Hi. Thanks for joining us. Welcome to the 51st Annual JP Morgan TMC Conference. I'm Phil Cusick. I follow the communications and media space here. I am joined by Dave Watson, President and CEO of Comcast Cable. Dave, thanks for joining us.
Good to be with you, Phil.
Nice to see you. You know, your role changed a bit recently to be global, and the presentation of the company has been shifted a little bit. Maybe just talk about your overall role and how things have changed first.
Sure. The group that, you know, we developed is the Connectivity & Platforms group to really represent how we're running the business and looking at scale, looking at innovation, all the things that we do. It's the U.S. cable business, it's the direct to the consumer international business with Sky, lumping those things together and taking the best of, kind of across the enterprise. When you look at it, you know, the thing that jumps out, it's 52.5 million customer relationships, all spending about $100 per. It's a pretty good, you know, solid business right from the get-go. Positions us well, I think, for the growth areas.
We have a couple that are not just one, several actually, that within this Connectivity & Platforms group. One is domestic broadband, domestic wireless, international connectivity, and then business services. You take those four together, you have a $40 billion run rate collection of growth-oriented, high margin businesses, and growing in the high single digits. You look at each one of them, 32 million residential broadband customers, a loyal, solid base, good churn performance, and solid ARPU at 4.5%. The wireless has tons of upside surrounding broadband with that. You look at then connectivity business and international is the breaking that one down. It's a, $3 billion business growing at a nice clip. Then business services from 20 years ago, you know, it's, was zero revenue.
You know, we're approaching a $10 billion run rate, the EBITDA at $5 billion, margins that are approaching 60%. There's a good collection there. We know we're up against, you know, some headwinds and the macro issues, but when you come back to it in the first quarter, we grew, you know, EBITDA within this category, Connectivity & Platforms, 4% and grew expanded margins by 160 basis points. We're off to a good start with this new collection.
Okay. You started with domestic cable and broadband. I think the big question for a lot of people in the room is where are we in the broadband sort of growth cycle? We had a big wave of growth in COVID. Housing sort of slowed pretty dramatically. Is this a business that can grow in the long term, or are we sort of done with that period of growing broadband subs?
I believe strongly that we will grow the customers over time. I think that there are the near-term headwinds, the macro issues. It is intensely competitive, there's no question. That, you know, you have a new wave of competitors that enter the marketplace, that you have that. When you think about the reasons why I'm confident of our ability to grow, it's that we have the best product. It's ubiquitous. We continue to consistently and steadily have invested in the network, not only for speed but for capacity, coverage, best products, best gateway devices. I like our competitive position now, but in the future. You look at the ability to surround broadband with products like mobile, and it's, you know, competitively, I think we're in good shape.
You do have these macro headwinds that we're facing. Having said all that, you have that 32 million broadband relationships that are, you know, solid. Churn is one of the most important metrics in any subscription business, you know, wireless or cable, and ours is still below, you know, the pre-pandemic levels. Really solid, and we're able to grow ARPU, and we grew that 4.5%. When you look at growth in the near term, we will get to, I think, longer term growth opportunities. You know, one of the reasons you've noted in the past is we're gonna add, this year alone, about 1 million passings. The passings are a collection of hyper-builds, of fill in within our footprint and edge-outs.
In 2022, we added 840,000, and then now with 1 million passings. You add all those things up over time, I'm pretty confident we'll get there, but we're also, I think, very focused on managing the macro issues with discipline, cost controls around video, fixed wireline phone, and just real extreme focus around the margin, high margin, high revenue growth areas. That's our focus. That's the top priorities for us.
Okay. Before I follow up, there are seats in the front if anyone wanna come up, and I'm not offended if you do. Please come and sit rather than stand. Let me follow up on... You talked about churn and part of, I think, why churn is down for everyone is that just moves are down pretty massively overall. Is churn down even more than that?
