Okay, everyone, we'll get started. I'm John Hodulik a gain from the communications team here in research, and I'm pleased to welcome Jessica Fischer, the CFO of Charter. Jessica, thanks for being here.
Happy to be here. Thanks, John.
So we've got 35 minutes for some Q&A. And if you have any questions, log them into the app and put them on the iPad, and I'll get them here, and I'll weave them into the conversation. So Jessica, let you know, what we do every year at this time of year is we get, you know, start to talk about 2024 and, you know, can you just lay out the priorities for the company as you look into the new year?
Yeah. So 2024 is all about executing, continuing to execute on the plan that we laid out at the end of December last year, which is really all about evolution, expansion, and execution. Evolution has a number of pieces. So if you think about on the first piece, what we're doing around network evolution. When we laid out the plan, we laid it out in three steps. We've initiated all of our step one markets at this point, and we'll finish a few of them inside of 2023. We'll finish the rest of them inside of 2024. In those spaces, the good news is, we're seeing the speeds that we expected to see.
We're executing from a cost perspective on the $100 per passing that we expected that we would be able to get. And the overall sort of network evolution trajectory, I think that we continue to be really confident in being able to execute against the plan that we had. The second piece of evolution is really thinking about mobile. The mobile business continues to grow really well. I know that a lot of people are concerned about our free line roll-off from the Spectrum One plans that were going to start happening inside of Q4. We're seeing really good performance in the roll-off of Spectrum One, of those free lines.
Actually, I would say that we might. I expect that our overall mobile churn in Q4 will be substantially the same as where it was in Q3. So, very strong performance on those lines. And with that, you know, I think that we'll continue to see growth from a revenue perspective in mobile. I think we'll continue to see growth from a customer perspective in mobile, as we continue to execute on making our mobile products better and on building the brand in the market around having sort of the best mobile service available to our customers. And so we're really excited about that.
And then the third piece of evolution, thinking about video, which we haven't gotten to be excited about video in a long time, so I'm excited to be in a place where we can talk about value that we're bringing to customers, right? So if you think about what we did in the dispute with Disney that we had at the end of last year, and then in the plan that we have coming out of that, it's really all about taking mobile value... Or I'm sorry, taking value and bringing it back into the video package, and so delivering that value to the consumers. And doing that, sort of coupling that strategy with the Xumo product that we rolled out just a month or two ago.
And Xumo enables our customers to have seamless access to all of those products. So whether they want to access content through video or through direct-to-consumer, to be able to do it in a way that allows them to access content easily across both of those platforms in a single space. And so we're excited about the value that video will bring to consumers. So that's the evolution piece. Expansion, I think that we said we were going to build 300,000 rural passings inside of 2023. We're pacing well for that. That pace has accelerated over the course of the year to get us to the 300,000.
Based on, based on where we are, pacing as of the fourth quarter, I think we'll be over 400,000 rural passings inside of 2024. Those are going well, both from a construction, sort of construction pacing, construction costs, and penetration standpoint. And so we continue to be very happy with how we're executing across the expansion plan. And then the last piece in execution, you know, we made investments across our employee base. They did put a little pressure on the business from a cost perspective coming through last year. We're seeing those investments materialize in lower attrition for employees, which then creates additional tenure.
That additional tenure means you get higher service levels, and higher service levels are beneficial both in the efficiency of the business and in how we serve our customers, which increases the longevity of customers staying with you. We'll start to see some of the benefit of that as we go through 2024 and continue sort of that, that focus around extending the tenure of our frontline employee workforce. The other piece of execution is really investing in digitization. So investing in how it is that we interact with customers through digital channels, and also investing in having the tools that our customer service agents and sales agents need to be most efficient in their transactions with customers. So in 2024, we are also working on sort of making those investments in digitization that will drive continued efficiencies for the business going forward.
It's a long answer, and it's because we have a lot to do-
It's okay.
which is good. So we're excited about continuing to execute on our plans and how well they're going as we move into next year.
