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June 30, 2023

Cable Growth Driver Series: Network Expansion and Upgrades

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Unpacking network growth opportunities through cable footprint expansion, competition for federal funding, and DOCSIS upgrades & capabilities
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June 30, 2023

Russ Lange


A fervent believer in the promise of human powered growth, Russ leads CMG in partnering with companies to help them become aligned, agile, customer-driven enterprises that unleash the potential of their organizations with sustainable improvements in focus, teams, culture, and process our clients.

About The Author

Mark Chinn


Mark leads CMG in partnering with Telecom companies to help them increase customers and accelerate revenue. His 25+ years of experience in growth, strategy and execution includes B2C and B2B multi-channel acquisition programs, customer experiences that surprise and delight, pricing that optimizes customer value, and innovative product development.

Although residential revenue from traditional video, broadband, and voice services along with the growing business services and mobile categories contribute most total cable revenue, cable companies are evaluating and rolling out new revenue sources. In this article we address opportunities for broadband footprint expansion as well as coming DOCSIS 4.0 technology upgrades.

Cable Footprint Expansion & Competition for Federal Funding:

Cable companies have launched (and are evaluating) new solutions and business models. The largest source of growth is expansion of homes passed, either through new construction within the footprint, or expansion of cable plants outside the cable footprint. While this increase will not fuel double-digit growth on its own, it still poses significance. Comcast, as an example, will ultimately serve 56% of its homes, assuming it performs at its overall average penetration. That adds up to over 2.5 million new customer relationships (captured over a multi-year period).

Comcast increased its footprint by 4.6 million homes passed over the five-year period 2016 – 2021, or about 1.6% per year

With $65 billion of funding earmarked for broadband in the 2021 federal infrastructure bill, Internet Service Providers (ISPs) of all types and sizes are competing for “shovel ready” broadband deployments in underserved and unserved areas of the country. Most of the funding (~ 66%) will be distributed by the National Telecommunications Industry Association (NTIA) through the states as part of the Broadband Equity, Access, and Deployment (BEAD) program.

Cable companies could be primary competitors for this funding, competing with telecommunications companies (telcos), wireless internet service providers (WISPs), and emerging fiber providers. Given that cable companies tend to approach plant expansion opportunities with discipline and ROI rigor, an interesting storyline will be whether Comcast, Charter, Cox and others can increase the number of new homes they serve due to BEAD funding, or simply attempt to cherry pick those underserved opportunities they were already considering – now with the benefit of the federal subsidy to cover deployment costs.

DOCSIS Upgrades and Capabilities:

A second source of growth is investment in DOCSIS upgrades. Most cable operators have tested this “10G” service extensively in their labs over the past several years, with some progressing to field testing as compatible equipment upgrades to amplifiers and modems became available. Symmetrical Gigabit grade service will allow cable to compete with symmetrical fiber-to-the-home (FTTH) offerings and provide a path to higher speeds and prices.

DOCSIS 4.0, also knows as Full Duplex (FDX) enables symmetrical downstream and upstream speeds at up to 10Gbps downstream by 6Gbps upstream over existing coaxial “last mile” plant

Comcast, is at the vanguard of deploying DOCSIS 4.0 and plans have these network upgrades live for its customers beginning the end of 2023. In its Q4 2022 earnings report, Brian Roberts, CEO of Comcast, stated “our residential broadband only customers are now consuming nearly 700 gigabytes of data every month. Customers on our Gigabit Plus products now comprise roughly 1/3 of our broadband subscribers.” Given these insights, it’s likely that the company can anticipate the DOCSIS 4.0 capabilities will enable internet rates to continue their upward trajectory as customers continue to pay more for higher bandwidth.

Comcast plans to forge its own path on DOCSIS 4.0, leveraging a version of the technology called Full Duplex DOCSIS (FDX). FDX enables both downstream and upstream traffic over the same spectrum, and is a distinct approach from Extended Spectrum DOCSIS (ESD) which expands the spectrum utilized (to around 1.8GHz from the current 1.2GHz) while allocating separate spectrum for downstream and upstream traffic.

