Good morning, everybody, and welcome to the 11th annual MoffettNathanson Media and Communications Conference. Welcome to those of you who are joining us via webcast. This is a treat. Chris is one of the few, or Charter is one of the few that has not only joined us every year since we started MoffettNathanson , but every year since you've been a public company, again. So.
Oh, that's true. It's good to be back.
It's, it's good to have you here. Look, so obviously we have to start with broadband. I'm going to talk ACP in a minute, because it's just so topical and, and, and in your face, I guess. But, but I want to start with just some general observations of where we are in the market, because at least we had a view that, okay, you're going to see fixed wireless access slow down a bit. You're going to see fiber overbuilds sort of at a stable level, and the headwinds on broadband, on cable broadband, therefore, start to lessen a little bit. Well, we saw both of the first two things.
Right.
Fixed wireless broadband did decelerate. Fiber did decelerate. DSL declines didn't actually decelerate all that much. And yet, with all the lessening of the headwinds, things didn't get better for, for broadband net adds for Charter. What, what gives? How do I reconcile that set of seemingly contradictory data?
You know, when we went back and took a deeper dive into both Q4, but even more so with Q1, I think all the things you said are true. And interestingly, we actually competed well, which is kind of counterintuitive given, you know, where the net adds came out. The bigger issue, and it wasn't specific to Charter, was the broadband market had a temporarily lower growth rate, particularly inside of Q1. It was a real drop. And that was caused by lower household formation, the first time that ACP was no longer available, not only for new connects, but also for movers. And so you had this taking place inside of an environment with, you know, low household formation, lower ACP, and at the same time, you still had incremental competition that was taking place.
So the opportunity here, you know, was to compete better, but you did it in an environment with much lower jump balls, so to speak, much lower activity inside of the marketplace. You also had some reversion to mobile substitution, back to some of the pre-pandemic levels. And we'd seen that a bit inside of Q4. We saw it in Q1. What that means is the wireline broadband market, you know, really just didn't have the same level of gross adds inside of Q1 that it had. And that's temporary.
Do you think the driver for that is ACP, as you said, that just stopping new signups?
It's one of many. You had the, I would say, probably less about stopping new signups. And what you also had is ACP movers, beginning at the beginning of February, if you were moving with an ACP wireline benefit because you were opening up a new account, you weren't able to continue into ACP.
I imagine that.
I think that impacted everybody across, you know, the entire.
Because I imagine that's a demographic that moves that tends to skew toward a.
Even in a low-move environment, you have a lower, you know, they rent, they, the renters tend to move higher. So look, it's a combination of all those things. The wireless substitution reversion is real. The lower household formation is real. And probably in that order with ACP reconnects, not being available as of the beginning of February. But it wasn't unique to Charter.
So if I step back and say, okay, leaving aside those perturbations, particularly the affordability questions that I said I'll get to some ACP questions in a second, but is your confidence in your longer-term growth rate actually higher now given what you saw from fixed wireless and fiber in the quarter?
I think what we saw from, well, first, we have very high confidence in our ability to return to normalized growth. And I think what we saw from fixed wireline overbuild as well as fixed wireless is just the beginning of what we were expecting. In fact, if I'm honest, it's taken a little bit longer than what we expected. But we have full confidence in our ability to return to growth, you know, for a few reasons. One, household formation will return to normal. Two, ACP will be behind us. The wireless, you know, reversion to mobile only is about back to where it was. It's nearly back to where it was before the pandemic. And if you really step back and say, okay, how do I now convince myself of the ability to compete in a once again growing broadband market?
It comes down to, do you have the best network? Yes. Do you have the best product? Do you have the fastest speeds? Do you have the unique ability to combine that with mobile in a way that nobody else can? Can you have the fastest mobile as a result? We do. Then can you save customers significant amounts of money? Having the best product, having the best price in the marketplace when combined with mobile gives you a lot of confidence that there's no reason that we shouldn't be able to return back to normalized growth.
You want to make some news for us and tell us when?
No, thanks for that. Look, you know, I've said it on the past two calls that, you know, our timing wasn't exactly right. And so while I have 100% conviction in everything I just said, it's hard for me to say is that six months from now, nine months from now, you know, it's just difficult to say. And some of it depends on, as well, the rational competitors in the marketplace and their behaviors as well.
So I do want to talk about ACP because first, sort of, it's obviously so topical and relevant, but I think it also helps understand the market over the last few years. First, you leaned into ACP much more so than your competitors and peers. Was that a big driver of subscriber growth, or was that a big driver of reaching out to existing subscribers and saying you are eligible for a benefit that you aren't taking advantage of and you should?
