Cable's Q4: Internet leads, video shows signs of rebound

Feb. 3, 2020
While Internet services continued to dominate cable's fourth quarter financials, new twists in the video business model are creating opportunities in a segment that has been shrinking for ...

While Internet services continued to dominate cable's fourth quarter financials, new twists in the video business model are creating opportunities in a segment that has been shrinking for years.


Fresh on the heels of debuting its new streaming service, Peacock, Comcast (NASDAQ:CMCSA) announced a strong fourth quarter driven by cable's transition to a connectivity-centric strategy and investment in xFi. Chairman and CEO Brian Roberts reported broadband net additions of 1.4 million during 2019, which is the best in 12 years, including 442,000 net additions during the quarter.

"We continue to reap the benefits from our ongoing investments to improve customer experience, setting all-time best for many key metrics including agent contact rate and first call resolution. We're increasing customer satisfaction and driving unnecessary costs out of the business. All-in, this drove 1.1 million net customer relationship additions in 2019, our best year on record," Roberts said.

Xfinity Flex, the company's personalized streaming dashboard, has been well received, Roberts said, noting that in the first month, they couldn't keep enough inventory. "We're deploying Flex as fast as we can."

Flex is free to Comcast's broadband customers. Peacock, which will offer classic content like "The Office" and "30 Rock" in addition to original comedies and dramas, will have different tiers of service. The free entry level will be about 7,500 hours; a 15,000-hour version will cost $5 per month if the customer is not a participating cable or satellite company.

"I think eventually we will get the vast majority if not all of cable and satellite. It will take some time. A lot of times the Peacock discussion will be tied to the ongoing MVPD discussion, and we have a lot of big deals up in the air. But I think by the end of the year you're going to see the $5 Peacock product offered free to a lot of cable and satellite customers," said Mike Cavanagh, SVP and CFO, Comcast.

Peacock will have an effect on Comcast's other businesses, Roberts said. "If you imagine a television show where 70% of the viewing comes from some place other than linear television, what Peacock is designed to do is to go after that 70%, get it on our platform in a place where we're ad-supported and we get 100% of the ad revenue. That's the intent."

"We're going to make more money from the television ecosystem, and that will allow us to continue to invest in the linear platform," Roberts said. "So if I were talking to a cable company, I would say Peacock is a way to make us a better, stronger competitor in a way that's good for all businesses, not just streaming."


Rogers Communications (TSX:RCI.A) said that in the fourth quarter as well as all of 2019, it took "significant steps to position Rogers for long-term growth and success," including the launch of unlimited data, the acceleration of the Ignite TV roll out, the laying out of the "critical" foundation for 5G.

Unlimited data and equipment financing were launched to achieve three objectives: stimulate data use and prepare for 5G; drive a step-change in the customer experience and reduce the cost to serve; and reduce the cost of acquisition and retention. "We are seeing good momentum on all three fronts, and I remain incredibly proud of our team for the leadership and the disciplined execution of these plans," said Joe Natale, president and CEO of Rogers.

Rogers' year ended with 325,000 subscribers for Ignite TV, the IPTV service, which is now available to the company's entire footprint. 2019 also saw the launch of "best-in-class" WiFi hub technology, the introduction of self-install, and the addition of Amazon Prime and Sportsnet NOW.

"Looking ahead to 2020 in our cable strategy, we're even more excited about our product road map. It includes more connected home technologies, video entertainment flexibility, along with popular content and OTT integration," Natale said.

The coming year also means the beginning of Rogers' 5G rollout, which is already in downtown Vancouver, Toronto, Ottawa and Montreal. "It is ready when 5G devices become available this year. We just finished testing Canada's first 5G device from Samsung, which will become available in March. We will further expand our 5G network to over 20 more markets this year," Natale said.

Rogers' 5G network will initially use 2.5 GHz spectrum, but then expand to use 600 MHz spectrum later this year. "This premium 5G spectrum provides great propagation across long distances and through dense urban environments, creating more consistent coverage in remote areas and smart cities," Natale said. Rogers also will begin deploying dynamic spectrum sharing technology, which means 4G spectrum can be used for 5G.

Overall, in 2020, Rogers plans to spend almost CAD 3 billion on infrastructure. "This capital and this investment is at risk. We do not have the right regulation. As we enter the world of 5G, regulatory certainty is critical to investment. We need regulation that encourages investment and fuels innovation. Punitive regulation will slow or worse stall 5G deployment," Natale said. "Ultimately it is about balancing affordability with investment. Striking the right balance is key to Canada's digital future. The government has shown they can effectively achieve this balance and they must do it again for Canada."


As for Charter Communications (NASDAQ:CHTR), the company created more than 1.1 million new customer relationships in 2019, which it said is "substantially" more than 2018, and added more than 1.4 million new Internet customers. Additionally, Charter now has more than 1 million mobile lines in service, 900,000 of which were added in 2019. The past year also saw substantial reduction in service transactions per customer relationship.

"Looking forward to 2020, we're well-positioned to continue to reduce service activity per customer, given a higher level of customers in Spectrum pricing and packaging, the completion of our in-sourcing program, and increasingly experienced in-source call center and field operation workforces, the overall improving quality, reliability and maintenance of our network, (and) greater levels of self-installation activity," said Tom Rutledge, chairman and CEO, Charter.

During a conference call, the question was raised whether Charter is considering becoming a partner or distributor for new direct-to-consumer (DTC) video products like Peacock. Rutledge noted that Charter also has products like Netflix on its interface, for example.

"In many ways, I look at these products like I look at pay TV. There are opportunities to enhance the video experience and part of the customer relationship. So we have ongoing discussions with all of the entities out there, and fundamentally, I think while there's a lot of dislocation going on in the video business, there's an opportunity in there for us," Rutledge said.        

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