Ongoing low churn activity among broadband customers is still posing challenges for Charter Communications, according to Tom Rutledge, chairman and CEO, who spoke Wednesday morning during MoffettNathanson’s 9th Annual Media & Communications Summit.
Though low churn means lower operating and marketing costs, it also means fewer opportunities. “The [churn] activity levels, particularly at the beginning of the year, were lower than they've ever been,” he said. “They were lower than they've ever been in every category. Any kind of churn in any way you measure it is down. Churn is our biggest opportunity for sale because the customer is ready to move, and so that's the biggest issue we have right now.”
Supply chain constraints and broader market effects resulting from the pandemic also have not fully “unwound” yet, he said, translating to ongoing uncertainty in the market. In addition, price inflation has created selling challenges in both the enterprise and consumer markets. While Charter is just one company along a chain of companies passing higher prices along to one another, and eventually to end users, Rutledge said, “You have to be careful you don’t destroy your opportunity [to sell].”
Amid these challenges, however, deeper market penetration and more broadband customer passings also creates more opportunity to sell. Charter’s broadband penetration is about 55%, and its adoption rate is greater than 80%. Charter has been building out about 1 million broadband passings per year and still sees more opportunity for new network construction in rural markets.
“There’s still the opportunity to sell the unserved passings that we’ve passed,” he said, adding that the company does continue to see higher yields on sales it does make and that the overall competitiveness of the sector is healthy. “Competition hasn’t changed, but consumer behavior has changed,” he noted. “My expectation is that the pace will begin to accelerate again over time.”
Rutledge also reiterated previous comments he has made about Charter’s new video streaming joint venture with fellow cable TV company Comcast, saying that while Charter has lost video subscribers on the cable TV side of the business (it lost 112,000 video subscribers in the first quarter) the joint venture presents a strong sales opportunity to build up video business.