one of the first big telcos after Verizon to embrace fiber. In 2017, under CEO Glen Post, the company had plans to pass 900,000 homes and businesses with fiber, with similar plans in upcoming years. Post, with a long telco background, had a clear vision of CenturyLink becoming a fiber-based ISP, at least in the many large cities it served.

However, at the end of 2017, the company took a sharp turn when it acquired Level 3. To nobody’s surprise, Jeff Storey from Level 3 took over as CEO, and the company changed its focus from residential fiber expansion to a focus on large business customers and small cell sites – the bread and butter of Level 3. By 2019, new fiber construction had dropped to 300,000 passings, with many of those coming from connecting large buildings to the network.

In 2020, the company’s stated focus was on adding large buildings to the network, and the company added 18,000 buildings to its fiber network, while only passing 400,000 total new fiber passings. That’s a low number of new fiber passings for a company that had 4.5 million broadband customers that year. 2020 was also the year when the company rebranded to become Lumen, a move to  distance itself from identification as a copper telco.

Instead of expanding fiber, Lumen decided to ditch copper assets and announced the sale of its last-mile networks in twenty states to Apollo Global Management in 2021. This brought a cash infusion needed for expansion and got rid of deteriorating copper networks.

Last year the company announced that its major expansion thrust was to beef up its large intercity fiber network across the country, with the goal of adding over 6 million miles of fiber strand by 2026. The original CenturyLink fiber network was starting to show some age, with many routes built forty years earlier. The company planned to upgrade to the newest fiber from Corning that can support 400-gigabit electronics. The new long-haul networks have fiber bundles between 432 and 864 fiber strands – much larger than the historical networks that had 96 to 144 fibers.

Lumen has been penalized by the many changes in its future direction by seeing the stock price go into the tank. CenturyLink stock peaked at almost $49 in 2007. By 2017, the stock had slipped to the mid-$20 range. Since then, the stock has dropped steadily and recently hit $1.80 per share after sitting at $10 per share a year earlier.

CEO Kate Johnson admitted that the company needs to do something different. The company eliminated its dividends to shareholders in the fourth quarter of 2022. The company is instead going to reinvest that money into building new fiber passings and has plans this year to connect 500,000 homes and businesses in 2023. It plans to build deeply into six major metro areas this year.

The company needs to reinvent itself. Lumen lost 253,000 broadband customers in 2022 – 7.7% of its broadband base. The company lost another 56,000 broadband customers in the first quarter this year, dropping the company to fewer than 3 million broadband customers while falling to be the eighth largest ISP after being surpassed by T-Mobile.

It’s not hard to understand, in retrospect, why the company has lost value. The company has seemingly reinvented itself every year since 2017 by changing its primary focus each year. Some of the changes, like adding more business buildings and beefing up the long-haul fiber network will likely generate a lot of cash and value in the long run. But Wall Street has clearly told the company to pick a future and stick to it.

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The Industry

Broadband Customers 1Q 2023

Leichtman Research Group recently released broadband customer statistics for the end of the first 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. 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 916,000 out of 962,000 total customer growth for the quarter. T-Mobile passed Lumen and Frontier in the quarter in terms of the total number of broadband customers.

% 1Q
1Q 2023 4Q 2022 1Q Change Change
Comcast 32,324,000 32,319,000 5,000 0.0%
Charter 30,509,000 30,433,000 76,000 0.2%
AT&T 15,345,000 15,386,000 (41,000) -0.3%
Verizon 7,528,000 7,484,000 44,000 0.6%
Cox 5,565,000 5,560,000 5,000 0.1%
Altice 4,612,700 4,632,000 (19,300) -0.4%
T-Mobile FWA 3,169,000 2,646,000 523,000 19.8%
Lumen 2,981,000 3,037,000 (56,000) -1.8%
Frontier 2,863,000 2,839,000 24,000 0.8%
Verizon FWA 1,866,000 1,473,000 393,000 26.7%
Mediacom 1,470,000 1,468,000 2,000 0.1%
Windstream 1,175,000 1,175,000 0 0.0%
Cable ONE 1,063,000 1,060,400 2,600 0.2%
Breezeline 689,903 693,731 (3,828) -0.6%
TDS 515,400 510,000 5,400 1.1%
Consolidated 369,862 367,458 2,404 0.7%
Total 112,045,865 111,083,589 962,276 0.9%
Cable 76,233,603 76,166,131 67,472 0.1%
Telco 30,777,262 30,798,458 (21,196) -0.1%
FWA 5,035,000 4,119,000 916,000 22.2%

The telcos collectively lost 21,000 customers for the quarter, but unlaying that number is the success story where telcos are collectively now adding as many customers on fiber as are being lost on DSL. After so many years of seeing Frontier bleeding broadband customers, it’s interesting to see the company now growing faster than the big cable companies. It’s hard to think that the telcos overall won be in a positive growth mode soon.

