• At Comcast, Broadband Takes Center Stage

    Last Thursday, Comcast reported a loss of 95K residential video subscribers in Q3 ’18, an improvement over the 134K it lost in Q3 ’17. Losing subscribers is never something to be celebrated, but amid the onslaught of skinny bundles, SVOD, cord-cutting, etc. the improvement was noteworthy (and certainly reflected the fact that AT&T slowed its promotion of DirecTV Now in Q3 ’18, which is why it gained just 63K skinny bundle subscribers, down from 323K a year ago).

    For Comcast it was a welcome relief from Q2 ’18, in which it lost 140K video subscribers, over 4x the 34K it lost in Q2 ’17. On its Q2 earnings call, Comcast executives acknowledged that skinny bundles were taking their toll, and yet they did not seem to articulate an aggressive response. But Q2 ’18 also saw the addition of 260K residential broadband subscribers, up from 175K adds in Q2’17. Given how highly saturated the residential broadband market now is, this jump seemed surprising, and yet, it was barely explained on the Q2 earning call.

    That made me very curious to see how Q3 broadband would turn out - was the Q2 blip up an anomaly or the start of a possible positive reaccelerating of growth? The answer appears to be the latter, with Comcast adding a whopping 334K residential broadband subscribers in Q3 ’18 vs. just 182K in Q3 ’17. And on this quarter’s earnings call, Comcast put the broadband growth story right at the top of its discussion, including the drivers behind it.

    In fact, after years of expounding on how X1 was reimagining the video business, Comcast is now pivoting its whole company narrative around broadband, On the earnings call CFO Michael Cavanagh said “Connectivity is at the center of our relationship with customers,” while CEO Brian Roberts previously noted “Led by X1, video plays an important supporting role in our strategy of driving whole home economics…” It’s also worth noting Comcast now 24.8 million residential broadband subscribers compared to 21 million residential video subscribers.

    X1 has been a hugely significant factor is Comcast battling the headwinds of cord-cutting and gaining share from other pay-TV providers. But it’s evident that Comcast sees innovation of its broadband service, which is now branded xFi, as the key to its future. In a recent call with EVP, Xfinity Services, Matt Strauss told me there are 3 pillars to the company’s broadband innovation focus: better speed, improved WiFi coverage and better control/security.

    On the speed front, Comcast said recently that it now passes 58 million homes and businesses with 1 Gigabit service, with over 70% of residential subscribers getting 100 mbps service. Improved WiFi is happening through the deployment of xPods, the extenders Comcast sells for $119 for a 3-pack. According to Matt, today’s home has 10-15 devices on the network, but he sees a future with 30-50 devices with everything needing to managed. That’s where a variety of control and security features included in the xFi product are also viewed as differentiators. As an example, being able to pause service for kids during meals has turned out to be very popular. And as privacy concerns are escalating for many, gaining more control over their online experience is more important.

    Comcast said that all of these innovations contributed to reduced churn as the top reason for the record-setting broadband additions in Q3. Not least though is that Comcast’s broadband innovations are helping deliver strong video streaming experiences, which is what matters most about broadband for many users today. As telcos being rolling out 5G, which is viewed by many as the first legitimate  competitor to cable broadband, quality of service for video streaming is going to be a litmus test.

    Comcast and other cable operators are mindful of 5G’s rollout, and in Comcast’s case, have decided that the best defense is a great offense. They’re determined to make their broadband offering the best, if not necessarily the cheapest, option for consumers. Comcast’s X1 experience suggests that investing to deliver the best experience results in being most competitive. This is the roadmap it is now following as it pivots to "connectivity" as its top priority.

     
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