So we had a low-income product released since 2016. It was a condition of the merger. And so we had already been pretty active in the space. You then have the introduction of ACP on the back of EBB, you know, which was the Emergency Broadband Benefit . And so, you know, that program, you know, the scope of that was really for 200% of the poverty level. It's actually a pretty large population. The FCC and the White House asked us to get behind the program, and we did. So the question is to how much incremental lift did we get relative to others? It's not really clear to me. Clearly, we drove the benefit in a lot higher because that's what we were asked to do, to those who qualified. And, you know, we were successful in doing so.
But I don't know to answer your question, how much incremental lift did we get versus others? For sure, what we did see is as a result of having more customers with ACP benefit, their ability to stay connected to broadband was much higher. Now, clearly, all of us got lift from ACP.
So, churn,
Churn was down.
Bad debt was very low.
Bad debt would have been down. Your transactions would have been down. And it just meant that customers who normally would be disconnect, reconnect, disconnect, reconnect based on affordability, some of that had for sure been smoothed out, which has a financial benefit to, to Charter.
If I think back to.
To all operators, really.
Sure. If I think back to the narrative that came out of COVID, it was that the lockdowns made transparent how much everyone needed broadband for work at home and distance learning. And I must admit, I was always sort of uncomfortable with that narrative because part of you would say, what, you didn't know that before COVID? Maybe in retrospect, what COVID did wasn't so much change the demand for because of work at home and distance learning, but in fact, just change affordability because of the creation of all those subsidies. And that what we're seeing now is simply a return toward penetration levels that were all that was sustainable given, the.
Affordability.
Affordability.
Look, if you're right, that's unfortunate. And I think it argues for having something like, a modified ACP in place for a longer period of time. On the flip side, if, if what you're saying is true, then it's a one-time impact, and the market will return back to a normalized growth rate, which is what we fully expect either way.
Do you and your regulatory team still hold out hope that a standalone ACP renewal comes to the floor of the House? I think it can come to the floor of the Senate, but does it ever come to the floor of the House?
You know, politics isn't my specialty. Every time that through this ACP process, I've thought that we had the right leadership in place to go drive it through. We have a fair number of champions out there who I think are trying to do the right thing. We've so far been disappointed, but I haven't given up hope that leadership will actually do the right thing and try to preserve. There's 22-23 million customers out there who have this benefit today, and a good portion of them are going to lose their internet.
So my last question about ACP is, I know it's too early at this point to say what's happening now that the program is running out of money and you've got a half month of payments and things. But, is there any update that you can share with us about how you're going to communicate about ACP and how do you identify a customer that leaves that might have left anyway or that might have moved and, anyway, or all those kind of complexities that say it's not as easy as saying we lost this many ACP subs?
So there's a lot in that question. Look, we stopped enrolling new customers in ACP on February 8th, beginning of February, just like everybody else. And we stopped having customers who were reconnecting February 8th. And we began to communicate with our customers very early on. So we now have several months of communicating with our customers, which gives us opportunities to talk to them in advance. And so the things that we have available to us are clearly you can move them into a different package that's a more affordable for where they are. You can put them into a retention package.
I think the most attractive, though, which we really lean into, is we have the ability to instead of a customer having a $30 ACP benefit, we can give them the equivalent of $50, $60, $70 of value by giving them a free mobile line for a year. And so we've offered that proactively to all of our ACP customers. It takes people a while to realize this is for real and for the benefit to go away to be a triggering point. You know, we're now inside of May, and we've got half, half of a subsidy, really, that's available inside of the month of May.
And so we're not only gaining experience through talking to our customers in advance of the full roll-off of the subsidy, but don't forget that we had as well. If you think about all the ways that Charter has leaned into the low-income environment, not only did we have the low-income product back since 2016, but if you go back to a lot of acronyms, Remote Education Offer , REO, you go back to Keep Americans Connected, where we had to deal with back balances for multiple products because we'd kept customers connected to broadband.
State-level programs as well.