Great. I think the 3 E's is a great framework for the rest of the session here. Why don't we start with broadband?
Yeah.
Competitive market, you know, we've had a number of broadband providers here at the conference, and, you know, obviously, you guys are seeing competition. I think you've been seeing for years on the fiber to the home side and then more recently in fixed wireless. So how would you characterize sort of competitive sort of pressure from both of those sources?
As you said, we've always had competition all across our footprint. And fiber in particular didn't get here all at once. So from a fiber perspective, pacing really matters, so how fast fiber is getting built. We see the most impact from a fiber provider when they're newly upgraded in the market. And after you get past, I think of it as like the splash period of having a new or newly upgraded competitor, then we really hold our own against them as a competitor. And so, and often continue to grow even, sort of once you get past that splash period. So the mix of sort of where do you have a brand new competitor versus where are you sort of competing against existing fiber in any given period really matters.
But the pacing of fiber build overall hasn't changed that much over time. We talked about it slowed down a little bit in the second quarter of this year, but, the growth has been fairly steady. And so that piece, I wouldn't say is sort of changing that much from a dynamic perspective. If you look at fixed wireless, on the other hand, fixed wireless is newer and was lit up sort of over a much larger swath of customers all at once. We see the impact, and, you know, it's one of those things, it's a lower quality, but also a lower cost product for a lot of consumers. And we see the brunt of that impact in our non-fiber overbuilt footprint.
Right.
And in that space, we do see some impact from sort of consumers moving to that, lower quality, lower cost product, particularly in, the more price-conscious, segment of the market. The reality of that, just to pull back and level set for people, is that, gross additions and gross churn, in any given period are both much higher, than the net adds that you see sort of them-
Sure.
netting against each other. And so relatively small variations in gross additions or in gross churn can actually produce an outsized impact in net additions. And you certainly see a little bit of that in terms of how fixed wireless impacts what we're seeing across our markets. So relatively small impact if you're talking about gross adds or gross churn, but the net of the two, it can be larger. But in the fixed wireless case, you know, eventually they're going to be capacity limited. And from a product usage perspective, as data usage continues to increase, I think that we'll continue to see customers recognizing that quality does matter. And so we think that we'll get those customers back. It's sort of a temporary impact, but it does have an impact in the short term.
And you said that, you know, it might have an impact on gross adds and churn. I mean, where are you seeing it? Because you, I think you guys have been talking, especially with the lack of activity and the lack of moving and all that, because there's probably not much churn. Is it mostly in the gross add side?
You know, churn continues to be quite low. As you know, as you noted, the housing market, market activity in housing is exceptionally low now.
Yeah.
And so to try to break out sort of which component is which on either side, I think that there's a little bit of impact potentially on both sides. Yeah, but it's hard to sort of say-
Right.
... it's necessarily one or the other.
Got it. And then, getting back to the fiber side, I mean, can you update us on sort of, you know, what the overlap is with fiber in your markets right now, and sort of how it's been growing and how, maybe how you expect it to grow?
Yeah. So overall, fiber overlap, I don't have the exact range, but overall fiber overlap continues to grow-
Yeah.
... inside of the footprint. I think what we've seen, you know, we've talked about it. The fiber overbuilders, perhaps smartly, took the best passings first. So they took the stuff with the most density and the stuff with the highest, so with the demographic profile, that's sort of the easiest for them. And those are the pieces that they built first. So over time, their passings are getting more expensive and getting more challenging from a demographic perspective as they continue to build. All of that's happening while the cost of capital has increased, and really while the cost to build is also pressured a bit. And so, logically, it feels to me like fiber overbuild should continue to slow.
Whether that means that it will actually continue to slow is a lot harder to say. But ultimately, I think the sort of number of passings that they can build in our footprint that are really attractive to them is shrinking. Right.
Right. Makes sense. The question we get a lot from investors is the ACP program. I mean, how is that... You guys have certainly, you know, that's been a tool of yours in terms of-
Yeah.
... addressing that lower end of the market. You know, how should we think of that in terms of, the you know, the ability to grow going forward?