I think churn, that's a significant contributor. The fact that just the macro issues, people just moving less, that is a piece of it. I also felt, when you look at our trend, you have to go back where our trending was before. Our trending for churn was steadily coming down. It was, you know, never at a rate that was, you know, it was best in class for the longest stretch, but it kept just getting better pre-pandemic. There was the pull forward, the macro issues, but some of this is just building out the best broadband product in the marketplace. When you segment the base, then you have an opportunity to deliver value. Then it things like mobile, being able to go to double play households, triple play households, and give them the packaging that they wanted and putting them in the right position. I think all those things have helped churn. I would also say that focusing on the customer experience, we've been relentless on that, taking out unnecessary transactional activity, at the same time improving the experience. That has helped. I think there's been a lot of contributors towards good churn performance, but certainly the macro, you know, impact is part of it. Yeah.
You mentioned segmenting the base and both on the call, and then Brian last week mentioned going after more of the low end. On your website today, I think there's a $25 offer.
Mm-hmm.
Is that something that is a new focus for Comcast, and you're gonna sustain that?
No. No. First off, segmentation, you know, you really gotta break it down that every day in a very large subscription business, you have acquisition activity, you have base management, you have retention. I think a lot of people think about segmentation when you think about offers upfront, but there's so much activity that goes on every day with, you know, great customer relationships that you are actively managing. There's acquisition, base management, and retention. We've been doing segmentation really forever. We've been at this for quite some time. When you look at it, you know, the net impact is this balance between share growth and revenue, ARPU. That. I think we, you know, have pretty good performance. Even without subscriber growth in broadband, we like our, our revenue performance and ARPU. When you think about the...
Where we start with segmentation, we start in the high end. We start in the high end, and we I think it the network activity that we have, we have this project where we're upgrading our existing footprint. We're 20% upgraded with the existing project that we talked about, mid-splits, going deeper with fiber and then giving 2 Gb down and then a really healthy increase to upstream. The at the beginning of June, we're announcing that we will be providing throughout the entire footprint, multi-gig symmetrical. It puts us in position to be able to constantly be focused on the high end of the base because that's where the customer's going. The customer's going, there's just more engagement.
When you think about broadband consumption, you know, you have the non-video broadband customers using 700 Gb, and then you have the sheer amount of Wi-Fi connected devices. There's like. Throughout last year, we had 1 billion Wi-Fi connected devices. Now granted, there's a handful of power devices that determine a lot of the consumption, but that's a lot of devices. What's happening is there's kind of a new peak moment that's emerging, and peak moments are streaming, gaming, all happening in a relatively close period of time. You manage a network, whether you're wireless or cable for these peak moments. We start with the high end, but we surround broadband with other products that help us compete in every segment. We do have an announcement that we'll talk about because mobile's been a great part of our portfolio, but we have a.
About a week and a half, we'll be launching a product called a streaming video product called NOW TV. NOW TV will be something that we can have as a companion to broadband. It's a streaming product that really provides the best of Comcast and now starting with the fact that NOW is a Sky brand and working with Dana and the team over there on that. It will be Peacock will be included. It will have live linear. It'll have the Xumo FAST Channels. It will have the best platform that is out there that is the same platform that fuels X1, essentially Sky, Flex, and so voice activity. It's just a great aggregation platform.
It's a box?
with video. It'll have a similar to Flex. It'll have the puck device that will be available. But it's easy. It'll be, you know, super easy to get. No contracts, no additional fees, and it'll be $20.
$20 a month or $20 cash?
$20 a month.
Okay.
It will be, for us, the way we're able to position it will be accretive. We're able to do this next generation video tiering, with the ability to make it, you know, financially accretive. At the same time, I think it's gonna be a great companion to broadband. You break down between the two. You have the book end. You have the high-end multi-gig symmetrical that will be-
With great Wi-Fi. Yeah.
Great Wi-Fi, great devices. You have mobile with broadband, and you have NOW TV, which is a great starter video service priced attractively, but still will be financially accretive for us.
You're pulling my over-the-air video linear channels? Where's the linear coming from?
We have a handful of video partners. We have Xumo already has a robust set of FAST channels that we're doing, so we're able. This is all streaming.
Yeah.
It's a streaming video tier. Peacock will be included with Peacock Premium. We're able to give sports, live TV, the film, television. It's a good collection.
