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4 February 2021

New FCC to deprioritize rural networks? Comcast/Charter etch out plans

US broadband could undergo its most assertive transformation to date starting in 2021, as operators accept that recent trends are here to stay. With lids being lifted on early build out plans, where will fixed network investment priorities lie as the new year develops?

Rural infrastructure builds have been expected to continue as a priority as they were under the Trump administration, however, it has been suggested that a Republican-led FCC could pivot from encouraging rural infrastructure builds outs to focusing on how to make internet services more affordable for lower income households.

“Build the networks and they will come” is a message we have heard repeatedly from network industry executives over the years – wired and wireless – yet this message fundamentally does little to close the digital divide. Cost over count could therefore be a key agenda under acting FCC chairwoman Jessica Rosenworcel, at a time when ISPs need careful monitoring as data caps creep in.

Charter Communications is among the top US operators plunging money back into high-speed networks after a prosperous year for its internet business, gaining over 2.2 million subscribers in 2020 to reach 28.9 million in total. Charter has earmarked $5 billion for rural network infrastructure build outs to reach 1.1 million new premises across 24 states, having been buoyed by the $1.2 billion Charter received from the Rural Digital Opportunity Fund (RDOF).

FTTP network infrastructure has been promised by Charter, although the proportion of these 1.1 million premises receiving FTTP is likely to be small. As always with these things, Charter is keeping tight-lipped.

But Charter has made sure to let existing internet subscribers know they aren’t being left behind, with investments planned to improve data throughput and latency with DOCSIS 3.1 technology, which the operator says still provides a long runway to improve its product set. DOCSIS 4.0 upgrades are also planned for this year to provide even greater capacity.

WiFi upgrades have also been swept in recently at Charter, improving the quality of in-home connectivity with a new WiFi 6 router, which is currently only available in one Charter market but plans to be made available in “nearly all” markets by mid-2021.

Notably, following in Comcast’s footsteps as Charter often likes to do, the cableco rolled out companion WiFi Pods from Plume in Q4 2020 to improve WiFi reception in the home. These mesh APs interoperate with Charter’s existing Advanced In-Home WiFi service for managing and optimizing WiFi networks, which Charter says has now been launched across more than 65% of its footprint and rising.

Charter claims to have spent over $35 billion on its network and infrastructure since the close of the Bright House/Time Warner transactions in 2016, investments which showed up in its 2020 performance. At the time of this deal being approved, there were serious reservations about the consolidatory effect it would have on US broadband. A few years and a pandemic later, Charter has used these assets to throw down the gauntlet by investing in areas of the country and in areas of technology where AT&T and Verizon have refused to.

Meanwhile, Comcast is being even more secretive about its network plans, instead reorganizing its Cable Networks and Broadcast Television divisions by merging them into its video streaming platform Peacock – in a structure designed to drive long-term cost efficiencies and revenue opportunities.

Comcast Cable CEO and President Dave Watson hyped up having access to the country’s best fixed network infrastructure, as well as its ongoing work to improve WiFi, where Plume again plays an important role. Watson also mentioned targeted wireless infrastructure as the third layer in Comcast’s network roadmap, which the operator might use to supplement the Verizon network and go after the high dense usage areas.

Cable Networks is still Comcast’s biggest bread winner and biggest EBITDA driver, but going forwards the subscription and advertising revenue streams will be blended into one business – across Broadcast, Cable, and Peacock. Comcast will therefore be selling it to advertisers as one platform, and so it will become more difficult to distinguish between the Cable Networks performance and performance in the TV business.

As the operator has evolved to become 70% broadband-centric, Comcast believes this restructuring will benefit growth of the business over time, which is true if it means veiling over underperforming business areas.

With Comcast sparing itself any of the gory details, we headed over to key network technology supplier Harmonic for some clues as to what Comcast got up to in Q4. We found that Harmonic has just begun shipping its new node platform that incorporates the powerful symmetric gigabit technology announced in coordination with Comcast last quarter, which Harmonic says enhances the business case for its distributed access architecture portfolio.

It’s worth noting that Harmonic has a mammoth $175 million software license agreement in place with Comcast for its CableOS technology.

Unfortunately, Comcast provided zero updates during its earnings call regarding the trials of ATSC 3.0 technology over HFC network infrastructure, which we suspect also involves Harmonic.

Ending on an important political note, Comcast CEO and Chairman Brian Roberts did have a few words on the new administration. “Our view is obviously strongly felt that the long-standing light touch regulation has worked since President Clinton created that classification and reduces regulatory risk for investors and allowed the company to invest more and have paid dividends unbelievably well during Covid. We were never asked to down raise any services, and content providers and consumers really benefited. That wasn’t universally the case around the globe, with different broadband regimes. But we do believe in the neutrality and how we’re not going to discriminate, block, throttle and some of the other principles that we’ve committed to.”