The year-over-year growth broadband subscriber growth rate now stands at 4.7%, a big jump from the 2.7% rate pre-COVID, according to financial researchers at MoffettNathanson. Most of the growth went to cable companies, while telcos, overall, saw a slower rate of broadband subscriber losses.
A new research note from the firm explores the potential drivers for the strong broadband performance – beyond the simple explanation that broadband became more important as Americans increasingly worked, learned and entertained themselves from home.
Another key factor, the researchers speculate, is that we didn’t see a big jump in broadband cancellations, even though some subscribers have had difficulty making ends meet.
“The growth is all the more remarkable given the evident economic stresses on so many families as a result of the COVID recession,” the research note states. “Recall that the $600 a week in enhanced unemployment benefits ended on July 31st . . . and yet a surprisingly large number nevertheless found a way to pay their broadband bill.”
As a possible explanation, the researchers note that some cable companies launched lower-cost broadband offerings or expanded eligibility for existing low-income offerings in response to the COVID pandemic. In addition, the Keep Americans Connected Pledge, to which the vast majority of broadband providers agreed, prevented the providers from cancelling service due to non-payment for a period of time, which may have helped stem customer losses.
That program ended in the summer, however, and the question moving forward, of course, is whether Americans will continue to be able to pay their broadband bill.
Broadband Subscriber Growth
MoffettNathanson has frequently argued that new household formation is a key driver of broadband subscriber growth, and despite COVID, new household formation was strong in the second quarter of 2020 and was still strong, but less so, in third quarter, according to Census Bureau data.
The researchers note that some municipalities had policies in place to prevent evictions during COVID, which may have contributed to the strong household numbers. The researchers also considered reports of spikes in divorce and separation rates as marriages were put to the test by stay-at-home directives but said divorce filings actually decreased in five states studied. The researchers note, however, that some couples may be separating in advance of an official divorce, further fueling new household formation.
The current broadband subscriber growth rate is the highest in a decade, the researchers note. They speculate, however, that the current situation represents a “pull forward,” meaning that growth for 2021 is likely to be weaker.
There is another positive regarding the broadband business, however. The researchers note that margins have increased as some subscribers have signed on for higher-speed services and as the percentage of cable company revenues that comes from higher-margin broadband services continues to increase.
