Count NewStreet Research's Jonathan Chaplin as a cable industry bull. In his latest report to shareholders, the analyst predicted that cable broadband penetration into U.S. homes, and pricing for broadband services, will both rise markedly in the near future.
For one, Chaplin noted that cable operators added a large number of new broadband customers in the third quarter -- around 790,000, according to Leichtman Research.
"Our long-term penetration forecast is well ahead of consensus and calls for an acceleration in broadband subscriber growth," he said. "We saw this play out in 3Q15 with cable companies reporting their best third quarter broadband adds in four years, with growth accelerating and beating consensus expectations."
Meanwhile, the analyst downplayed anxiety among his peers that regulators will seek to control broadband pricing, armed with Title II authority.
"We think this view is misguided," Chaplin added. "Regulators have neither the desire nor the ability to regulate retail rates. We will know if we are correct soon enough: Comcast is steadily expanding usage-based pricing to new markets. If the new pricing takes hold, and if there is no regulatory reaction, we expect ARPU growth to accelerate over time; however, before that, we would expect Cable multiples to rise towards that of other infrastructure companies in the U.S. and Europe."
Meanwhile, Chaplin listed cable's pending migration into the wireless business as another attractive feature.
Noting Comcast's (NASDAQ: CMCSA) recent signaling that it will execute on a 2011 deal clause that will allow it to license MVNO capacity from Verizon (NYSE: VZ), Chaplin said, "Our analysis suggests that this should be an attractive business for cable companies, even under current MVNO terms. In addition, if Comcast is successful, they should soon have the leverage to command better terms."
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