The only cable company with any significant growth is Charter – and that growth likely comes from the company now constructing fiber in some of the markets where it won the RDOF subsidies.

The only company on the list with a significant loss is Lumen, which lost 1.8% of its customers in the quarter. Lumen is also the telco with the least aggressive fiber growth plans.

There are several companies conspicuously missing from the list. It’s hard to think that Brightspeed and Google Fiber are not larger than the companies at the bottom of the list.

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The Industry

Is Fiber Growth Slowing?

In a recent article in LightReading, Mike Dano cites data from industry analyst Cowan that shows that some of the largest fiber builders in the country have already trimmed back their construction plans for 2023.

AT&T has the largest retrenchment and is trimming 2023 plans from 3.5 to 4 million passings back to 2 to 2.5 million. The company says that it is not changing its long-term goal to reach 30 million passings with fiber, but a cutback of this size means it won’t likely reach that target in 2025.

Lumen’s new CEO Kate Johnson said the company is taking a pause while it rethinks its path forward. In doing so, the company trimmed 2023 fiber expansion plans from 1.75 million passings to something under 1 million.

Cowen says other big ISPs will also trim plans a bit. Frontier is probably trimming 2023 plans from 1.6 million to 1.4 million passings. Altice is cutting expectations back from 1.6 million to 1.5 million. Consolidated is reducing 400,000 planned new passings to 350,000.

There are other fiber builders that don’t seem to be cutting plans. Brightspeed, Metronet, and others still seem to be on track for their 2023 plans.

But cutbacks of the size of the AT&T and Lumen plans raise some questions about the trajectory of fiber overbuilding. If construction plans announced two years ago had held steady, there was a massive push to build fiber networks to compete with cable companies. Do these cuts mean that fiber competition won’t materialize as planned?

There have been big external changes affecting the entire industry. Fiber material costs are up, as evidenced by the recent price hike announced by Corning. Prices of fiber components are up across the board for everything from conduit, handholes, drop wires, etc. A bigger cost impact is the cost of labor, with technicians labor rates rising across the industry.

Fiber construction is also not immune from interest rate increases. I already have some clients thinking of shelving fiber expansion projects until interest rates come back to earth.

All of this adds up to a lower return for fiber builders. I was always a bit mystified by the frenetic planned pace of fiber expansion craze in cities since the returns have never been spectacular. I’ve always assumed the push to build fiber has been more of a land grab as big ISPs see other fiber builders encroach on areas they want as markets. I think much of the fiber construction craze has been about either building now or getting locked out of markets in the future.

Any level of cutbacks is good news for cable companies, since the above cutbacks mean several million fewer fiber passings to compete with by the end of 2023. Any relaxing of the competitive pressure gives cable companies more time to upgrade upload speeds over the next three years. I have to wonder if the cable company’s plans to increase upload speeds play into any of the decisions to cut back on fiber expansion. It would be really interesting to sit inside the Board rooms as the big ISPs debate these strategies. The broadband environment is getting more complex by the day.

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The Industry Uncategorized

Lumen’s Fiber Path Forward

Lumen is taking a different path forward than the other big telcos. AT&T continues to build fiber in selected clusters, mostly in cities, rather than concentrate on building entire markets. Frontier, Windstream, and Consolidated are all concentrating on upgrading existing telco DSL networks to fiber.

Lumen has a different path forward. In a recent press release, the company announced a major upgrade to its long-haul fiber routes that cross the country. The company’s main fiber strategy is to beef up the intercity network with plans to add six million miles of fiber to existing fiber routes by 2026. In case you are wondering how there can possibly be six million route miles of fiber in the country – that count is miles of individual fibers. This is a marketing trick that long-haul fiber providers have been using for years to make networks seem gigantic.

The existing Lumen long-haul fiber network came to the company in two acquisitions. The original network came when CenturyLink bought US West, which had earlier merged with Qwest, a major builder of long-haul networks. The network was strengthened when CenturyLink purchased Level 3 Communications.

The original Quest fiber is getting dated in terms of capacity and performance. Much of this fiber was built thirty and forty years ago. While most of the fiber is still functional, fiber glass technology has improved drastically since then. Lumen will be using two low-loss types of fiber from Corning. This newer fiber is far clearer than older fiber and will increase the distance between repeater points while also allowing for using the fastest 400-gigabit electronics today and faster electronics later.