Yes. So we're huge advocates of ACP. We hope that it continues to get additional funding. And it's really because of what it does for consumers in terms of providing them with continuous connectivity. So if you think about customers, who take advantage of the ACP program, their profile prior to the program would have been a higher non-pay profile. So what you would see is that you would see those customers churn out of the business, with non-pay. Often, you'd then see them come back in some other form. So they would, they would have intermittent connectivity. They'd be connected, they'd go non-pay, they'd come back.
It means that it's hard to say, like, sort of in terms of total customer impact, what you get from ACP, but the value in keeping someone continuously connected, I think is significant. And I think about it, you know, somebody who has a child who's in school and needs access to connectivity, or somebody who could be working from home intermittently, like, they need to have connectivity all the time, not just when they can get it and when they can pay for it. So, so we're huge advocates of the program. We hope that it continues to be funded in that way going forward.
Great. So putting it all together, you know, fixed wireless, you know, what you've seen in terms of fiber, the low move sort of churn or moves in general in the housing markets, how do you think about the trajectory for internet customer growth going forward?
So long term, I think broadband can continue to grow really well. I think about it in a few components. First, you're gonna have growth in the housing market, and you're gonna have growth in housing because of the build that we're doing in rural, and so that's important. From a fiber competitive perspective, we continue to compete well against fiber. We're bringing a lot of value to market in the mobile products that we're providing to customers by saving them hundreds of dollars a year. I think it creates a halo that then will impact perception of the broadband product as well, which I think will help us to grow the broadband business going forward.
By what we're doing in video, sort of driving value back into video, I think, again, you get a differentiating factor with consumers that will help us compete against fiber. From a fixed wireless perspective, as I said, I think they have capacity issues, and so eventually, you win those customers back. And so when you put all of that together, I think the long-term trajectory for broadband is quite good. I would say, though, the shorter term has challenges, right? So there's good things going on. Mobile roll-off, as I said, is going quite well. Rural build is going quite well, and we're executing both from a passings and a penetrations perspective there.
But we talked about, in our third quarter call, that in October, we had seen a little bit of carryover churn related to the combination of Disney and rate impacts that occurred inside of Q3. November has been similarly soft, so I can certainly see that it's likely that we could end up with negative Internet net adds inside of Q4. But I wanna be really clear that we think that that's sort of it's short-term challenges, that the opportunity in the overall broadband market and our position around sort of how we see total broadband, opportunity in the long term has not changed.
Right. And I think yesterday, Altice cautioned that they were seeing some increased competition in the fourth quarter as well. And I think, Comcast didn't say yesterday, but they messaged that, I think, a little bit earlier.
Right. Yeah, absolutely. So we're not out of line with the rest of the industry in terms of what we are seeing. We do, though, think that where we're positioned from a longer term perspective, because of the investments that we're making, that we are positioned really well to be able to grow, to be able to grow in the long term.
Let's talk about the network evolution. We'll talk about the rural expansion later, but on the network evolution side, you started off with some comments about how well that's progressing. Now, I think you had mentioned some adjustments to the timing of the-
Right.
... project on your call. Could you just sort of run us through those, those changes?
Yeah. So like I said, in the step one markets, we've initiated all of those, and we expect that we will complete them over the course of 2024. That was the first, I think, 15% or so of the footprint. The step two markets is where we'll have a few months away, and it's really a few months away and getting started in the step two markets. Some of that is to manage our total capital spend, understanding that there's an appropriate sort of total load for the business going into next year. Some of it is also to manage sort of vendors and make sure that we have the staging ready, so that when we do start those step two markets, our plan continues to be to go quite fast in getting them completed.
So the overall, I think, delay in the project again, ends up being just sort of a handful of months. But it is, it does help us to manage the capital impact of the project as we go into next year.
And again, it's sort of early, early days in network evolution, but do you expect the trends to improve in each of those local markets, you know, as you upgrade? Because, you know, obviously, faster speeds available, better upstream speeds, which has historically been-
Yeah.