I imagine the hope is that will go into your other cable partners that use your technology around the hemisphere anyway.
I think it opens up the notion of there will be a next generation of packaging opportunities that giving us the ability to reimagine a more, I guess, you know, profitable way of delivering video, but packaging it with broadband, and that's that next generation double play or even triple play.
Yeah.
In that you can combine now mobile. You think about it's a great. You can layer on other streaming products if you want, Peacocks included. $20 is a great starting point.
Yeah. It turns out that aggregating video might be a good business.
It could.
Yeah.
Once again.
Someday. Okay. I do wanna go back to the, to the lower end for a second. Just one more question there. ACP is something where we were surprised recently to see that Charter gets 4x the revenue in that, in that segment as you do. Is that an opportunity, and do you think that's a sustainable subsidy that you wanna go after?
We've looked at the ACP as an opportunity. The predecessor, you know, the first generation product and then ACP, we think it's a great opportunity. I think we've been good stewards of how to run the program and being very, you know, thoughtful in terms of eligibility, making sure it's a good experience like every segment that we do. We think it's a very attractive program, and we're all for it. What we wanna do is just make sure we're delivering it to the right customer and doing a good job fulfilling it. I think it'll be an ongoing. We'll see where it goes long term, but we're right there and participating and trying to get customers that are eligible into the program.
That low end was, I think a couple weeks of it was what took first quarter to positive subscribers.
You know, to your earlier question, you know, we always do come in. While we segment the base, we'll go in with offers in the $25. You look, there are some $35 offers out there. We're trialing, you know, $50 offers with a mobile extension included. There are different offers. We've always done that, the ability to go into different geographic areas, test things, learn from it, and move on. The net of this, when you do segmentation, is still solid ARPU growth.
Yeah
Y ou know, in broadband of 4.5%.
The seasonality you've talked about is sort of you've expected less than normal seasonality this quarter as sort of the base evens out through the year a little bit. Is that still something that is valid?
I think what's happening, places like Florida, that will have more normal seasonal activity. People are leaving when they used to leave.
Yeah.
There's just beginning to be more normal activity. It's, I don't think you can historically completely compare it to where it was, but aspects of it will be more normal.
Okay. Well, let's go back to the 1 million passings you talked about.
Mm-hmm.
As you said, it was 840,000 last year, 1 million this year. Comments have been that you would like to do more over time if that becomes available. What's the sort of... What does it look like now to build broadband? Most of this is not subsidized, right?
That's right, right now.
Right. How are you sort of building engines and getting ready for those subsidy programs to come along?
Well, First off, when you look at the entire amount of 1 million, it's the majority continues to be near term, the fill-ins.
Yeah.
There's still activity building out to within our footprint. There's ongoing hyper-builds for business services. Business services continues to be an awesome business for us. I mentioned it earlier. A lot of capital dollars go towards business services right from the get go. The third one are the edge-outs. Our focus has been to, you know, that is really a key difference between the 840,000 last year to the 1 million is just more edge-outs. The way we look at it is proximity to current plant, density that we look at, doing it in a profitable way.
It is a new opportunity in that we have a whole portfolio of products to be able to go to these communities with, mobile included, and being able to talk about business services, residential. We are be very disciplined in terms of profitable outcomes and how aggressive we are. We're having good success at the state level where most of these new programs are focused and handed, and the applications are being reviewed and then handed out at the state level. We're winning our fair share. I think most of the benefit of this will begin to be seen next year. A lot of this right now is not grant wins quite yet. We'll see that activity beginning to show up next year.
Has the math on building new footprint changed either your assumptions on penetration or ARPU or margin? It seems like this is a bigger focus of the company than it's been in a long time.
I think it's a unique opportunity. It's a unique opportunity, to that you have with the stimulus dollars that are available. It's a unique opportunity with the range of products that we now have. You know, then even what I announced earlier, NOW TV being able to show up with an affordable, you know, video product right from the get-go that's streaming, it certainly is a new set of variables that we have. It is. We're still extremely focused on profitable outcomes.
Yeah.
