Continuing to position its broadband business as its growth engine going forward, Comcast Cable CEO Dave Watson told investors Monday that the company actually comes out ahead when certain “low end” customers ditch pay TV but keep broadband.
“It’s actually accretive when that happens,” noted Watson, speaking at the MoffettNathanson 5th Annual Media & Communications Summit in New York.
With each customer that drops video, Watson pointed out, Comcast’s programming costs decline. Since most video products are sold in discounted bundles, the price this customer pays for broadband increases. Meanwhile, Comcast has less CPE and an overall less complicated customer relationship to manage.
“It’s a manageable transition,” Watson noted.
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Comcast lost another 93,000 pay TV customers in the first quarter. And as Re/code noted, revenue from residential broadband came within $1.5 billion of what video produced for the operator in the first quarter—the closest margin between the two sectors ever for the cable company.
With Wall Street souring on U.S. cable stocks in general in recent weeks, Watson was asked by MoffettNathanson analyst Craig Moffett to counter a key source of investor dissonance—that U.S. broadband growth is now in terminal decline.
“The fact of the matter is, the broadband business is a growth business,” Watson responded. “The market is growing, and we’re taking share.”
Moffett pointed out that, in the year since he last spoke to Watson at the same investor event on the same stage, the number of upgradeable DSL homes in the U.S. had fallen from 5 million to 4 million. Comcast, meanwhile, gained 379,000 broadband users in the first quarter, down from 430,000 in the first quarter of 2017.
“Our focus is to deliver a better broadband product. And better broadband delivers better value,” said Watson, who asserted that premium features, such as Wi-Fi management product xFi, will sustain Comcast’s ability to keep grabbing broadband share.
“Not all broadband is created equal,” he said. “And I think we’re well positioned against lower-end broadband products.”
While Comcast concedes its video business is in some level of decline, Watson was cagey in regard to what appear to be declining growth of programming costs. Comcast reported only 3% growth in programming costs in the first quarter. That percentage increase had been in the double digits in previous quarters.
Watson was asked, does this reflect a new world order in terms of the leverage MVPDs have in relationship to programmers?
Watson restated Comcast’s position that the growth rate decline was simply a function of timing—Comcast didn’t have any significant program licensing renewals in the first quarter. However, he added, “I think this is kind of the range that we’re going to be staring at going forward.”
Finally, asked about Comcast’s wireless product—will we see Comcast significantly ramp up promotion for Xfinity Mobile at some point?
Watson said the primary goals for the service will remain modest—that is, to simply spur demand for the company’s wireline broadband offerings going forward.
“xFi is such a differentiated service,” he said. “Great speeds, great coverage, great control. We’ll spend more time talking about that.”