Dave Watson, Comcast Cable president and CEO, described the current broadband environment as the most competitive he’s ever seen while discussing the company’s strategies at this week’s J.P. Morgan Investor Conference.
“The number one focus, without a doubt, is growing broadband revenue,” said Watson.
Watson explained that customers are opting for higher speed tiers and packages, so improving the network is necessary for revenue growth. He reported that 70% of Comcast’s broadband customers utilize 500 Mbps or faster speeds, and a third utilize 1 Gbps.
“So, the main thing that we believe is the key to the balancing act is the network: investing in the network and segmentation,” he said. “And those are the two key things that we’ve been pretty consistent on, very focused on.”
Improving the network and DOCSIS 4.0 deployment
Watson described mid-splits as one of the factors behind an improved network. Mid-splits currently reach 40% of Comcast’s footprint, and the company plans to grow that to 50% by the end of the year.
“Once we do mid-splits, it opens up the ability to come in with DOCSIS 4.0; DOCSIS 4.0 ushers in multi-gig symmetrical,” said Watson.
Another factor is virtualizing the network, which Watson said will allow Comcast to improve capital spending while still scaling the network.
“So, the brains are moving from the hardware to the cloud: It improves telemetry, improves reliability; the time for us to make any kind of changes to the network is dramatically accelerated,” he said.
Comcast is also focused on increasing passings. In 2023, the company added 1.1 million passings and anticipates a slightly higher number this year.
“The question that’s come up has been: are we holding back managing capital intensity? We’re not. Strategy defines capital intensity, and our strategy is to compete fiercely,” he said.
Growing broadband subscribers
Watson said subscriber growth comes down to how Comcast segments the marketplace.
“Our starting point,” he said, “are the best customers, the ones that want the best experience. And so that is the beginning point of segmentation. However, we’re competitive in every segment.”
Also key, according to Watson, is innovating around broadband. Mobile, he said, is a good companion to broadband, and when paired, is having a positive impact on churn. This strategy also involves introducing new products in the lower end of the market.
Comcast is also banking on its new streaming bundle to help grow and maintain its broadband subscriber base. The upcoming StreamSaver product, which bundles Peacock, Netflix, and Apple TV, will be available at a discounted price for Comcast broadband customers.
“The reason we did it in the first place was broadband; it’s for the broadband customers,” said Watson. “They’re looking for simple, easy alternatives, and this is a great streaming set of packages to bring to the marketplace, so I’m excited. I think it’s a home run for consumers.”
The end of ACP
As the affordable connectivity program (ACP) ends, recipients will see their bills increase. Comcast is preparing for disconnects as a result, but whether the bulk comes in the second or third quarter remains to be seen.
“There will be an elevation of churn, I think, as this goes through,” said Watson. “We’ve gone through the first, you know, a little bit of a wave of the partial payment, but that’s not indicative of what will happen later.”
Watson reported that most customers who enrolled in ACP were existing ones.
“This is a form of promotional role,” he said. “We’ve been doing promotional roles for a very long time. There’s a whole protocol: how you do that and how you manage it. We know this is a very important moment for customers, and we’re going to be very sensitive and careful with how we do it. But we’ve become very accustomed to promotional roles. So, this is going to be that. But we’re prepared and operationally ready, and we have the product portfolio to back it up.”
Watson further reported that the end of ACP funding isn’t altering Comcast’s ARPU guidance range of 3% to 4%.
“Because customers have been with us for a while, most of them prior, that had a good experience with internet and broadband, we are hopeful to be able to work with them,” he said.
Business as usual with business services
With a $5 billion annualized EBITDA run rate, Comcast’s business services continue to look promising. Watson says Comcast has taken a consistent, aggressive approach, deploying the same strategy in business as in residential.
“We’ve already established a leadership position in small business broadband (SMB), which I think is impressive for cable and Comcast to pull off. But at the same time, we compete fiercely for small business.”
He also said Comcast will continue to be a challenger in mid-market and enterprise.
“I think there are even more opportunities as you add in new, more sophisticated and advanced applications, things like SD-WAN, things like UCaas, CCAS; security is essential,” he said.
Across business segments, Watson explained, reliability is a universal requirement.
“Reliability to the business customer is everything,” he said. “It must work. And we have the most reliable approach towards small business, medium, high-end customers, and I think a great roadmap for mid-market.”
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