Seeking to bolster its competitive position against Verizon, AT&T and other broadband rivals, Altice USA is scrambling to upgrade its networks for gigabit capability and boost data speeds throughout its footprint.
Altice USA , the fourth-largest cable operator in the US with 4.9 million customers, is both constructing new FTTH networks in its regions and, more quietly, rolling out DOCSIS 3.1 over its legacy HFC networks to deliver the higher broadband speeds. In particular, it's raising the maximum downstream speed that it offers to at least 300 to 400 Mbit/s in most of its footprint.
Speaking on the company's fourth-quarter earnings call earlier this week, Altice USA Chairman & CEO Dexter Goei said the MSO now offers downstream speeds of 300 Mbit/s or more to 89% of its 8.6 million homes passed, up from 83% at the end of 2016 and just 16% at the close of 2015. That 89% figures includes all of the homes in the former Cablevision Systems footprint in the New York metro area, where the cable provider fiercely competes with Verizon Communications Inc. (NYSE: VZ)'s Fios service.
Moreover, Goei said, Altice USA now offers maximum downstream speeds of 400 Mbit/s to 86% of its households, up from just 23% at the end of 2016 and a mere 16% at the close of 2015. That 86% figure includes 95% of the Optimum homes in the former Cablevision footprint.
Last but not least, Goei noted, Altice USA has now rolled out 1-Gig service to 29% of its homes passed, up from 23% at the end of 2016 and 16% at the close of 2015. All those homes are in the MSO's former Suddenlink territories, which have largely received FTTH upgrades already under a program launched before the Altice takeover. The MSO is now working to upgrade the Cablevision regions to FTTH networks too. (See Altice Amps Up US Capex for FTTH, New Box.)
"But we are not stopping here and we'll continue to widen the availability of faster and faster speeds," Goei said, according to a Seeking Alpha transcript of the earnings call. "These upgrades have allowed us to meet customer demand for higher broadband speeds, with 90% of our gross additions taking speeds greater than 100 megs. And the average broadband speed taken by Altice USA's customer base more than doubled to 128 megs at the end of 2017, with average daily usage per customer now reaching about 200 gigs, as customers are now using our broadband services more and more."
Despite these growing speed capabilities and Verizon's heavy marketing of Fios' symmetrical 1-Gig speeds, though, Altice USA is not yet seeing much customer demand for its 1-Gig product. Instead, Goei said, the sweet spot for subscribers seems to be more like 100 Mbit/s or 200 Mbit/s, at least over its HFC network in in the New York area.
"Effectively today, we probably have an upper limit, depending on penetration levels, of 600 megs on our current network, so we've gone up to 400 megs systemwide," he said. "But fundamentally, we're not seeing a big amount of penetration there. I think it has been a good counter to the 1 gig, or the almost 1 gig, FiOS offer, and customers really value the ability to have higher speeds and the better service that we have over at Optimum than Fios, which is why we're not really losing any market share relative to Fios. So, it's more of a mindshare discussion. The bigger chunk of our onboarding is really at the 100- and 200-meg level on Optimum."
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These moves come as Altice USA, like most US cable operators, continues to enjoy steady, if somewhat slower, broadband customer growth. In the fourth quarter, the cableco added 25,000 residential broadband customers, down from 36,000 in the year-ago period, primarily due to a slowdown in the former Suddenlink areas because of increased competition from AT&T Inc. (NYSE: T) and other rivals. For the full year, Altice USA added nearly 84,000 data subscribers to push its total broadband customer base over the 4 million mark.
In contrast, like most US MSOs, Altice USA continues to suffer an erosion of its video customer base. The cableco lost another 25,000 pay-TV subscribers in the fourth quarter, compared to a loss of 21,000 a year earlier. For all of 2017, the company shed 129,000 video subs, dropping its total to just over 3.4 million.
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