Can Comcast get back to subscriber growth?

• Comcast CFO Jason Armstrong said the operator might not get back to subscriber growth in the next few quarters, but he's optimistic for the long term

• While fixed wireless has become a viable cable competitor, Armstrong claimed that will change if the technology runs out of broadband capacity 

• Ultimately, Comcast is more focused on maintaining its high-end subscriber base than chasing customers interested in switching to fixed wireless

Comcast had a solid 2023 with growth in earnings and broadband revenue, but it also shed 66,000 broadband subscribers last year. Thus, a looming question remains: Can Comcast get back to subscriber growth?

Comcast CFO Jason Armstrong outlined a strategy for 2024 at an investor conference this month, centered around the company's primary growth drivers like broadband and wireless. Specifically, he said the operator is aiming to ride momentum from last year by focusing on revenue generation.

The broadband segment remains key here, with a goal of holding onto Comcast’s subscriber base (right now it has 32 million) and increasing average revenue per user (ARPU). But the broadband market is “more competitive than ever,” Armstrong said, and cable operators are generally experiencing subscriber losses due to cost-sensitive customers opting for less expensive internet options.

In such a competitive environment, he doesn’t expect that customer growth will return within the next few quarters, but said “the foundational work to create that opportunity down the line is all in place right now.”

That includes Comcast rolling out mid-split upgrades and the launch of DOCSIS 4.0.

Unsurprisingly, solving for the competitive aspects of the market will also include fiber, which he said is going to be a “very viable competitor that’s there for the long run.”

In December, Comcast President Mike Cavanaugh estimated that fiber competitors covered around half of Comcast’s footprint, is “probably heading towards 60%” and will “probably keep going.” That said, Comcast has “competed against fiber for 20 years, we know how to compete against [it],” Cavanaugh added.

Comcast doesn’t disclose the total amount of fiber it builds on a yearly basis, but one project alone in 2023 included a $100 million investment in Texas to build 1,000 miles of fiber-rich highway, reaching 80,000 homes and businesses.

In 2024, the company is aiming to pass an additional 1.1 million homes in 2024, though it’s unclear what percentage of that will be with fiber.

FWA here to stay?

In addition to fiber, Comcast is also contending with another newer, and perhaps more unexpected competitor: fixed wireless.

Fixed wireless access (FWA) services from the likes of T-Mobile, Verizon and others have gained steam perhaps faster than many in the broadband industry thought they would — cable operators struggled with subscriber losses, and even fiber gains slipped in Q4 2023. Armstrong said customers, particularly at the low end of the market, are increasingly opting for fixed wireless options due to their affordability.

As Comcast adjusts offerings to cater to this segment, it’s facing competition from wireless providers entering its markets, sometimes “five or six” at a time. Despite this, Comcast believes it has a cost-efficient approach to handle the growing demand for broadband services.

“I'm optimistic,” Armstrong said. “It comes down to who's got the lowest cost to serve, and lowest marginal cost to serve, which is a path we've laid out between mid-splits and DOCSIS 4.0 symmetrical. We've got an extremely cost-efficient way to go handle the next wave of traffic.”

Armstrong claimed wireless providers will face challenges when their FWA capacity is exhausted. In such scenarios, these providers might need to invest in additional spectrum and infrastructure, which can be costly. Comcast believes it can compete effectively against these providers by leveraging its existing infrastructure and cost structure.

Indeed, “there are good reasons to believe” that FWA will ultimately be capacity constrained, analyst Craig Moffett told Fierce this month. If (or when) that happens, then cable broadband net adds will get better over time, even if “better” is simply less bad, or less negative, he said.

However, if FWA is not capacity constrained, or fixed wireless providers ultimately spend dedicated capital to sustain it, then cable companies like Comcast might be stuck in the current reality of subscriber losses.

Securing the base

Moffett noted that cable operators often point to suppressed move activity as a problem, but that excuse for subscriber losses is “probably a red herring.”

Low move rates (how many people in the country are buying new houses and leaving their old ones) would be hurting cable operators if they were still gaining subscriber share. “But they aren’t. They’re losing share,” he said. 

Essentially, people usually need to pick a new service when they move, and it seems they're increasingly not picking cable. So even if more people were moving, cable still wouldn't benefit. “More move activity would therefore do more harm than good,” continued Moffett.

In any case, Comcast is more interested in protecting its high-end customers than chasing lower-end users who might be jumping to give other options, like fixed wireless, a try. 

While the company wants to compete, the priority will be to protect its base 32 million customers. Armstrong said the most competitive pressure has been at the low end of the market where the consumer is more willing to make speed trade offs for lower prices. He added that 70% of Comcast's customer base is taking 400-megabit speeds and above. About a third are taking 1-gig speeds and above, when only 15% were asking for gigabit speeds a year ago. 

“Probably the most important thing we can do is segment appropriately, and not let competition in one part of the market seep into other parts of the market and really drag your base down,” he said.

Despite ongoing subscriber losses, Armstrong said he is confident in Comcast’s ability to continue to grow ARPU by 3% to 4% annually, driven by increased customer usage and higher broadband speeds.

Growing ARPU, he added, “starts with segmentation, but then it continues into the average customer doing more and getting more utility out of your network.”