Charter is also fast following with a three phase approach to deploying DOCSIS 4.0 across its entire footprint (55M homes passed), running from late 2023 through 2025. As of now, Charter appears to be favoring an ESD DOCSIS 4.0 deployment, although they have reportedly evaluated FDX. Charter’s first phase currently underway will increase its usable spectrum to 1.2 GHz across 15% of its footprint. Phase 2 will begin in early 2024 rolling out Distributed Access Architecture (DAA) which distributes some traditional headend components to the network edge. Covering another 50% of its footprint, it will allow Charter to boost downstream speeds to 5 Gbps. Finally,Phase 3 will begin in late 2024 deploying DOCSIS 4.0 for the remaining 35% of its footprint.

Lastly, Cox is targeting their own DOCSIS 4.0 launch plans in early 2025 and appear to be leaning towards an ESD deployment. Leveraging a hybrid model, Altice plans to upgrade DOCSIS 3.0 plant to boost speeds in former Suddenlink markets, while announcing plans to deploy FTTH to 6.5 million homes, mostly in its former Cablevision markets.

Regardless of the DOCIS 4.0 deployment (FDX or EDS), it is clear from testing and reports that the technology will improve broadband performance significantly, with the capability to deliver customer downstream speeds of 2Mbps (potentially as high as 3Mbps) and upstream speeds of 1Mbps. This performance will put cable at parity with FTTH at a time when telcos continue overbuilding fiber across cable footprints.

Based on DOCSIS upgrade deployment costs, big cable is expecting material broadband pricing power to offset the investment. This assumption is supported by the evidence of previous DOCSIS upgrades – in fact, cable broadband Average Revenue Per User (ARPU) has already been rising at about 4.5% year-over-year since 2017, from $55M to nearly $69M in 2022. Continued ARPU success enabled by DOCSIS technology is a clear win for cable as broadband subscriber growth slows.

Broadband ARPU and ARPU Growth Rate 2017-2027

On upgrade costs, Charter has the most optimistic guidance at only $100 per upgraded DOCSIS 4.0 home, while Comcast estimates $200 per home for its FDX DOCSIS upgrades. For its fiber upgrades, Altice’s guidance is $500 per home, although the price of fiber, including materials and labor, has been increasing and may continue to rise. Regardless of the exact price paid for upgrades, it’s clear that the cable companies are banking on a path to continued broadband price increases supported with higher DOCSIS 4.0 speeds.

Netting It Out:

Cable companies have several network-based opportunities on the short-term horizon. Federal BEAD funding in largely rural, unserved areas provides one path to subscriber growth, potentially supplementing new cable build already planned. We anticipate seeing how cable approaches the BEAD opportunity in the coming months as the NTIA announces state funding allocations in Q3 of this year. Certainly cable is central to discussions with state broadband offices and the issue will center on profitable returns based on the extent to which federal subsidies offset the critical factor of low customer density.

Technology upgrades to DOCSIS4.0 are more straightforward, at least for the largest cable companies that tend to lead technology selection and deployments (supported by CableLabs). Here we have a blueprint dating back to DOCSIS 1 in the late 1990s: upgrades enable higher speeds that Cable builds into its broadband pricing tiers, driving acquisition and customer ARPU along with subscriber demand. What makes DOCSIS 4.0 unique among previous upgrades is the degree of fiber competition, current and coming, within the cable footprint and the slowing broadband subscriber growth that puts more pressure on technology to deliver stronger ARPU growth. We should begin to see the impact of DOCSIS 4.0 on multi-gig plan adoption and ARPU in late 2024.

Realizing Opportunity

For 25 years, CMG has developed customized strategies for our clients to navigate the ever-evolving telecom landscape. As segments mature, decay, and develop, we help our clients identify the most promising growth opportunities and realize market share through tailored strategy. Contact CMG to learn more about how we can guide your business to expand its cable footprint, compete for federal broadband funding earmarked, and deploy DOCSIS network upgrades.

Visit the link below to read our Cable Industry Assessment and learn about other growth opportunities for telecom businesses.