State-level programs and try to preserve them into the broadband relationship. So we learned a lot from that, which is now cascading into this framework as well. And then the EBB itself, the Emergency Broadband Benefit , was originally $50, and the benefit got, under new rules, which had to be modified. You had to transition that customer base into the Affordable Connectivity Plan, ACP. So we have a lot of experience to kind of lean on in terms of what we think is going to work. That's not to say it's not going to be disruptive. It's going to be disruptive, you know, for, you know, subscriber count, you know, one time, really Q2 and Q3. And the reason Q3 is as we work through non-pay. Like I said, we'll manage through collections and try to work with customers to preserve their broadband relationship.
but then also from an ARPU standpoint, all the things I described, whether it's a, you know, whether it's a broadband temporary step down in ARPU or whether it's a mobile line, because we give out free mobile lines for the first year. By the way, we know that's going to stick based on our Spectrum One experience. And it's going to stick because it's a $30 line at retail instead of what they probably currently pay as $50, $60, $70. And it's the fastest mobile product inside the marketplace. So, you know, the other piece of your question, you asked, how are we going to track it? I, I will admit to you, on one hand, there's going to be a combination of art and science.
And we're going to do our very best to provide good estimates, the best that we can, and we're going to label it as such. But, you know, you can get reasonably comfortable. We can get reasonably comfortable inside the business. If you take a look at acquisition, voluntary churn, and non-pay churn across income deciles, and then flag those with ACP and without ACP, both year over year and sequentially, you get a sense of what was the market happening with the placebo-based different cohorts at different low-income levels. And you can take a look at the impact of those who had ACP and didn't have ACP. You know, it's data science. And, you know, we'll take it with a grain of salt and we'll call it that way.
But I think we'll have a pretty good ability to at least project what we think the impact to net adds were.
I'm going to finally leave ACP alone. And let's go to fixed wireless for a second.
Yep.
You've been, or I meant to say cell phone internet, I think, is what you've called.
Cell phone internet.
That's a completely different way to compete than when you compete against fiber. With fiber, you know where it's being built, you know what the pacing is, and you can target promotions to an individual audience. 5G fixed wireless is like a thin layer of peanut butter all across the country that you sort of have to think about very differently and not geographically focused. How does that change the way you compete, and how have you changed the way that you compete against it? You started advertising against it, for example.
Yes. Well, I think, you know, we're going to adopt now not just cell phone internet, but inside the company, as you called it, a thin layer of peanut butter. And, so that was to Craig Moffett. But, look, I, I don't disagree. It's, on one hand, it's another overbuilder, and we've been competing with overbuilds for, you know, decades. On the other hand, as you mentioned, sector by sector, it's a, you know, available in a passing one day and not available, you know, in another based on capacity in the moment. And so as we've been dealing with this for the past couple of years, it's a little bit of a whack-a-mole in terms of how do you market and retain against it. And so a couple of things I'd say.
One is when you have low penetration, that's easy to go do and mass market and do that. As you get higher penetration for cell phone internet and you're having to tell more and more customers, no, I can't provide you that service there, I haven't seen that environment where you're telling customers you're not available for the service. And how effective can that? So I think what has been an advantage could turn into a disadvantage over time as they get more penetrated. The second thing is that, you know, as you know, we have national retail pricing everywhere we operate. And so in this environment, I think that's actually an advantage. We always said that we wanted to operate in every single one of our markets as if we had a wireline competitor in place as of that moment. And for the most part, you know, we have.
But we did that nationally. It gives us the ability to price and package and really to put the most value in. The piece that I think we've, you know, we can do a better job of is messaging really with our, you know, customers or prospects about the overall value of what we're providing. See, when somebody comes on the phone and says, I can get this product for $35, $40, or $50, and our response is, but ours is a Spectrum One, $49.99, 300 Mbps, more reliable, faster speeds, we've missed the point. The bigger point is the only reason that you're able to get that service at that price is because you're overpaying for significantly, probably for multiple lines inside the household.
So the conversation we need to have is of a promotional rate of $50 Spectrum One, including a free mobile line and advanced Wi-Fi, against probably the, what, $150-$180 for a two-line household that you're paying for cell phone internet combined with two mobile lines. That's a very different conversation.
So you really lean into Spectrum One as the answer.
I think that's what we need to do. I think what we haven't done is really say, well, tell me how much you're paying overall on your bill. And let's just talk about, you know, like-for-like services. And that's a little complicated. It sounds easy here. But, you know, we have 100,000 employees across the company, and we need to, you know, go to the not just the quality of the product, but go to the value. And so I think the industry, you know, probably can do a better job in, you know, starting with us.
But what you're describing sounds like you. That's not something you've already done in your scripts in the call centers and things like that.
I not in the way that I think we can. So more than that.
It sounds like you guys have a to-do list. If I'm listening to Chris, he's that's going to be a big deal.
The team already knows.
When you come off stage.
I spend a lot of time doing roundtables with our salespeople. They're great. It's probably a little uncomfortable for them, but I do a fair amount of role-playing. That's how I get a sense of, you know, how the, you know, how we're talking to the market.
