Comcast is the largest Internet provider in the US with over 29.8 million residential broadband customers, but the company's long streak of adding Internet subscribers each quarter is finally over.
In Q2 2022 earnings announced today, Comcast said it has 29,826,000 residential broadband customers, a drop of 10,000 since Q1 2022, and 2,337,000 business broadband customers, a gain of 10,000. The overall tally of 32,163,000 residential and business Internet customers remained unchanged.
Comcast CEO Brian Roberts said the company's cable division is experiencing "a unique and evolving macroeconomic environment that is temporarily putting pressure on the volume of our new customer connects." Comcast also lost cable-TV and VoIP phone customers in the quarter but added wireless phone subscribers.
Comcast was still able to increase quarterly broadband revenue compared to Q2 2021 by 6.8 percent, to $6.1 billion, due to higher average prices and the fact that Comcast has more customers than it did a year ago despite the drop over the past three months.
Comcast's stock price fell over 9 percent in today's trading despite increases in the NASDAQ, Dow Jones, and S&P 500; it has dropped over 32 percent in the past 12 months.
Zero broadband growth a first for Comcast
It's the first quarter ever in which Comcast failed to gain broadband subscribers, The Wall Street Journal wrote. "A review of the company's quarterly filings shows that Comcast added at least 100,000 net new broadband subscribers every quarter over the past 20 years, with the exception of a single instance during the 2008-09 financial crisis, when the company gained 65,000 broadband subscribers in the second quarter of 2009," the article said. That covers the entire period since Comcast's November 2002 merger with AT&T Broadband.
While competition from fiber and wireless services was cited as a reason for cable's stagnation, it was inevitable that Comcast would hit limits on customer growth eventually. After years of rapid customer increases, Comcast has probably signed up just about everyone who wants its service and lives in a home within Comcast's network.
In many parts of the US, Comcast is the only viable option for fast home Internet service. There are also people who would like to get cable Internet in areas where Comcast has deemed it not profitable enough to build and cases where Comcast refuses to wire up a particular address unless the homeowner pays tens of thousands of dollars up front.
Comcast reduced capital spending on its cable division in 2019, devoting less money to network extensions and improvements in the "line extensions" and "scalable infrastructure" categories. But that spending increased in 2020, 2021, and the first six months of 2022.
From January to June this year, Comcast said its cable division "capital expenditures increased 2.5 percent to $3.1 billion, primarily reflecting increased investment in line extensions, scalable infrastructure, and support capital, partially offset by decreased investment in customer premise equipment."
CEO predicts return to subscriber growth
Roberts told analysts today that Comcast "certainly expect[s] a return to residential broadband subscriber additions... we're working hard to expand our footprint, taking advantage of growth in housing and businesses in our current markets, accelerating edge-outs into new areas and we are playing offense when it comes to government subsidies," according to a Seeking Alpha transcript.
Roberts said the decline in new customers is partly due to fewer people moving. "Our win share of new customer acquisition opportunities remains high, but the slowdown in moves has resulted in fewer of these jump balls and this had had the largest impact on our gross connects," he said.
Other factors include consumer behavior beginning "to return to pre-pandemic patterns," and people using mobile service instead. "In the first year of the pandemic, we added nearly 50 percent or 600,000 more customers than our prior annual average growth," he said. Much of Comcast's broadband growth early in the pandemic came from low-income customers who didn't already have home Internet service, he noted.
Roberts also cited competition from both fiber and fixed wireless home Internet.
"Fixed wireless is a new entrant in the marketplace and while there are likely to be significant long-term limitations, today's excess capacity in wireless networks is creating what we believe to be a temporary opportunity targeted at value-oriented customers," Roberts said. Comcast will return to growth by "aggressively compet[ing] for market share," offering "a superior product," and bundling home Internet with mobile service, he said.
Comcast added 317,000 wireless customers in the quarter, boosting the total to 4.6 million. About 7.9 percent of households that use Comcast broadband now have at least one wireless line with the company. Comcast wireless service uses the Verizon cellular network.
Charter Communications, which had 28.3 million residential Internet customers in Q1, is scheduled to announce Q2 results tomorrow.
Faster uploads still coming... any year now
Longer-term, Comcast and cable providers, in general, have been promising faster cable upload speeds for years thanks to improvements to DOCSIS, the Data Over Cable Service Interface Specification. Comcast still hasn't delivered on that to consumers, but Roberts said the company isn't giving up on the goal. Comcast's cable upload speeds have long topped out at 35Mbps even as the same network delivers gigabit download speeds.
"We are making great progress in our network transition to DOCSIS 4.0, which gives us a clear path to reaching multi-gigabit symmetrical speeds at scale faster and at a lower cost relative to our competitors," Roberts said. Comcast offers a fiber service, too, but it has limited availability and much higher prices.
Comcast's overall revenue was $30 billion in Q2 2022, a year-over-year increase of 5.1 percent. Net income was $3.4 billion, down 9.2 percent.
The total numbers include not just cable but also the NBCUniversal division and the London-based Sky Group that Comcast bought in 2018. Roberts said NBCUniversal posted "terrific results at theme parks."
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