Charter CEO Chris Winfrey had some hot takes at the MoffatNathanson conference
Charter Communications CEO Chris Winfrey took a few shots across the industry’s bow at the recent MoffettNathanson Media, Internet and Communications Conference. Among them: The profitable fiber builds have been done already. Mobile is a feature, not a product. And for good measure, 5G macro towers are “the slowest, least-used portion of the network that’s out there today.”
Winfrey’s company is making a bid to become the largest cable and broadband provider in the United States, via a $34.5 billion deal announced last week to acquire rival cable company Cox Communications. The move to combine the two cable players comes as streaming platforms and telecom carriers increasingly encroach on traditional cable turf, using fiber and 5G to gain broadband market share.
At MoffattNathanson, Winfrey talked up Wi-Fi and CBRS, and touted Charter as having the fastest mobile speed due to shifting mobile traffic off of the host network to Wi-Fi for a speed boost—which Ookla had explored in testing earlier this year.
Winfrey said that 87% of Charter’s Spectrum Mobile traffic goes over its own network, either via Wi-Fi or via its CBRS spectrum.
“That’s not the most stunning part. The most stunning part is for the three national MNO or telco wireless companies, over 80% of their traffic goes over Wi-Fi as well,” Winfrey continued, adding: “Mobile is really just an extension, or monetization, of Wi-Fi for the vast majority.” He continued: “There’s still 5G macro cell towers, but that’s actually the slowest, least-used portion of the network that’s out there today.”
He commented further: “I could be a little controversial and say, is mobile really a product … or is it just a feature, an extension of broadband?” he asked.
Against the backdrop of wireless operators insisting that they need more exclusive-use spectrum to handle traffic needs of their customers, even to the potential detriment of shared spectrum like CBRS, Charter has taken the strategic approach that mobile is indeed an extension of broadband—and Winfrey said it’s working.
“None of us are connecting our Internet through a modem anymore directly. It’s all wireless,” he reminded the audience. Customers want wireless inside the home—which is obviously Wi-Fi’s domain—and outside the home, they don’t care who the provider is, as long as their wireless connectivity is fast and continuous, Winfrey said.
Still, he also made the point during his session that Charter has a “very strategic” and “valuable” relationship with Verizon. “The macro cell tower isn’t something that you’re going to be able to get away from,” he said, pointing to the need to support customers driving along busy highways with kids in the back watching videos. “We need that capacity to complement the full, rounded mobile product that we have. And it’s always going to be important to us, and we have a good relationship with Verizon. It’s expected to stay that way,” he added.
When it comes to its business strategy across wireline and mobile, Winfrey said that Charter first wanted an add-on to its broadband business that could be profitable, and to leverage its competitive advantages in having a lot of wired infrastructure. Over time, he said, has come to view mobile as something more like an extension of a connectivity service, than a service unto itself.
“Not just saying this to be provocative—but really, is mobile necessarily a separate product?” Winfrey commended. “Or is it a combined seamless connectivity service where you have usage on top, and … additional lines?” He added: “I think the jury’s still out on that. But the opportunity for us is real, whether or not that pans out to true.”
Later in the conversation, he also talked about mobile as an extension of broadband and that penetration of mobile services should grow to a higher percentage of the Charter base because of the combination of seamless connectivity. After all, he said, voice services—which had less utility than cellular services—had penetration rates of greater than 50% amid broadband households at their peak.
“Mobile … may be a saturated category, but it’s certainly not a dying category,” Winfrey added. “I think our potential there is really high to increase penetration. And I think we have years and years of … profitable growth in front of us.”
Winfrey also pushed back on remarks earlier in the conference by Verizon Consumer Group CEO Sowmyanarayan Sampath, which broadly categorized some of the gains that competitors like cable companies have made in mobile, as part of a “prepaid to postpaid migration” of lower-value customers.
“Look, some people have gotten really good at talking about our business. We have the benefit of actually being in the business and knowing what’s there,” Winfrey said in response to a question about Sampath’s remarks, adding that while there was a higher mix of pre-to-postpaid conversation when Spectrum Mobile first launched, that isn’t reflective of the company’s customer ports today. “I will tell you, this is not a prepaid conversion strategy,” he said.
During the session, Winfrey also touched on a number of other topics, including:
CBRS: Charter is deploying CBRS in 23 markets this year, Winfrey said. “CBRS has taken a little while to get off the ground, and the reason for that is we had to get an entire ecosystem stood up,” he explained. “That’s now all done. And so that’s why we picked up the pace for rolling out CBRS. It’s very good. It’s successful and it’s doing everything that we’d like. … The ROI for the deployment of CBRS is very high. … This is very low capital at the end of the day. It’s got a great ROI and so we’re now in full deployment mode.”
Fiber investment: Winfrey offered a provocative counterpoint to the fiber build-out craze, saying that the fiber investments that are being made today, in general, face lower density, higher costs per passing and may have already reached their terminal penetration, or point of a steady-state customer base—and that he thinks those investments will have a negative return on capital. Some fiber players, he continued, are being starting to be sold before the lack of return becomes apparent.
“If you’re going to sell, sell it while you’ve got the initial penetration gains of any new entrant of any type of product in the marketplace—and don’t wait for the terminal penetrations to show out that you’re not going to be able to get where you’re going to go,” Winfrey said. “You’re starting to see that. … My bet is you will see a flurry of more of these smaller fiber companies that are coming to market to be sold because of exactly what I just described.”
“I think there’s always a peak. People sell it. Smart money sells at the peak, and you find out where things are,” Winfrey said, adding: “I think for the most part, the vast majority of what might have … arguably had a decent economic return, it’s already been built.”
DOCSIS 4: Charter has not been marketing DOCSIS 4 heavily, Winfrey said, because it only cover 15% of the company’s footprint. It doesn’t intend to make more noise until more of the footprint is converted to multi-gigabit and upstream-gigabit speeds, he added. In the long-term, Winfrey added, he thinks the upgrades Chater is making will “generate long-term, better satisfaction, lower churn, higher sales and higher margins.” And if or when upstream bandwidth becomes more critical, he added, Charter will be well-positioned to take advantage of that.