So the other obvious competitive threat is fiber. And you have a personal history of knowing something about overbuilding fiber here and in Europe. And so our fiber overbuild tracker keeps showing that it's actually growing a little more slowly, not because people have cut back their plans, but just because it's taking longer to get there. So they push their plans out further and further. But as you do that, what you're building is getting less and less dense.
Correct.
and you've got labor cost inflation. I wonder if you can just think about sort of what you're seeing with respect to the pace of overbuilds in your footprint and where you think that goes, just given the economics.
Well, I think a lot of the announcements that were made earlier on were in a different interest rate environment. Some of it may have been duplicative of people announcing that they were going to overbuild the same passings and find out they need to scale that back. But, you know, we have a tremendous amount of experience of building fiber. You know, we're the largest rural provider, the largest rural builder inside the country. And what is clear to us, it always has been, is that overbuilders historically have never been able to hit their penetration. They've never been able to hit their ROIs. And the only reason that some of them have done okay is because they sold quick enough. And that, unfortunately, doesn't save us because history tends to just keep on repeating itself.
Every decade, somebody comes up with this idea that they're going to go do this. And that's taken place. But now what you're finding is not only is the interest rate environment a little different, but the cost per passing is much higher because of both labor and, you know, significantly low density. And anybody who's overbuilding where an existing operator already is has to understand that there's now a low cost, low value product, a cell phone internet that didn't exist there either, all of which points to, you know, a question of, are you really going to have a return? Because your net cost per passing is dramatically higher. Your cost to service is higher. And your penetration is going to be lower as a result of all that. And, now, again, that hasn't stopped people in the past.
The one comfort I do take is if you look around and some of the even the bigger money operators have taken a look and said, you know what? Maybe I should have, even though I have the money to go do it myself, maybe I should go get third-party capital. Let's go do a joint venture. And when the people who are most exposed to the numbers and understand what's going on are starting to look for more naive money to come in and fill the gap and subsidize what's going to be a poor return, then I start to smile a little bit because, you know, the reality is that the market's not dumb. You can hoodwink a few people along the way, but the market's not dumb.
Every time you've had an overbuild in the past, people have woken up and said, wait a second, this isn't going to make a return, and it stops.
I saw that.
Until the idea comes again.
I saw that Brightspeed and Apollo brought in PJT to think about the debt structure there as well, which.
I actually hadn't seen that.
But I think that, that speaks to,
You know, you have, you know, a number, without naming companies, you have a number of these overbuilders not only are looking for third-party capital, but are actually looking like they're going to run into financial trouble all over again. So.
Let's talk about broadband ARPU. You've, you've obviously seen two of your publicly traded cable peers now report actually falling ARPU. And that I think certainly plays to a bear case for you that ARPU has to follow units downward, and that there's this price war coming. Why is that incorrect? And what makes Charter different?
Look, I, I couldn't disagree more. I think if you step back, what you're talking about is a couple of relatively small subscale operators who have been running an operating strategy that's the antithesis of what we do. We've been saying it for years, and we've been saying that's how this is going to end. It's not going to end well because they overpriced their product and/or delivered too, too little value inside the product for the price that they were charging. Our view has always been to price, you know, have high-quality products packaged and priced in a way that our competitors can't replicate. Doesn't mean it's cheap, but it's a fair price, one that can stick and has high value inside the home and not end up with what you and I have talked about as a barbell strategy around your pricing structure.
And so we have a fundamentally different operating strategy. And I think comparing to, you know, a couple smaller operators doesn't make all that much sense. We're totally different. If you take a look at the larger operators, you know, who tend to think about pricing and packaging, putting value in, providing high-quality service, and, you know, packaging in other products, you'll see that, just because you have a lower ARPU today actually means you're more protected and you have the ability to continue to have financial growth, grow with inflation as you need to, even in a market that has temporary higher amounts of competition and, a temporary amount of higher investment, which is what we're doing.
Yeah. You know, it's funny how if I think back how many years I've heard Charter is leaving money on the table by not growing, even back before you, when Tom was in this chair on the stage.
Yeah.
People would say you're leaving money on the table. I think that you're probably feeling pretty good about the fact you have the lowest ARPU in the industry right now.
Oh, look, I'd feel a lot better if we were growing broadband, in the way that I know that we can. But yeah, I think, in the position that we're in to be able to temporarily manage through and have financial growth to deliver even double growth, even in spite of ACP, you know, going away now, I think leaves us in a position where we feel good about the decisions that we've made.
So, but and I know you've talked about the impact of Spectrum One and the allocation of some of that discount to broadband that holds down your broadband ARPU growth. But if I think long-term, how confident should we all be that you can grow broadband ARPU by 3%-4%, which I think is kind of where you've said the sweet spot?
I don't know that we've given, maybe Jessica did. I don't think we've given a target, but I think, you know, no, not dissimilar from, you know, some of our real peers. I think we have the ability to continue to earn ARPU over time, not only by passing through inflationary cost increases, but, you know, we're, we're relatively underpenetrated in some of our higher tiers. I think our ability to, you know, have higher upsell into those tiers, particularly now that you have Spectrum One combined where you're driving in this value, is significant.
I want to. We'll talk more about mobile in a minute. So we'll come back to Spectrum One. I want to just talk about convergence. I had an interesting conversation with Verizon on this stage 45 minutes ago. And as I think about convergence, your footprint is obviously an advantage, right? You offer wireless and wired everywhere that you are essentially.
Correct.
So there's no, here's what I offer here and here's what I offer there. Talk about that a little bit and how that informs the way you're thinking about the offer that you have for customers.
So if you think about mobile for us, it's a little different than I think mobile for a lot of people. It in my mind, and we've said it before, I don't think mobile is a product. I think it's an extension of your broadband service. And so when you pull out of the driveway and I say, who's your operator right now? You'd say, I don't know. I don't care. It just has to work. It has to be fast, and it has to be seamless connectivity. And that's your broadband connection. It's how we all use, you know, these services. And so broadband is just an extension of, mobile is just an extension of broadband. It's kind of like a value-added service. And it doesn't mean that, you know, we fully combine it in. We can. People still have multiple lines. It's still a profitable product for us.
But more and more, I think it's just going to be an extension of what we have. Today, roughly 88% of the bits that go over our mobile phones really are carried by our own network, primarily Spectrum Wi-Fi. And so you end up with a product that, you know, is faster than any other mobile operator in the country because it has seamless connectivity. It's gigabit wireless because it's piggybacking off of Wi-Fi. And interestingly enough, the 5G radios that we have a lease arrangement with is only 12% of our traffic. The 5G radios are backup. It's when nothing else is really working that same way. And we have the ability to, on one hand, increase our offload to faster speeds and a lower cost framework for ourselves by utilizing more Wi-Fi deployment and more CBRS deployment.
but we also have a very attractive, long-term relationship with Verizon, and they've been a good partner, and that's attractive as well. And so, we'll continue to manage through that over time. But, you know, the mobile attribute to our broadband service, I think, is really unique because nobody else other than Comcast and now Cox, and I guess I assume Optimum as well, is able so cable is the only one who's able to do that. We have a structural advantage.
Do you feel like you're making headway in explaining that to customers so that they can start to think about it as converged service, or is it still?
Yes.
2 products and the advantages?
Yes. It's not as fast as I'd like. So what we've seen so far is, you know, a demonstrable improvement in churn for broadband customers who take mobile, which is still relatively low. For a long time, we were hesitant to talk too much about that because you have, you know, self-selection. And so I didn't want to brag about that or advertise that. We did maybe a quarter or two ago because, you know, how much of that self-selection? They took your product because they already liked you, right? But now when you're sitting over 8 million lines, you still have some self-selection that's in there, but it's enough data to actually take a look and say, no, it's meaningful and it has a real impact. So I think that piece has gone extremely well. And Spectrum One, when it rolls off, it sticks. Why?
Because it's a faster product, seamless connectivity, and it's at a lower price point than you can find anywhere else inside the marketplace. So where else would you go? The piece that I think to your question about educating the market is on acquisition. And I don't think it's had the pull-through effect yet that I think it's really capable of doing. And that's just going to take a combination of time, word of mouth, and for us to try new things in the marketplace of seeing how can you stimulate demand, how can you educate customers. It still is recognized as much as I believe in convergence. Historically, the household is where you sell broadband, and the individuals are where you sell the mobile lines.
I, for example, haven't seen you do advertising yet that sort of says this, you know, that tries to illustrate this as a connectivity everywhere service.
You know, the advertising shows Spectrum One with the broadband service, the advanced Wi-Fi, and the mobile, and it shows a picture of people out on the, you know, the yard and traveling and moving around and the combination of all those things together. So I do think that's, that's my point. And maybe, maybe we can do a better job of that. But finding different ways to try to educate people that this is potentially a brand new definition of broadband. And not only is it faster, more seamless connectivity, but it can save you hundreds or thousands of dollars per year.