... I wouldn't say the issue, but I mean, are you seeing any of that as you roll these out and go through step one?
So I think there's two reasons to sort of do the upgrade, right? One is that by upgrading across the entire market to the multi-gig speeds in the downstream and gig speeds in the upstream, you actually see the next generation of products that will utilize additional bandwidth. One of the benefits of our network is the ability to take on extra capacity in a really capital-efficient manner. And so seeding those products that utilize that additional capacity, I think, is valuable for us. The second reason is really around marketing claims, right? And being able to match the marketing claims that are out there, for some of our competitors in the market. I think the combination of those two things, they both help from an overall competitiveness perspective.
Now, does that mean that it's because of the upstream? Like, the preponderance of data usage is still in the downstream, right? Most of data usage is still people watching video today. So do I see the product that says, "Oh, you need a gigabit speed in the upstream?" No, I don't see it, but that doesn't mean... Like, cable's always been sort of a field of dreams business. Like, you build it, and then they come, right? And so it doesn't mean that that product won't be out there. I think that we could see it, but I don't see it right now.
Got it. Okay. So let's turn to video. You know, over the last five years, Charter has always been sort of innovative, I mean, and, and on the video side, and, and we definitely see that in terms of video losses. I mean, over at least that period, you, you guys have lost way fewer subs than any of the traditional, video distributors. And you seem to be taking that approach to the next level, I would say, on, on at least two fronts that, that I'm aware of, and that is one-... what you're doing with Xumo on the one side, and then also what you're doing with affiliate deals on the other side. So, let's start. Maybe we'll start with the, affiliate deals. Obviously, the, the, the deal with Disney was-- made a lot of noise.
It did.
I think I remember an analyst call on a Friday in the summer that was a lot, there was a lot of noise, at least in my household, from that. So that approach, where you're including the SVOD service in the traditional bundle-
Mm-hmm.
and dropping some of the longer tail networks, is that something that we expect to see sort of broadened out across all of your deals over the next sort of 3-5 years?
Yes, absolutely. So we're not willing to make our customers pay twice for content. What that means is that if there is a programmer who is making their content available in a direct-to-consumer service, and our customers are paying for that content in a linear service, our expectation is that that direct-to-consumer service would be part of our bundle. If people aren't willing to do that, then I'm happy to sell their direct-to-consumer product. Or, you know, we're happy to have our sales force, which is large and effective, to sell their direct-to-consumer products to our broadband-only subscribers. But our expectation is that we will not make customers pay twice for content going forward.
And that makes sense. I mean, so when we think of it going forward, I mean, we, you know, we looked at the networks that were dropped on Disney. So again, I think there's sort of two ways you could look at it. One, it's networks with a below a certain ratings threshold. But I think the way that we've heard it from you now, Jessica, and from Chris previously, it's really the duplicative content. So, like, if you, if you assume you're going to include the SVOD service, any channels where there's really duplicative content on that channel are kind of in the crosshairs in terms of what potentially gets dropped. Is that a way to characterize it, you think?
You know-
You're not paying twice.
Ultimately, what's important is not to pay twice.
Right.
And so how you get there from a path perspective, I think there are a lot, sort of a lot of roads that you can go down. And, and I should add one to that. So there's two things, right? Really, it's you wanna—we wanna be able to create, first off, sort of a fully loaded product, so that somebody who says, "I want to have everything, and I want to have access to everything," they can come to us, from us, that product, where they have access to everything. And it doesn't mean that they have to buy our product, and they have to buy four DTCs that match the channels that they've already paid for. One product, they get to buy everything. That product is gonna be expensive, right? It's just the reality of where programming is today.
But there are customers out there who are willing to pay that price point to have everything included, and we wanna make that product available to them. The second piece was around flexibility, though, right?
Right.
