Charter expects positive sub growth in Q2 despite hefty ACP losses

Charter Communications CFO Jessica Fischer revealed the operator is expecting as many as 70,000 broadband customers to churn off its network in Q2 as they roll off a government subsidy program, but stressed it still believes it will achieve overall positive broadband subscriber growth for the period.

Speaking during a Credit Suisse investor conference, Fischer explained Charter has been an active participant in the Federal Communications Commission’s Emergency Broadband Benefit (EBB) program and its successor, the Affordable Connectivity Program (ACP). While it has acquired some customers through the program, she said its main focus has been signing up members of its base who quality for the benefit. Thus, Charter now has “a much larger population of EBB and ACP subscribers than probably all other broadband providers.”

While this has helped its subscriber base weather economic pressures, it also left Charter exposed to churn when the EBB ended and customers were transitioned to the ACP earlier this year.

“As part of the transition from the EBB to ACP, a small portion of those subsidized subscribers either didn’t opt-in to continue their service after EBB, or they didn’t meet the ACP requirements,” she explained. “Accordingly they have or will be disenrolled from the subsidy program and we’re no longer going to count them as customers as of the end of the quarter.”

A total of between 60,000 to 70,000 subscribers are expected to be dropped as part of this move.

Excluding the impact of these losses, Fischer said Charter expects to deliver positive total net internet adds in Q2. She added “I think that we’ll have positive total net internet additions even when including the headwinds that I described.”

Her comments came amid concerns from investors and analysts about slowing broadband net additions, particularly in the cable segment, and fears that operators could actually post losses in the seasonally sluggish second quarter.

In an analysis published last month, New Street Research noted cable broadband net additions plunged from pre-pandemic totals of 719,000 in Q1 2018 and 798,000 in Q1 2019 to just 409,000 in Q1 2022. The firm predicted cable net additions would fall to just 104,000 in Q2 2022, down from 454,000 and 417,000 in the same quarter of 2018 and 2019, respectively.

But Fischer said Charter has plenty of room for growth, both through the expansion of its network via edge outs and government subsidized builds as well as by luring in customers with better value. Wireless plays a key role in the latter strategy, but Fischer said the operator is also working to impress customers with a better user experience. These efforts also have the added benefit of making network operations more efficient.

“We’ve been working on a program we call our proactive maintenance program. And today with telemetry we’re able to detect when a customer is having service issues with their device in the home. And we’re also able often to pinpoint whether that issue is inside of the home, whether it’s inside of the wiring, whether it’s in the drop between our line and the home or whether it’s sort of out in the network at large,” she explained. While Charter previously used this technology for its own internal network monitoring, Fischer said it’s now using it to reach out to customers and proactively schedule customer service appointments to resolve issues.

“That’s a differentiating experience from a customer side” and actually makes it easier for Charter to manage its appointment calendar for field technicians, she said. “So that’s very in the weeds but it’s one example out of what I would say is many of how is it from where we are right now do you continue to both better the customer experience and do it in ways that also drive down the cost of maintaining your network.”