By the way, I'm going to go off script for a second because I got an interesting question. I asked this of Brian also. Somebody asked a question, which is, why, why don't you call your service fiber service? And you've, I'm sure, you've seen the.
The cases out in, I guess it was, Portugal and.
Spain. Yeah.
Yeah.
New Zealand.
Maybe it was Spain. Maybe it was Spain and New Zealand. Yes, I have. Look, you know, 99%. I don't take this as exact number, but 99.8 or 98, 99.9% of our network is fiber. It's really the drop is effectively coax. But when you have a fiber overbuilder, what do you think your drop is inside the home? It's the in-home wiring, right? We continue to go deeper and deeper with that fiber. We have given it some thought, and we're watching what takes place in different environments. I think our point of view has been less marketing about the technology and more marketing about the utility. What are you going to get? How's it going to change the way you live?
How's it going to save you money instead of trying to get in a war about, you know, a definition of technology? You know, as, as sexy as DOCSIS 4.0 may sound, you know, so, that's a cable, cable joke.
So let's go back to wireless for a second. So I would assume that wireless net additions will continue to decelerate somewhat simply because the base is getting bigger. So churn is operating, even if it's low, on a big base. But I guess the obvious question is, at what point do you need to start handset subsidies to keep the base engaged and keep them from going somewhere else to get a free phone?
Well, let me start with by maybe disagreeing with you. I think the fact that we added 500,000 net adds lines inside of Q1 in what is probably the lowest growth temporarily, lowest growth, broadband market, so less selling opportunities, to me gives me a lot of confidence that when household formation comes back, movers come back, ACP is behind us, and you're, you know, in a market that has more jump balls, our mobile sales should actually increase. For all the reasons that we've talked about, the value and the quality. So I'm pretty pleased about that. We've never thought that being in the subsidies business for handsets was really a great business. I still think that's the case.
When you have the fastest product, you have seamless connectivity, you save customers money, and you get the lowest price point for that type of product in the marketplace. I don't think, you know, we need to today, and I don't think we need to in the future. Now, that being said, we are rolling out what we think are unique features. One is Anytime Upgrade , which is unique in the marketplace for an extra $10 per month. Not only do you have, you know, higher limits, but you also have the ability to swap out your phones and get into a new EIP at any given point in time. That's attractive. And then, shortly, meaning within the next few days, we'll be rolling out Contract Buyout , which is our opportunity from a subscriber acquisition standpoint to rip out multiple lines.
Really big family plans.
Correct. That are stuck in contracts, that are stuck in contracts by these large MNOs that have locked up these devices and, and tied up these consumers. And so doing Contract Buyout is another way of subscriber acquisition. That's not device subsidy. That's a way of digging, digging them out, as we say, in cable.
You've built CBRS offload in, in Charlotte. What'd you learn? And, and you I think you've said that you think you can offload as much as a third of what you currently put over the MVNO agreement eventually. Is that, is that the right number? And how'd you come up with that number?
You know, we set it at a point in time where we were 85% offload. We're now at roughly 88%.
So you're getting close to that third number.
You know, you're getting close. But most of that's really come about through Wi-Fi proliferation of having the Spectrum Mobile SSID enabled in all of our different households. CBRS is just beginning. So I'm comfortable with where we said we could get to. But we're not in a race either. The reality is that if you think about the network evolution, the network expansion, not only do we have a large number of capital programs at play, but that's there's still effectively construction on the plant to go install these radios, at the same time that we have those same groups of people doing other type of work. And you take the trade-off there with the fact that we have a very good, attractive relationship with Verizon. And so we can go at our own pace. We don't have to rush.
The interesting piece is the more lines we have, the better the ROI. And so the ROI is only going to continue to get better and better as we have more lines. But we are rolling out in another market this year.
It's funny. I asked a question of Brian also this morning, that how he whether he sees wireless as a primarily as a standalone business that is you're in wireless because it's wireless and it's three times the size of the broadband market, or you're in wireless because it helps your broadband business. He answers it by the latter, saying it's primarily about broadband. My sense is you see it as a standalone business.
No.
Or as a revenue in its own right.
Well, it is revenue in its own right because it just is. But it if you go back to what I said before, it's really an attribute of your broadband service. Today, if you have one of the MNOs as a mobile provider at a much higher rate, with less connectivity, with less speed, you're still, you know, offloading to our network. It's still, for the most part, it's an extension of our broadband network. It already is. So I actually don't think if it was a true standalone product, I don't think the mobile product's actually that good of a product. I think it's a great product when it's combined together with our broadband service.
