Charter Communications posted a surprise drop in broadband subscribers in the Q4-2023, the company announced on Friday.  Charter’s internet customers decreased by 61,000 (-62,000 residential and +1,000 business) in the 4th quarter, with nearly all of the decline from residential customers. That was much worse than expectations for 17,290 additions, according to Visible Alpha and a year-ago gain of +105,000.  The broadband subscriber drop was especially disappointing given Charter’s homes passed growth accelerated to 2.5% year-over-year, Craig Moffett said in a research note.

“Internet growth in our existing footprint has been challenging, driven by admittedly more persistent competition from fixed wireless and similar levels of wireline overbuild activity,” CEO Chris Winfrey said on a post-earnings call, adding that new investments will help drive growth despite the “temporary challenges.”  Chief Financial Officer Jessica Fischer had warned in December that the company could lose internet customers in the quarter. At the time, speaking at an analyst conference, she said the company was facing short-term challenges and that results would be in line with the rest of the industry.

Charter was not the only cableco/MSO to report decreased broadband internet subscribers in the 4th quarter. Last week, rival Comcast reported a loss of 34,000 broadband customers, fewer than expectations, but exceeding the 18,000 broadband customers it lost in the previous quarter.

Stiff competition across broadband and wireless mobile and the decline of traditional television have been causes of concern, with Charter trying to expand its reach into rural areas in an effort to boost subscriber and earnings growth. Charter is facing heightened competition from Verizon and T-Mobile’s wireless home internet offerings, and the cable company could soon lose even more subscribers when a key government program runs out of funding in April, JPMorgan analysts say in a research note. In particular, the end of the Affordable Connectivity Program (ACP), which provided up to $30 per month to eligible customers to put toward their internet bills, could hurt Charter more than its peers.   If ACP is not refunded, “we’ll work very hard to keep customers connected,” Winfrey said.  Charter has more than 5 million ACP recipients, the highest in the industry. The majority of them were Charter broadband subscribers before the program began.

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Charter added 142,000 broadband subs via its rural subsidy program in Q4, for a total of 420,000, and an overall penetration rate of 33.8% – up from 27.2% in the year-ago quarter. The company posted $74 million in rural revenues, up from $39 million a year earlier. Charter pulled in subsidy revenues of $29 million in Q4. Total capex for the project in Q4 was $426 million, down from $567 million in the year-ago quarter.  Charter plans to activate 450,000 new subsidized rural passings in 2024. With all programs rolled up, Charter has committed to build 1.75 million subsidized rural passings.

Charter expects to complete its Rural Digital Opportunity Fund (RDOF) builds by the end of 2026 – two years ahead of schedule. Charter also intends to participate in the much larger $42.45 billion Broadband Equity Access and Deployment (BEAD) program.

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Completion of Charter’s hybrid fiber/coax (HFC) network upgrade has been delayed to 2026 due in part to a lengthier certification process for distributed access architecture (DAA) technology.  Charter’s original plan was to complete its HFC upgrades by the end of 2025. Charter’s HFC evolution plan consists of three steps: