What is StreamSaver's Business Purpose?

StreamSaver is a new streaming bundle including Peacock, Netflix, and Apple TV that available exclusively to Xfinity customers, in the same way that Xfinity mobile services are only available to Xfinity customers. 

But it might be reasonable to suggest the new bundle will boost Peacock and Apple TV market share by only single digits.

Netflix, Amazon Prime are the clear leaders leaders, with Disney (Disney, Hulu, coming ESPN service) poised to emerge at the top as well. All the others remain well into secondary or tertiary roles, and the new bundle likely cannot move the needle very much.

Of course, Comcast might see the value not so much in Peacock market share growth (Comcast owns Peacock) but in the value of customer acquisition and retention for its overall subscription businesses (mobile service, home broadband, linear TV).

As with Comcast's mobile phone service, the new bundle can be purchased only by existing Comcast customers (home broadband or linear video service). So the effort is primarily to increase the value of Comcast services.

As often is the case with bundles, the value is partly the price. The advantage of product bundles for the end user (aside from the bundles of features) is almost always the lower price. Streamsaver features the ad-supported versions of the services at $15 per month, where the a la carte prices of those services cost between $6 and $10 a month each.

A reasonable question is how many accounts, and how much revenue, that new service could attract.

Perhaps the easiest assumption is that Xfinity customers who already buy Peacock, Netflix and AppleTV+ will be most inclined to switch. Perhaps next most likely to adopt are Xfinity customers who already buy one or two of those services (Netflix as the presumed anchor and leader) and who can be convinced to the other services. 

The other issue is that the new bundle can only be purchased by Xfinity customers buying either home broadband or Xfinity linear video services. And that means the bundle can likely only be considered by people living in roughly half of U.S. homes. 

The potential market issues can be illustrated by Comcast’s similar approach to selling mobile phone service. 

The context is that Comcast will only sell the bundle to its existing fixed network customers. Since the Comcast fixed network might only reach 45 percent of U.S. dwellings, that puts an upward limit on accounts. 

Then the issue is how much market share Comcast can take from the mobile market leaders (Verizon, AT&T, T-Mobile) that collectively have about 97 percent of the installed base of customers. 

In the third quarter of 2023, Comcast’s Xfinity mobile service had about six million accounts, with revenue growth near 25 percent per year. 

According to the CTIA, there are 523 million mobile devices in the U.S. market with 97 percent of adults owning a mobile phone. Using a (definition of “adults” as those 18 or older, the U.S. Census Bureau estimates that in 2020, adults represented 78 percent of the total population, or 258.3 million people.

If 97 percent of those people have mobile phones and service, that implies something on the order of 250.55 million accounts. If correct, Comcast has an installed base of about two percent of the market. 

The U.S. Census Bureau estimates there were around 140.7 million housing units in the United States in 2020, about 90 percent occupied. So assume dwellings with people living in them at about 126.6 million, with an average occupancy of 2.5 people, for a total of 316.58 million potential mobile accounts. Assume 97 percent have such accounts, for an implied subscriber base of around 307 million, excluding separate business accounts. 

So the installed base of accounts might range from 250 million to 307 million. Assume Comcast’s network passed about 57 million homes (including small business accounts, that figure could reach 80 million locations, by some estimates. Assume it continues to sell exclusively to its own customers. Assume that its installed base of customers is about 55 percent of homes passed (customers buying internet access or video services). 

That suggests terminal adoption ranging from 31.4 million to 44 million locations. If each location features 2.5 accounts, that implies a theoretical terminal customer base of perhaps 78.5 million to 110 million accounts. 

Those figures are the theoretical maximum, keeping in mind that the leading mobile service providers today have installed bases in the 30 percent range each. According to Statista, in May 2023, mobile market shares were:

Verizon: 34.9%

AT&T: 32.2%

T-Mobile: 29.5%

Other Carriers: 3.4%. 

Many observers believe Xfinity therefore will not reach terminal share as high as 55 percent, even within its own service territory, as its fixed network reaches perhaps 45 percent of occupied homes. So with the present policies, Comcast cannot sell to 55 percent of the market. 

With those conditions, were Comcast to reach relative parity with any of the leading mobile service providers, it might hope to reach a ceiling of about 14 percent total market share (assuming 30 percent as a reasonable share within its sales territory, representing 45 percent of locations). 

The new streaming bundle will face the same geographic limitations as does mobile service. On the other hand the streaming market still is growing, and is not mature, as is mobile service. And, obviously, the attraction of the bundle--for Peacock and AppleTV--is the potential to increase share in a market dominated by Netflix, Amazon Prime and Disney. 

Streaming Provider	Estimated Market Share
Netflix	32%
Amazon Prime Video	22%
Hulu	14%
Disney+	12%
Other (HBO Max, Apple TV+, Peacock, etc.)	20%

But the bundle also increases the range of products and value for Xfinity customers. Right now, it is hard to say whether ultimate value comes from growing Peacock share or increasing the value of the Xfinity service overall (reduced churn, for example) or serving as a means of supporting higher revenue per account. 