So some customers don't want everything or don't have the ability to pay for everything, but they want to be able to aggregate content in a way that works for them, so that they can have access to the components of the product that they actually use and pay a reasonable price for those. So the second piece that we were looking for is we wanna create flexibility around the ability to create products that contain plenty of value for the customer, but that fit within their price point. And then the third nice-to-have on the back of that is it's also we have this great sales force that should be able to sell direct-to-consumer products to our broadband customers and to generate value for customers by doing that.
And the nice thing about Xumo is that you have this platform that allows people to seamlessly sort of move from one bucket to the other as that works for them as a customer. So we have a platform now where we can deliver the content to the customer the way that they're paying for it. And so if you can kind of... If that's the end goal, then the deals have to find a way to sort of fit within that goal. Right?
Right. That makes sense. So from a cost side, from a sort of pricing standpoint on the video side, I mean, a lot of the research we've done and seen that a lot, a lot of customers cut the cord because the pricing is up. So do you think that this new framework? So you're on one side, taking on the wholesale cost of the SVOD service, but the other side, you're dropping the long-tail networks. I mean, do you think it can help? I mean, you're and you're really swapping sort of not much content, not much visit for the really super premium content. Certainly in the Disney deal with Disney+.
I mean, do you think it could help lower the potential price increases we see in the bundle going forward? And then therefore, sort of potentially lower churn or sort of lower the cord-cutting that we're seeing now? Or frankly, on the other side, is the savings really gonna come from, as you suggested, people just getting rid of paying separately for all these SVOD services? We have three SVOD services per household. Customers of yours no longer have to pay for those, or over time.
Yeah. So some of the savings, I think, for customers is that it's—I'm not gonna make them pay twice when they're getting sort of this full, fully fledged bundle, which really is about bringing the value back into, to what we're selling to them. I think on the other side, like, should there be more price pressure on programmers overall? I... Yes, we've talked a lot over the long term about the fact that programmer rate increases generally continue to challenge the video space overall. You know, it's a vicious cycle. They push through price. We are no longer capable of doing anything other than pushing those price increases through to consumers, and that has an impact over how many consumers are willing to buy. But I do think-...
By pushing value back into the bundle, including the DTC services, I think you create value there, which helps you from a consumer perception standpoint. I think by creating the skinnier bundles, where customers get the content that they want for a price that they're capable of paying creates value. And so with the combination of those things, I think you get to the outcome that you're talking about, which is, do customers perceive that when they buy the b- when they buy that product, they're getting the value that they're paying for? I think, I think you fix the problem in both ways.
Yeah. Makes sense. So let's turn to Xumo. And as you said, the sort of, you know, CPE approach you guys are taking or the sort of delivery makes total sense combined with the affiliate, you know, and it's clearly the future of video combining sort of, you know, linear with SVOD, with potentially FAST. How quickly does this become your and maybe it's already the case, but this become your main or if not only, sort of service you're selling in video?
So Xumo is the primary product that we're deploying to new video customers today. So, I mean, I think that means it's there.
Yeah.
How to use that. We're not sort of going and proactively swapping existing boxes out. It's just a product for new customers.
Right.
But it does then turn a piece of the existing equipment, right?
Right. And is there a point, where you've got so few of the sort of traditional infrastructure, you know, boxes in the homes and relying so little on the sort of traditional video infrastructure that you pull all that out?
Maybe. QAM video is gonna be with us for a long time.
Okay.
You know, it will take a long time for those boxes to completely turn over the mix. I do think, as the QAM video footprint shrinks, so as fewer people have traditional set-top boxes, that there are gonna be efficiencies that we'll get from that. You're moving people from MPEG-2 to MPEG-4. Your switched video can be even more efficient as you're serving sort of fewer QAM services, and so we'll shrink the network footprint of QAM video, which is where you're going.
Yeah.
But that point at which you say, "I have enough penetration of these that I wanna go take out the last piece," I think is likely very far down the road.
Gotcha. And then on the CapEx piece that you guys called out for Xumo, could you talk about that in terms of, you know, sort of not just the sort of length of the sort of CapEx cycle as you build the inventory and start moving those boxes?
