Voice Has 5 Years Left, as a $20 a Month Product, Cablevision Believes

Two on-going issues in the fixed network communications business were highlighted during the Charter Communications quarterly earnings report for the first quarter of 2015. The first is the reality of stranded assets--deployed access capital that does not earn a return.

“Our broadband penetration is now at over 40 percent of homes passed, and today at about 85 percent of our residential Internet customers subscribe to tiers that provide 60 megabits or more,” according to Tom Rutledge, Charter Communications CEO.

While the high percentage of customers buying service at a minimum of 85 Mbps is significant, the other salient fact is the roughly 60 percent of homes passed by the network that do not buy.

As a rough metric, that means the cost of the network “per customer” is more than double the cost of the network “per potential customer site.” That is a problem is every highly-competitive market.

One advantage mobile networks have, over fixed network, are the dimensions of the stranded asset problem. At an extreme, capital is not deployed where there are few potential customers. That is true for all networks.

But especially where potential customer concentrations are dense, mobile networks are less likely to strand capital.

The other issue illustrated is product maturity and decline. Asked about voice pricing, Rutledge acknowledged that prices are destined to decline further.

“Our view in the long run is that it has to go down,” said Rutledge. Today, fixed line voice priced at $20 a month is seen as providing value. “Will it be five years from now? Probably not,” said Rutledge.
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