If you get it right in terms of proximity to your existing infrastructure, you know, what we're talking about is that 200 + range, 200,000 plus range of edge-outs. The great part about Comcast is, and again, Brian, Mike and everybody have been, if there are opportunities to do more, we will. We're very disciplined in how we do it. I think the addition of the new products has added a little bit better returns. You know, we're going to look to build out as many as we can. Operationally, I think we're in good position to be able to pull this off and walking through exactly how to build it.
We wanna be there for the communities and be that partner where they can count on us for the long run.
You said about 200+ thousand edge-outs. That's the number this year?
That'll be this year.
That's a good run rate going forward? You think that can ramp?
Hard to say. We'll see where it goes at the state level, but we're gonna be aggressive. This is a huge opportunity for us. Can't give you the exact number, but we're gonna be on this for the next couple of years, I think. My sense of things in terms of funding, it'll be available through next year. Different states have different times where they are in terms of the bidding process. Some got out a little bit early, and some are going through a different process. We're right there arm in arm, trying to help, you know, figure out the process with them. I like that it's a little bit more seasoned right now. The capital markets are slightly less frothy right now, and you have a better line of sight on returns right now. We're gonna participate, you know, fully and completely, I think, going forward.
The states that have got to whether it's a bidding process, I don't think anyone is in an award process, are they?
No. Some states, they've had different sources of money for some time.
Right.
They have handed out. They've started the process of handing out grants already.
Have you seen a sort of a bidding down of value in those from some of your competitors, or it's pretty reasonable?
I could go on for hours talking about the.
We have 14 minutes.
No, it is. They have a very... It varies by state, but they have a whole bidding process on points typically in terms of how you build it, where you build it, time to market, an assortment of different variables that go into it.
Yeah. Well, I'm gonna go back to NOW TV because I thought Brian last week was pretty clear. To paraphrase, the way I heard it was, video is going over the top, period. You know, we're gonna take a football game, and we're gonna put it on Peacock. This is how it's gonna be, and there's nothing we can do about it, so we might as well get on board.
Mm-hmm.
How does that change how you think about the Connectivity & Platforms business? NOW TV is obviously a piece of that. Where do you see our all video watching in five years? Is that? Like, what's the Norths tar you're looking for?
Clearly everyone's seen it, seen the data where things have flipped, that the most of the engagement has gone towards streaming. There's still, you know, moments. I know there's a lot of speculation of what happens to sports, but I think there's still a longer runway there in terms of... At the same time, what we're witnessing, and we saw it already last fall, there's a new peak moment for broadband connectivity engagement. It's Thursday nights. It's Amazon, you know, with football. We're all over that. We think that we're there for those peak moments. What I mentioned earlier, Phil, is that you look at all those devices, you look at the sheer amount of engagement.
I think anyone that, you know, thinks about your own personal situation or anybody, you have to, you know, ask yourself, where do you think broadband's going? Broadband is gonna continue to see more streaming. You're gonna see more video games, more applications. So there'll be these new peak moments that occur in terms of streaming. You know, the way we look at it is that we go down to the application layer and look at our performance in terms of where our broadband network is and how we built it with, one of your points, the great Wi-Fi capability that we have with these gateway devices. We look at the Netflix scoring in terms of the best ISP. We have the top score for that. We look at gaming companies in terms of lag rates.
We perform extremely well, got top scores for that. Speed Test, we do. We look at streaming, we look at applications, and I think we're positioned well for today. Where the network's going, we're building for the future as well. That's one of the most important parts. There's not this, you know, peak moment, a bubble that's happening. We're planning out capital, I think, in a very thoughtful way that people can understand, and doing that now with this new Connectivity & Platforms group with clear line of sight in terms of how we're gonna spend capital. We're getting prepared for where I think the customer's going, not where they're at right now.
You rhetorically asked where broadband's going. I think it's going up into the right at 35%.
Yeah.
It's not gonna stop. Let's just talk about wireless really quick because this is one of the things that you can layer on top of that broadband connection. We've had these discussions about wireless. We've had the carriers here yesterday. I think everybody's dinging Comcast and Charter right now, a little more Charter than you, for going after the low end. What I remember, and you mentioned business services, is 15 years ago, Comcast was going after the low end in business services 'cause that was easy.