Let's talk about your rural build.
Yep.
As you finish your network evolution project, and your RDOF build is going to be coming off at around the same time, the next big CapEx project was and I presume still is going to be BEAD. When do you think you're going to have some clarity about how big that opportunity is for you?
I think it's still going to be a little ways down the road. The states need to get through their waiver process, and then they'll need to, you know, run their auction, and then you'll have the contracting process. But we'll, you know, probably by the end of this year, we'll have ability to really size it. We're still excited about it. It's a very unique opportunity. Nobody's ever offered to help subsidize these network builds in the past. And over the past few years, now with BEAD, it's a one-time, unique opportunity. And so, you know, we're committed to being part of that as long as it can happen under the right rules and regulations. At the same time, we're going to be disciplined. You know, we recognize that we're in a different capital market environment than we were just a couple of years ago.
The build that we're doing today has fantastic returns. It's fantastic capital. But we're going to be very disciplined both on capacity as well as, you know, the returns that we need to make sure that we can get.
There's two questions that I struggle with about BEAD.
Yes.
One is that relative to RDoF, you're starting to get much less dense. And that means that if you're going to try to right now, you're growing your homes passed at 2.5% a year to try to sustain 2.5% a year once you get to low density means the sheer level volume of mileage that you're building.
Yes.
starts to be so large that you're becoming a contractor for the government rather than an operator.
That's an interesting way of putting it. But you know, a good return on capital and with a permanent perpetuity growth rate and really a free option to have further expansion, particularly in some of these markets.
Isn't it just the sheer scale of labor and all that that you have to add? Doesn't that eventually become so onerous that you say it's getting too much?
You know, that's premised on you, you thought the density is going to be lower than what we're doing in RDoF and ARPA. I don't think that's the case.
Okay.
There are density thresholds and for competitive reasons, I'm not going to go into that. But there are, there are density thresholds where we take a look and for exactly the reasons you said, you know, it doesn't matter how much subsidy you get, we're not going to go there because there's an operating cost windshield time of the tech, even able to get there. And particularly when you're limited in terms of how you could price and package, then you want to be really careful about getting into that environment. So we've always had limitations on low density in terms of what we're doing. There are markets that even though it's low density today, take Florida, Carolinas, Texas, where it's not built inside of our model. But, you know, I'll pick on my home state of Florida.
If you build in Florida and it's 10 homes per mile today, chances that that's going to be 10 homes per mile in 15 years from now is pretty low, right? It's going to be much higher. And so you have to kind of mentally think about that too, along the way. And your question around labor and supply, because we're the largest rural operator in the country, we're the largest rural builder in the country. We've been at this for a long time. I think we're seen as both scaled and committed and reliable. And I think we're advantaged because of our past behavior, both from a labor as well as from a material standpoint. And from a pricing standpoint too.
The other concern I have, though, is that as you I think in RDoF, you were sort of 4-to-1 private to public capital or somewhere in that range.
Yep.
If that flips on its head, you can still be fully compensated, but it works the same way as leverage. You start to take on a tremendous amount of risk where a 10% cost overrun suddenly puts the whole project underwater.
Yes. And nobody knows that better than we do. So we've managed to have our average cost per passing, you know, be at where we expected it to be. But that doesn't mean that there wasn't a tremendous amount of puts and takes. You know, some of the, you know, the good guys that we received are synergy passings, the other side of the county road. Some of the negatives obviously would have been that the labor market did increase. Access to poles has been very frustrating, been very difficult. And it's probably the largest impediment to the rural buildout is access to poles, where it either costs you to have to fund an appropriate replacement cost for an electrical company that should have done it many years ago or to go underground at a much higher cost. So we've taken our learning lessons.
We've factored that into everything we're doing. It doesn't mean that you can't have some surprises. But I think we're pretty well equipped to know what we're getting into.
All right. Well, you can imagine I, I'm going to ask my last question here about, why not buy back stock instead? But I'm going to hold that question.
All right.
And I just want to very quickly touch on.
Nobody here wants to hear that.
Yeah, nobody wants to hear that. I just want to keep people hanging for the last four minutes. But, but I do want to just quickly touch on the video business.
Yes.
In the wake of your Disney deal, has that sort of changed your expectation of the trajectory of the business? Or, in retrospect, was that, no, we're still, you know, because your video declines were actually at the time a lot slower than everybody else's, and you're starting to look a little bit more like the industry.