It might be reasonable to assume all three sources of value will be in play. There are lots of moving parts, though, as most of the other leading or contending streaming firms also are moving to create bundles. 

The coming Disney and Warner Bros. Discovery bundle combines Disney+ with Hulu (including both ad-supported and ad-free options) and Warner Bros. Discovery Max content. 

Also, a new sports streaming service featuring content from Disney (through ESPN), Fox, and Warner Bros. Discovery, Venu Sports, also is launching. Unknown at this point is whether the coming ESPN streaming service will be available as part of that bundle. 

The differences are that StreamSaver can only be purchased by Xfinity customers. The other bundles can be bought by any U.S. consumer.  

Still, the streaming bundles seem to suggest that Netflix and Disney could emerge as the tentpoles of the business. 

C-Band is a Huge Deal for Verizon: Extends Home Broadband Addressable Market from 25% to Virtually 100%

One iron rule for internet access services is that if one has enough bandwidth, access speeds can be very high. For mobile operators, bandwidth expansion can come in a few ways: adding more spectrum, building smaller cells or deploying better modulation techniques or radios.

In that regard, for 5G, mid-band spectrum has been key for firms such as Verizon, which have had less mid-band spectrum than others. The difference is striking. 

After deploying C-band spectrum, Verizon mobile peak speeds “go from 9 Mbps to an amazing 2.4 gigabits per second,” said Hans Vestberg, Verizon CEO.

That has implications for home broadband as well, as, in principle, peak speeds might reach gigabit per second levels. And that, in turn, is important because it dramatically extends the addressable market for fixed wireless from perhaps 25 percent of buyers to perhaps 99 percent of buyers (those who buy home broadband at speeds up to about 2 Gbps, and do not require symmetrical access)

True, Verizon has millimeter wave assets to deploy in urban areas, but C-band means fixed wireless has higher bandwidth in suburban and rural areas as well. 

For Verizon, which has a smaller fixed network footprint than many of its leading competitors, that really does matter, as it means Verizon can compete for home broadband customers who want higher speeds in most U.S. geographic areas. 

Of a total of 140 million U.S.  homes, AT&T’s landline network passes 62 million. Comcast has (can actually sell service to) about 57 million homes passed.

The Charter Communications network passes about 50 million homes, the number of potential customer locations it can sell to.

The number of Verizon homes passed might be 27 million. Lumen Technologies never reports its homes-passed figures, but likely has 20-million or so consumer locations.

The point is that Verizon cannot easily expand its fiber to home footprint outside its historic service areas, for reasons of investment magnitude. So fixed wireless makes eminent sense for a firm that can presently reach only about 19 percent of U.S. homes using its fixed network. 

The same sort of logic holds for T-Mobile, which historically has had zero access network fixed network footprint. There is neither time nor money for T-Mobile to wire the entire country, or even a substantial part of it, using FTTH. 

So C-band is a really big deal. It extends Verizon’s home broadband addressable market from about 25 percent of homes to up to 100-percent of homes.

NextLight Grabs 60-Percent Market Share Competing Against Lumen and Comcast

NextLight, the electrical utility owned internet service provider in Longmont, Colo. says it has gotten 60 percent take rates for its fiber-to-home service, with similar take rates among business customers, after gaining about 54 percent take rates after five years of operation. 

Should many other competitive ISPs achieve such success, incumbent telco and cable operator ISPs could face serious challenges. 

It has been conventional wisdom in U.S. fixed network markets that two competitors are a sustainable market structure, typically featuring one cable operator and the legacy telco, with market shares ranging between a 70-30 pattern (where the telco only has copper access)  to something closer to 60-40 as a rule (where the telco is upgrading to fiber access). 

Telcos hope for market shares approaching 50-50 as FTTH becomes the dominant access platform over time. 

The new issue is additional providers, ranging from municipal or utility-owned ISPs to independent ISPs, including independent ISP operations that cover only parts of a metro area. In a sense, that is the mass market or consumer version of the competitive local exchange carrier strategy adopted decades ago, where suppliers target business customers in major office parks or downtown core areas. 

The American Association of Public Broadband cites 750 municipal internet service provider networks in operation in the United States, mostly serving smaller communities. Not all have full retail operations, though. 

Chattanooga Electric Power claims 175,000 customers in the Chattanooga, Tennessee area. The next-largest 10 such ISPs have fewer customers, often because they are smaller population centers. 

• City of Salem Electric Department (Oregon): 50,000

• City of Longmont Power & Communications (Colorado): 40,000

• Plum Creek Electric Cooperative (North Dakota): 35,000

• Jackson Energy Authority (Tennessee): 25,000

• City of Holyoke Municipal Light Department (Massachusetts): 20,000

• City of Boulder Municipal Electric Utility (Colorado): 18,000

• City of Dubuque Utilities (Iowa): 17,000

• City of Lawrence Public Utilities (Kansas): 15,000

• City of Lexington Utilities (Kentucky): 15,000

 

And other networks are launching in larger population centers. As with any set of contestants in any other industry, not all suppliers will succeed and not all will likely survive. Managerial skill still seems to matter, as do the other prosaic concerns such as managing debt burdens and picking the right areas to serve. 