Mm-hmm.
It was sort of free pickings. How should we think about how wireless evolves over the next five or 10 years as that low-end customer base either gets... You pick them all up or more competition focuses on it and it sort of evens out?
We're clearly a challenger. It's good to be a challenger in a line of business services and mobile. With mobile, I think we're uniquely positioned in terms of By the Gig and Unlimited. What I said earlier in terms of how we manage going after broadband, very similar way with mobile, where we focus on acquisition, base management, upgrades, downgrades, and then retention. Mobile is such a huge part of all three of those efforts. One of the things that we've done in the last year and a half or so, we've rolled out higher tiers of unlimited in terms of performance, in terms of capabilities, and it comes at a, at a higher price point. Our mobile ARPU is hanging in there as well because we manage things, you know, that way.
One of the things too that we have, we have this companion which is just great Wi-Fi, and being able to have Wi-Fi do a lot of the lifting in the home, the 20 million hotspots that we have. We talk to our customers not just about that we're at the low end of the marketplace. We talk about mobile as if we're the leader because we have built the next generation mobile capability when you combine great Wi-Fi with great mobile service. We have a wonderful, the wholesale deal with Verizon, really like our positioning there, but it helps us compete in every single segment. We think we... Whatever they do, we get access to. I think we're in good position to compete in every single segment, and not surprisingly, our focus does start in the high end, but we'll compete in every single segment.
Charter talks about, I think it's 85% of the traffic on phones is off, cellular now. Is that a similar number for you?
Very much so.
Yeah. Can that keep going higher as your Wi-Fi gets better and is more ubiquitous, or is that sort of the right level?
Well, we'll see. You know, one of the questions that gets asked is offload, and that would be with private spectrum, not necessarily Wi-Fi. We offload a ton in those public hotspots today. We think of Wi-Fi as part of our network. We literally manage it that way in terms of capacity, coverage, and capabilities. It, I think that, you know, there may be opportunities, but for our offload approach, we'll be very opportunistic 'cause we simply don't have to, because we have a great MVNO. It puts us in position to compete, you know, aggressively all over. We could, and look, we look at the, you know, 3% of our footprint contributes 60% of the traffic.
In those spots we're testing, I think, and Charter's talked about this too, we're testing, you know, very actively that offload approach with our own spectrum. We'll see. There's not a need to, but there could be an opportunity to do it.
Yeah. 3% of your footprint is still a huge number of square miles.
Yeah.
Yeah. It's a big place. I wanna switch gears quickly to international connectivity recently under your group. How do you think about the opportunities here and what's really driving what was a very strong connectivity revenue growth last quarter?
Yeah. It, it really is. First off, you know, it is great to be able to work with Dana and the Sky team. Very talented group, a great brand, you know, very well regarded in Europe, and gives them the opportunity to extend into these, you know, profitable categories, you know, broadband and mobile. When you look at the $3 billion in terms of revenue, 2/3 of it's broadband. You had 7 million broadband customers between U.K. and Italy. And mobile is, you know, the other 1/3, and that's U.K. It, it is, you know, growing in the connectivity business in the U.K. and Italy growing in the mid-teens. It, and it's a, it's a terrific business. They've done a nice job positioning it.
They also have a very, a very thoughtful approach towards acquisition, base management, going to and helping upgrade, and then retention. I really like their broadband performance and opportunities and, you know, U.K. mobile, more to come, outside of the U.K. We'll see, but they're doing very well so far in the connectivity business. Really like the, you know, the $3 billion trajectory.
Is there a need for capital in that business to own some network in those markets or MVNO's fine?
They've done a really nice job. I think there are similarities between what we've done in terms of being able to strike a really good wholesale deal. I think their approach is capital light as well, but then they're able to deliver a great customer experience, you know, with the U.K. They have great Wi-Fi, so we're able to help with them with the same gateway devices, the same software layer that we're able to leverage. Again, think about the 52 .5 million at the beginning in terms of relationships. We have a single stack of software that'll help us fuel the best video platform, and then we have the great operating system for broadband as well that can deliver great Wi-Fi inside their home, and that's international or domestic.