A little bit. Part of the biggest driver of that is really tied to having to pass through these very large programming increases. And so we are, because of the other options available in the marketplace, seeing more churn tied to video rate increases than we did historically because it's available in a pretty broad way, in some cases at a cheaper price because the programmers have done that directly. Now, do we think that we can, fundamentally change the course of video? That's not inside of our business plans. But I think what we're really trying to do first and foremost is make sure that we're proud of the product that we're putting on the bill to our broadband customers, that it's actually not becoming a liability to our broadband service.
And the way you do that is through some of the deals that we've been trying to get through and we have gotten through. And so, you know, what we're trying to really do is find, can you create a video ecosystem that works extremely well for customers, that actually works for programmers, and it works for distributors as well? And that means, you know, it's not easy. These aren't easy conversations. They've been difficult. But I think we're starting to make some progress. And the way you do that is really to focus almost exclusively on the customer. Can I get value into the product, something that I'm proud to charge for? And can I get utility, which is solved through Xumo? And the value equation really means us being able to distribute and sell the video product in a way that the customer wants to take it.
And so if you think about the deals that we've been doing, on one hand, at one end of the spectrum, you could have the full expanded product with sports. It's expensive, but it's going to have a lot of value in it. It's going to have Disney+. It's going to have ESPN+. It's going to have ViX, which is the Spanish language. And I'm not going to list off all the other ones because they're not done yet, but they will be there as well. And you think about that product and you say, combined with Xumo, I have the ability to have everything. It's expensive, but I have it all. And I can find it. And it's at a cheaper price point. If I want all that, then I can find anywhere else in the marketplace. That is a great model for the programmers.
They get paid more in that model than they get paid in any other way that I'm about to describe. And they have the subscription revenue, whether the customer watches it or not. They have the advertising. They have low churn. You know, it's Nirvana. It's, it's what we used to call cable. And then you have the second segment, which is if customers, because the product has gotten so expensive, primarily because of sports, we do have a general entertainment, non-sports, non-broadcast, that is a skinny bundle, a streaming service. And that allows us to retain customers and be able to upsell them back into the more expensive package. And then finally, you know, we have the DTCs where we now have the ability to sell the direct-to-consumer products.
In some cases, because of where programmers have priced those products, that's actually going to make more sense for customers. If that's where they want to go and come in and out with high churn and to move in and out of that environment, we could both sell à la carte as well as bundle those direct-to-consumer services. So, you know, our, our endeavor here with video is to make sure we have value and utility, that we can go wherever the customer wants to go. We are actually very focused on creating value, not just for us, but, and obviously the consumers, but also programmers.
The programmers have fought long and hard against things that create value for them, it seems.
Well, they never wanted us to go to à la carte, but then they went à la carte. It's not a great business.
So look, now I'm going to ask the question everybody came for, which is your cable stocks right now are trading below replacement value.
Yes.
You're spending a tremendous amount of money to build fiber in what I think are attractive return areas. There is this obvious question of when, when you're trading at below the replacement cost, or the lower cost per connected home than what you're building in rural areas, would you be better off buying Charter?
I think temporarily, the answer might be yes. But I think if you think about it, we're trying to manage a triangle here. One is a unique organic growth investment opportunity that is not going to come around again. You either executed on it now or it's forgone. The second is managing a leverage ratio in a way that in a volatile capital market that respects all classes of capital inside of our structure, including investment grade. And the third is where you can see me foaming at the mouth is, can we buy more stock? And those are competing notions. So we're trying to find the right balance. You've heard me talk about BEAD being disciplined.
You've heard us talk about, you know, moving to the middle of our target leverage range and still trying to do as much as we can to buy back stock. You know, personally, I've, I'm a big fan of that as well. And I'd like to do it all. Unfortunately, you know, that's not the environment we're in. And so we're trying to thread that needle. I will tell you that when you think about our allocation of capital, which always started with organic growth, M&A, if it was better than buying your own stock, buying your own stock, and, you know, leverage management, and then if you had nowhere better to put it, you could do dividends and let people be taxed on it, which is clearly not our favorite place to go, you know, that strategy hasn't changed.
But one of the things I think a lot of people forget is that if you're only about doing buybacks and that's how you run your business, the only reason that works is if you can get growth. If you don't get growth, buying back your stock isn't an accretive thing to do. And so making the organic investments actually preserves and accelerates the return of your buybacks. And it also increases the terminal value of the company, which is, you know, that's, that's where you really want to go.
It's a great place to end the conversation. I can't thank you enough for being here.
Thank you.
I look forward to doing it again next year.
Next year.
For our 20th time or whatever on stage.
Excellent. Thanks.
Thank you, Michael.