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RDOF Expansion Bigger Than Expected

Charter Says Some State BEAD Rules Could Chill Bidding

Charter Communications is warning some states that it won't be interested in broadband equity, access and deployment (BEAD) program opportunities there. States that closely follow NTIA proposed guidelines regarding internet tiers, pricing and labor practices "just won't be attractive states for us to bid in," CEO Chris Winfrey said Friday as the company announced Q3 financial results. He said Charter "will focus our investments in the states that allow us to retain flexibility to run the business, properly respond to market demand and ultimately earn a healthy return."

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The company also said its rural network expansion might slow down its broader network evolution plan, which includes ongoing high-split deployments and eventually DOCSIS 4.0 implementation. Its Rural Digital Opportunity Fund-funded network expansion has turned up 300,000 adjacent passings that Charter wasn't aware of and that it will add to its network as the RDOF work is completed, Chief Financial Officer Jessica Fischer said. Those adjacent passings mean its RDOF initiative will result in 1.3 million passings, she said. Winfrey said RDOF focus could slow network evolution work by potentially six months. Fischer said BEAD construction won't start until 2025. Winfrey said Charter will add a total of 300,000 subsidized rural passings this year and will pick up that pace in 2024. Fischer said that potentially could be in the range of 440,000 rural passings next year. Winfrey said Charter’s rural buildouts over the past year have seen nearly a 50% penetration -- higher than the cabler had expected.

Fischer said Charter is seeing some broadband subscriber losses to fixed wireless competition, particularly in lower-usage and price-sensitive residential subs. Asked about the likelihood of finishing 2023 with more broadband subs than 2022, Winfrey said it "would require a very successful November and December. So I think we're going to be hard-pressed to hit that."

Charter said it ended Q3 with 28.6 million residential broadband subscribers, up 300,000 from the same quarter in Q3 2022. It said it ended the quarter with 13.8 million residential video subs, down 900,000 year over year; 7 million residential voice subs, down 1 million; and 7 million residential mobile lines, up 2.5 million. Revenues for the quarter were $13.58 billion, essentially flat year over year.

Pointing to carriage agreement Charter struck with Disney last month (see 2309110034), Winfrey said the MVPD “plan[s] to modernize" other distribution agreements on renewal, including terms that give Charter’s video subscribers free access also to programmers’ streaming services. Asked about the future of the traditional video business, Winfrey said that in five years, "I think there'll still be a traditional video business that exists," but with streaming services included "in a way that increases the stickiness of the linear business." Fischer said the temporary blackout of ESPN before the Disney deal was reached cost Charter 15,000 internet subscriptions, while the Disney programming dispute overall resulted in about 100,000 video subs lost. That was less than expected, due in part to content being available via streaming, she said.

Asked about how the Affordable Connectivity Program running out of money could affect Charter, Winfrey said most subs receiving ACP support had previously been receiving service through other low-income broadband programs. He said Charter expects it would retain those post-ACP subs, potentially moving them to cheaper, lower-speed services or to its mobile service. "But I'm hopeful that the program, which has been very successful, gets successfully renewed," he said.