What's the business mix in the European businesses? Can you take that U.S. sort of knowledge and move it over?
That is a big opportunity for us. You know, they do a really good job with bars and restaurants, not as much. Still in the early stages of thinking through the business opportunity, and that's one of the ones that we'll work with them on.
Is the regulated wholesale opportunity for fiber the same in business as it is in consumer, or is it tougher to get access?
No, I think for you start with small business, and I think it's very similar.
Okay. You mentioned the sort of value of putting this all together in 52 million global connections. How should we think about the sustainability of what was really amazing margin growth in the first quarter over time?
You know, there is a little bit of the Olympics that we had in the first quarter, but the real story to me is just the focus that we have around the revenue growth, the high margin opportunities that we have in the four categories that I talked about. Just the fact that, you know, we can manage the headwinds, but still, you know, just go after the business services, which didn't spend a lot of time on. Think about, you know, just that one area for business services to be able to from zero to, you know, 20 years ago, for it to be the kind of business. The big part about business services is staying so focused on high revenue, high margin opportunities. They have a long runway ahead, really long runway.
They're still shooting higher in terms of customers and potential.
Total growth because they have a good balance between. You know, we're 20% of a $50 billion marketplace, and that's just within our footprint. If you go off net and think about business services, you know, to which we can now do with Masergy. We can now do, you know, mid-market, and deliver that, you know, throughout the world. It grows the addressable market to, you know, $70 billion-$100 billion. Our starts with the. When you go to margin, it starts with just relentless focus on where's the growth and how we're gonna continue to grow these businesses. That is the main focus.
Then you go to the cost side, and we've been very focused on taking out the transactional activity, unnecessary things, truck rolls, telephone calls, doing better with digital, doing better with customer service, and a disciplined cost control around fixed costs. Just, you know, not a lot of drama, but a lot of discipline, focus around taking out where you just don't need it and how you can be a better operator. When you add all that up, the real story behind margin, and you look at the, where we're at between legacy and then the fact we, between Connectivity & Platforms expanded 160 basis points, it's really the focus around high margin, growth-oriented businesses. Managing the ones that are a little bit harder, video and taking a disciplined approach towards profitability with those categories that have those headwinds.
I like the runway. I like our position in the marketplace and the growth prospects. I think the network position, the product position, competitive position, it is intensely competitive, make no mistake about it. We've been at it for some time. We've been up against fiber for 20 years now. We've learned a lot from it, and we're going to go through this surge where fixed wireless has a little bit of momentum. Until... Same thing we saw with fiber. Until you get a little bit of that base built, and then you start getting win-backs, you start getting a little bit more fluid activity back and forth. I believe over time, that will happen. Be back to looking at, you know, a different story with broadband.
We'll be able to grow the business because of ARPU, multiple products, and disciplined approaches towards these, growth-oriented businesses.
That sort of. You bring us back to where we started. As I, we sort of wrap up, seems like this is a period where you're growing the business through new products, revenue per user, sort of driving more devices into customers' homes, like NOW TV. At some point, you think that broadband starts growing again, in the meantime, focusing on costs. Is there any sort of new cost program that you're doing, or is this just regular way?
Every year.
Yeah.
Every year, as long as I can remember, we've been focused on taking a healthy approach towards cost control. A lot of it in cable, we can still get better. There's still runway for getting better around the customer experience and get doing... If, you know, there's gonna be a beneficiary in the AI world, it's gonna be cable. There'd be lots of winners in that. We will be focused on and already leveraging it and being able to do where there's a fiber cut exactly where the interval to do a better job getting to it. We're gonna continue to take cost out in a disciplined fixed way. We're, I think positioned well for the future, good focus on where the network's going. It is...
I think it starts with, though, that we still have growth prospects ahead of us in these growing categories in mobile and most certainly broadband. Nice to be able to have good news for the high end, good news for every segment, including the value-oriented segment, and being able to leverage our capabilities like we announced today with NOW TV.
Good. Good place to leave it. Thanks, Dave.
Thank you, Phil. Thank you, everyone.
Nice to see you. Thank you. You got it.