Yeah. There's probably a couple of years where that sort of Xumo box buying impact you see it inside of CapEx. What I would remind people, though, is the Xumo boxes are actually less expensive than our old boxes were, and we are only deploying them to new video customers. So in terms of gross dollars, I don't think that impact is particularly large.
Gotcha. Now, just quickly on mobile. So I think you start off saying that the churn that you're seeing as the free promotion rolls off is better. I think you said it's basically the churn that you're seeing now is similar to what you saw in the third quarter.
Total churn across the mobile group is similar to what we've seen.
That's great. I mean, how are you doing anything that you can call out aside from your normal, I mean, part of the business of being a cable company is sort of managing promotional roll-off. So is there anything different that you're doing this time around to put up those numbers?
Yeah, and you shouldn't misinterpret. I'm not saying that there's not some residual churn-
Sure.
... from that program. There absolutely is. But I think the total number of free lines that sort of reach that 12-month threshold is probably a little less than people think. And we've said all along, like, these are customers. We could see their usage profile. The usage was quite good. We knew what their device profiles were, sort of what kinds of devices they had, and those have been quite good or similar to the mix that we see across other customers. We knew that our porting ratios continued, it continued to be consistent with what we had had prior to having the Spectrum One plan. So, them having a little residual churn is expected. Them having. We never expected them to have a huge amount of outside churn.
And so I think what we're seeing right now is just consistent with what we had thought and I guess had hoped for as we've gotten to the roll-off of those lines.
How would you characterize sort of the future growth of the mobile space and mobile into your subscriber base will do for the overall economics of the business?
So I think our opportunity for future growth is big, right? There are 130 million or so mobile lines in our footprint today. We have around 7 million of those lines. Our share of growth additions in the market would imply that we could get a much larger share of lines over the next handful of years than where we are now. And so the potential to continue to grow mobile, I think, is high. What we're able to do by giving customers access to our Wi-Fi network and as we build CBRS, the CBRS network, where we can put targeted builds in places that have congestion, right? Is we create a better product for consumers than what they're able to get today from a mobile network operator.
And that's pretty exciting, and it's exciting both for the trajectory of the mobile business itself. You know, we're generating service margin on those lines today, that as that grows, you get EBITDA growth benefit as well as cash flow growth benefit, right? But in addition to that, it's exciting for the impact that it has on broadband, because I really do think it can be a halo impact to the broadband business and improve the churn profile and the longevity of your broadband customer base as well. So I think it's exciting both in what it generates as mobile on its own and in what it generates for a broader connectivity business.
... The CBRS build out, I mean, how, what does that look like over the next few years? I mean, we had Mike Cavanagh from Comcast, and he talked about not just the pilot they did in Philly, and then they're expanding to Pittsburgh and Atlanta, a couple other markets. I mean, is that... Do you expect to build out the spectrum that you've got in all your incremental markets, in local markets?
Absolutely. So we expect to build out all of the spectrum that we've purchased. I think the build will be ROI-focused. Those ROIs get better as you have more mobile customers, right? So, over time, the places it makes sense to deploy will continue to grow. I think because we have a really great relationship with our MVNO provider, because of that, the necessity of doing it all right now, isn't there. So I think that we'll be prudent from a capital perspective in how we roll the CBRS builds over time. But we're confident in how the technology works. We're confident in our ability to generate ROIs as we roll it out, and so we'll definitely utilize what we have.
And I think from that, we'll generate additional offload too, which is also helpful to the economics and mobile business.
For sure. Let's turn to the rural and maybe touch on CapEx. Can you discuss the progress you're seeing in the overall subsidized rural expansion initiatives, including your RDOF and state builds?
Yeah. So progress is quite good. As I said, we're building 300,000 passings this year, looking at more than 400,000 next year. Our execution against the cost component of that, so, you know, we talked about in our third quarter call that we had identified in RDOF that we would go from 1 million to 1.3 million total passings that we plan to build. Doing it at the same sort of net of subsidy cost per passing, as what we had announced back when we announced the rural builds back in 2020. Given the amount of cost inflation that there's been in both equipment and labor across the market, I actually think from an execution perspective, that's very exciting.