Earlier this year, Lumen announced it is improving its Ethernet architecture in forty cities this year. This means upgrading local networks to major customers to be able to provide speeds up to 30 gigabits. While this upgrade will mostly benefit business customers, this also will improve the local fiber backbone in these cities to 100 gigabits, which should improve performance for all broadband customers.

Lumen is also pursuing a last-mile fiber expansion. In August, the company announced fiber expansion plans in Denver, Minneapolis, and Seattle. The company had a target for this year to pass one million locations with fiber but has fallen a little behind due to supply chain and logistics.

Unlike the other telcos, Lumen hasn’t been talking much about the upcoming rural grant funding. This doesn’t mean the company might not pursue those opportunities since rural fiber expansion creates monopolies. But major residential expansion does not seem to be a key part of the Lumen plan, at least compared to plans for companies like Frontier, which says it plans to pass 12 million homes with fiber.

Another big unknown is if the company is still trying to sell any of its remaining copper networks like it did with sale of the twenty easternmost states to Apollo Global Management. It would be a more drastic affair to liquidate last-mile customers in the states where US West was formally the Bell company incumbent provider.

Any more sales of last-mile networks would be an interesting step where Lumen would be retracting to be a large business ISP. The company already had a sizable share of the business market that got bolstered by the acquisition of Level 3.

Lumen shares one characteristic with all of the big telcos in that it knows it must reinvent itself. After many years of no activity, Verizon is expanding FiOS again while also pushing a nationwide FWA network. AT&T is fully committed to building last-mile fiber networks and continues to add millions of new passings per year. The smaller telcos like Frontier and Windstream have clearly decided they must build fiber or fade away. Lumen is still the big wild card that hasn’t fully committed to any single expansion strategy and is pursuing different paths. From folks who track what the big ISPs are doing, if nothing else, this makes them the most interesting company to watch.

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The Industry

Here Comes FWA

Broadband industry statistics have been compiled by the Leichtman Research Group which provides an interesting new narrative for the industry. The biggest ISPs added just over one million new broadband customers in the first quarter of 2022, but half of the new customers went to the FWA products from Verizon and T-Mobile.

FWA stands for Fixed Wireless Access and is home broadband delivered using cellular frequencies. T-Mobile and Verizon are aggressively marketing the product, which is touted to have download speeds over 100 Mbps. The market is going to get hotter when Dish gets its launch underway soon. AT&T has also been promising a major new marketing effort to sell the product.

 1Q 2022 1Q Change % Change
Comcast 32,163,000 262,000 0.8%
Charter 30,274,000 185,000 0.6%
AT&T 15,533,000 29,000 0.2%
Verizon 7,400,000 35,000 0.5%
Cox 5,560,000 30,000 0.5%
Lumen 4,470,000 (49,000) -1.1%
Altice 4,373,200 (13,000) -0.3%
Frontier 2,819,000 20,000 0.7%
Mediacom 1,468,000 5,000 0.3%
Windstream 1,176,000 11,300 1.0%
Cable ONE 1,057,000 11,000 1.1%
T-Mobile FWA 984,000 338,000 52.3%
Breezeline 719,608 2,830 0.4%
TDS 495,200 4,900 1.0%
Verizon FWA 433,000 194,000 81.2%
Consolidated 380,150 (850) -0.2%
   Total 109,305,158 1,065,180 1.0%
Total Cable 75,614,808 482,830 0.6%
Total Telco 32,273,350 50,350 0.2%
FWA 1,417,000 532,000 60.1%

FWA was originally touted as the replacement for rural DSL. However, both T-Mobile and Verizon report having success selling the product in urban areas and competing with cable companies. This means that FWA success is going to bring down customer counts for other ISPs.

Over the past several years, Comcast and Charter have been accounting for most of the growth in broadband customers. In the first quarter, the two FWA providers and Comcast and Charter together account for 92% of net increases in broadband customers.

There are some interesting numbers inside this report.

  • Frontier has clearly turned it around after steady losses for several years and saw growth of 0.7% for the quarter.
  • The big loser is now Lumen, which lost over 1% of its broadband customers in the quarter.
  • We know that AT&T has been selling fiber connections at a hot pace but is still seeing significant losses of DSL customers to net out at a small positive growth.
  • The biggest percentage gainer among landline companies for the quarter is CABLE ONE, with quarterly growth of 1.1%.
  • Altice continues to struggle and lost broadband customers for the quarter.
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