Charter Communications is one of the biggest deployers of fiber in rural areas of the U.S. right now, thanks to the jumpstart it got with RDOF funding. And it’s using other government subsidies for its new fiber deployments, as well. But the company doesn’t plan to overbuild its existing cable plant with fiber.
Speaking at the MoffettNathanson analyst conference yesterday, Charter CEO Chris Winfrey talked about the company’s fiber work.
Interestingly, he said that Charter first realized that building fiber in rural areas was a pretty good business after it was forced to do some fiber projects in upstate New York. In 2019, as part of a deal to avoid litigation related to its acquisition of Time Warner Cable, New York regulators required Charter to provide broadband to 145,000 residences and business in rural New York. The expansion precluded New York City addresses.
Yesterday, Winfrey said Charter did 185,000 upstate rural New York passings as part of the deal related to Time Warner Cable. “It was a merger requirement. We didn't think we'd make that much money on it,” he said. “We kind of looked at it as a tax on the deal. It's actually turned out to be great.”
Later, Charter won $1.2 billion in RDOF funds to reach 1 million rural locations across 24 states over the coming years. And it’s also won federal American Rescue Plan Act (ARPA) funds. Recently Charter’s CFO Jessica Fischer said the company plans to reach 300,000 new locations via subsidized funds this year.
Yesterday, Winfrey said, “We're ahead of schedule on the 1 million homes that we're building on RDOF. We've committed to another 260,000 state grants through ARPA and other funding that's still going on.”
He said the subsidies being offered to deploy fiber in rural areas present a unique opportunity. “I can't remember in my entire cable career where somebody said 'Can we give you money to extend and build out your network so you can have permanent passings in an area where you're going to get very high penetration rates and return on investment?'”
Charter also has its eyes on the upcoming Broadband Equity & Access Deployment (BEAD) opportunity. The company will be following the BEAD requirements of each state and participating where it makes sense from a business perspective.
Supply chain and labor
Analyst Craig Moffett quizzed Winfrey about supply chain and labor issues.
Winfrey said Charter had its hands full in 2022 in terms of supply chain issues for its fiber deployments, whether it was chips, optical glass or labor. He said, “It was a fight.” But things have since improved, and the company now has secured all the labor and supply of products that it needs for its network expansion plans.
“We have a clear line-of-sight to, you know, purchases per the supply chain, and we have clear line-of-sight to the labor that we need and the pricing associated with that,” said Winfrey.
He added that Charter has also stood up in-house teams that can do both aerial and underground construction.
Winfrey said issues around local permits were a limiting factor — a complaint that’s not new in the telecommunications industry. He also complained that companies that own poles are making Charter and others “replace the poles that they've had for 50 years that are decrepit.”
He said it can take upwards of nine months just to get a poll agreement and similarly long amounts of time for permits.