In the passings that we're building, we're seeing that we can execute against that cost profile. Penetrations also continue to be quite good, and actually better than we expected across the rural markets. And so overall, we're really happy with how the expansion initiative continues to go. State builds adding on to that are also helpful. And indeed, we're working with-
Right.
... the state regulators to try to make sure that the regulatory format is conducive to private investment, as we make it into the BEAD build.
That, I think Chris has made, you know, his or your, the company's opinion well known, I think, in talking about the BEAD process on a state-by-state level. Are those conversations sort of resonating within the states to make sure that we have an environment that's conducive to the kind of investment they're hoping for?
You know, it matters on a state-by-state basis who you're talking to and where they will land. But I think that people. I think hopefully people understand our position. And I think that we're hopeful that overall rules will land, particularly in those states that are key spaces for investment for us, in a place that will be conducive to our being able to build in those builds.
Great. Okay, two more finance questions. And as the CFO, this is right up, right, right in your neighborhood. I know you guys generally don't like talking about the margins of the business, but you've got a real mix shift going on. Definitely sort of less video, more connectivity, but also now more wireless, which is gonna be seen as lower. I mean, in that kind of a backdrop, should we still, as investors, expect to see continued margin expansion?
So you're right. We don't like to talk about margin-
Yeah.
... it's because of this mix issue.
If Chris was here, I would not be asking him. But yeah.
I'll let him know.
Okay.
The way to think about, first, you have sort of the base component of the business. Does the business get more efficient over time, is the first question, right? I think absolutely, from a digitization standpoint, from the investments that we're making in employees, and even from the investment that we're making in the network. So, like, if I think about the step one markets that we've upgraded, the trouble calls that we see in those markets today are lower than the trouble calls in those markets prior to the upgrade, which was part of our expectation when you go do network evolution. I talked about that we thought that plant maintenance expense would come down in the long term, and we're seeing that in the markets that we've upgraded. The base question, does the business get more efficient over time? Absolutely.
I think that it does. The mix question, like, can you get a lot more margin percent out of the business if your mix shifts? I think some of our cable peers have proved out that that can be the case. But we like the video and the mobile products, both, which are products that I guess that pressure that margin more because they add value to the customer. And ultimately, what our business has always been about is how can you generate the most revenue and the most cash flow from the network?
And you do that by having high-value products, providing them to consumers so that you can generate greater penetrations and more of those products, which also then generates more cash flow per customer, and that, in total, generates the most cash flow that you can generate from the network. So that's our goal. I think the base efficiency of the business continues to get better. I think mix is a question of how well we can execute on mobile and video. But overall, that means that the financial efficiency of the business gets better over time.
Speaking of financial efficiency, last question: You've had this long-standing leverage target of 4-4.5 times. You've typically been right at the sort of high end of that range. Does that approach to the balance sheet and use of cash continue to make sense, given what you're seeing in the sort of the market and in a world where, you know, people are now expecting sort of higher for longer when it comes to interest rates?
Yeah. You know, I think that we've done a really great job in managing the balance sheet and the rate environment that we have now. So the impact of the higher interest rate environment on the debt that we carry has not been that significant. I think in terms of what we have that we would need to refinance even in the next four years, you know, it is somewhat limited in terms of the impact that it can have from an overall rate perspective, because our portfolio is long dated, and it's largely fixed rate. And the leverage profile, the biggest component of why leverage makes sense, is always dependent on your expectations around how the business grows from a financial perspective going forward.
And so does that mean that there's no rate environment in which I would say that we should change leverage? No, like, but I don't think that we have reached that rate environment today. I think we continue to target the 4-4.5 times range, because of the belief we have in the growth of the business in the long term, and because ultimately, from an interest rate perspective, we can manage the overall balance sheet. and so it's that confidence in the business that sort of keeps us where we are. Go ahead.
Sounds good. We'll leave it there. Thanks, Jessica.