Charter CFO Fischer maintains financial focus at Deutsche Bank conference as ACP nears end

  • Charter is estimated to have about 4 million Affordable Connectivity Program subscribers

  • At the Deutsche Bank's conference this week, Charter's CFO said the company will try to retain these subs, but did not mention continuing to offer these low-income customers their broadband service at a reduced rate

  • The industry is anxiously waiting to see what happens because the program is set to end in April

Charter Communications CFO Jessica Fischer provided an update on Charter’s broadband business at Deutsche Bank’s Media, Entertainment & Telecom conference this week where she talked about everything from the Rural Digital Opportunity Fund (RDOF) to competition from fixed wireless access (FWA) to the Affordable Connectivity Program (ACP).

When it comes to ACP, the industry is anxiously waiting to see what happens because the program is set to end in April — and Charter might have more exposure than other internet service providers. 

In January, New Street Research estimated that Charter had at least 4.1 million fixed broadband ACP subscribers. Charter says it now has more than 5 million ACP subs.

When asked about how the operator plans to address the end of the program with its ACP subscribers, she said, “We have a highly skilled sales and retention workforce. We have a mobile product that can save people hundreds or even thousands of dollars. We will use the might of that force to try to keep as many customers connected as we can. But without a doubt it will be disruptive.”

She did not mention continuing to offer these low-income customers their broadband service at a reduced rate — instead she focused on how the potential loss of these customers might affect the company’s finances.

"It feels like the valuation impact in the market is out-sized relative to the actual number of customers who are at risk. We’ll be prepared. We’ll work our way through it. It will disrupt customers in the meantime," Fischer said.

The ending of the ACP is a lightning rod topic for operators and has the potential to impact the lives of low-income Americans. A Feb. 21 note from Congressman Frank Pallone, Jr. (NJ-06) and Federal Communications Commission (FCC) Chairwoman Jessica Rosenworcel called for urgent congressional action to extend funding for ACP.

In case you forgot, the program provides eligible households with a discount on their monthly internet bills. In New Jersey alone, 338,000 families are benefiting from the program. To date, "New Jersey families have received more than $151 million from the program, saving $8.3 million each month," according to the note from Pallone.

“The digital divide will only grow larger if Congress fails to extend funding for the program in the coming months. We simply cannot allow this to happen. This program is helping Americans in every zip code and every congressional district – Democrat and Republican – and we must come together in a bipartisan way to pass the Affordable Connectivity Program Extension Act," Pallone said in the statement.

The conversation between Fischer and the Deutsche Bank moderator Bryan Kraft revealed just what a tricky situation the ending of ACP will be for operators like Charter.

Fischer said that it will be challenging to notify customers about the abrupt end of the program and implement the changes on their bills. “Our business is complex to implement against something like that. It is much more difficult if there is not a window of some time prior to when the actual sort of adjustments have to start coming off the bill,” said Fischer.

FWA deal or no deal?

Moving on to the topic of FWA, Kraft asked Fischer about T-Mobile’s recent move to increase the price for its FWA service to $60 per month.

She suggested that Charter customers get a better deal when they combine Charter’s broadband with Charter’s mobile virtual network operator (MVNO) wireless service. But then, more interestingly, she talked about the cost to companies such as T-Mobile and Verizon to deliver FWA.

“All of the providers who are offering fixed wireless are offering it at a price that assumes there’s no capital costs associated with that product – that it’s sort of excess capacity, and so I might as well sell it. The reality is that spectrum is a constrained asset. And it’s a costly asset," she said.

Once the wireless carriers reach their capacity constraints, they’ll have to bring their customer counts down, or they’ll have to start pricing FWA consistent with the amount of data it uses, “which is 30 times what you use for wireless mobile lines,” she said. “We believe in the long term we’re going to get a good share of those customers back. Because the reality is it’s not a costless product."

RDOF drama continues

Charter was a big recipient of RDOF awards, winning $1.22 billion after the auction in 2020, under the name CCO Holdings.

After a lengthy period in which the FCC reviewed the long form applications of RDOF winners, and during which time some companies (including Charter) defaulted on some RDOF locations, the FCC in January published the final list of RDOF awards. Ultimately, Charter’s company called Charter Fiberlink came out with more than $495 million in awards. And other Charter legal entities including Time Warner Cable Information Services and Bright House Network Information Services also had winning bids, resulting in Charter garnering more than $1 billion in RDOF funds.*

This week Fischer said that in spite of the fact it committed to the RDOF builds back in 2020, the company is running at a cost-per-passing that is consistent with its original estimates.

“From a penetration perspective, we’re hitting just under 40% after six months; over 50% on our stuff that’s been 12 months and longer,” she said. "And in both of those segments you have penetrations that are continuing to grow. We’re really happy with the penetrations we’re getting across those markets.”

She said Charter also looks forward to selling mobile to the fiber customers that it ultimately passes in the RDOF locations.

*After publication of this story, Charter clarified that it won RDOF bids under several names and the story was updated accordingly.