Many for-profit ISPs now believe they have better opportunities in rural areas, for example, where a new fiber network can be “first” to serve the market. Up to this point few have attempted to compete in a major big city market. ISPs targeting operations in mid-size cities have generally only chosen to serve portions of their cities. 

The obvious broader issues are the roles and strategies traditional retail service providers can envision as their markets are reshaped by competition, new investors and virtualized or other roles beyond the traditional vertically-integrated model. 

The question naturally arises: how many of these new competitors will succeed, and what are the implications for sustainable market shares over time?

In a market with two significant suppliers, each serving the whole market, an ISP might require  market share of at least 30 percent to be sustainable. That has often been the pattern where a cable operator competes against a telco with copper-only access, where the available telco speeds are quite limited in comparison to a cable operator hybrid fiber coax network. In such cases, there is an order or magnitude or two orders of magnitude difference in top speeds. 

In a market with three significant suppliers, an ISP typically needs to have a market share of at least 20 percent to be sustainable, if competition across the full geography is envisioned. Such ISPs also tend to require more efficient operations. 

In a market with four significant suppliers, where we can assume as many as two of the four compete only in a portion of the metro market, an ISP typically needs to have a market share of at least 10 percent (of the full area potential market) to be sustainable, though ISPs serving only a portion of a metro area also probably need take rates higher than 10 percent in the areas they do choose to serve. 

If an independent ISP cannot get 20 percent to 30 percent take rates in its chosen geographical areas of coverage, it probably is not doing well. 

The best suppliers can take so much share from the incumbents (telco and cable) that severe damage to the incumbent business model is possible, turning those competitive areas into loss-making operations. 

A fixed network operator with sufficiently offsetting performance might survive actual losses in a few geographies. In fact, traditional monopoly fixed network suppliers expected permanent losses in rural areas, breakeven or slightly better performance in suburbs and most of the profits from operations in city cores. 

NextLight seemingly has avoided issues of cross-subsidization of internet access service by the electrical utility ratepayers, separating its financial operations from those of Longmont Power Company.

NextLight has its own board of directors, management team, and accounting system.

NextLight seemingly provides service “at cost,” plus a small margin to cover its operating expenses. The objective is to break even, rather than “making a profit.”

NextLight's network is physically separate from LPC's network, though critics might argue NextLight uses power company rights of way and other benefits of having a sponsor with an on-going business, which could translate to financial advantages. 

Others might argue there is some cross subsidy. There is a no-recourse surcharge on LPC's electric bills, used to fund the construction and operation of NextLight, and it is applied to all LPC customers, regardless of whether they subscribe to NextLight service.

That said, NextLight has gotten a legal opinion from the Colorado Attorney General's Office stating that NextLight is not engaging in cross-subsidization, and that the non-bypassable surcharge is a fair and reasonable way to fund the network. 

In fairness, what revenue-generating entity would not look to leverage its current assets to create new lines of business? Cable operators used their video subscription networks to create fully-functional telecom networks; use their fixed network to support their mobile service provider operations; extended their consumer networks to provide business-specific services; used their linear video customer base to leverage a move into content ownership. 

Telcos do the same, when trying to extend their core operations to new services. In the more-regulated era, they had to establish separate subsidiaries to enter non-regulated lines of business. That is less an issue in today’s largely-deregulated markets. 

The city of about 100,000 is about 30 miles north of Denver, so might be considered a suburb by some, a neighboring city by others. Using either characterization, population density varies quite substantially. 

The population density of Longmont, Colorado in its city core is 11,999 people per square mile while the population density of the outlying areas is 1,369 people per square mile  

 

Housing density and population density obviously are key indicators of potential access network cost and revenue possibility. Housing density enables and constrains home broadband market size, while population density is correlated with business revenue potential. 

To a large extent, housing and population density also affect network cost: the lowest-cost-per-passing networks can be built in dense areas while the most costly networks are in rural areas. 

Among U.S. internet service providers, the “average housing density is 400 locations per square mile, with Comcast sitting squarely on that level of density. Smaller telcos tend to serve more-rural areas and have housing densities an order of magnitude or two orders of magnitude less than the largest ISPs. 

Company	Housing Units	Average Housing Density (dwellings per square mile)
Verizon	58.2 million	1,500
AT&T	51.8 million	1,300
Lumen (formerly CenturyLink)	25.7 million	600
Charter	22.9 million	500
Comcast	19.5 million	400
Windstream	14.8 million	300
Brightspeed	1.9 million	40

At least historically, that explains why Verizon was early to invest in fiber to home facilities. It has the most-dense serving areas, so has the best economics. Only recently have many smaller and independent ISPs been able to make a business case for investing in FTTH in rural and exurban areas, though lots of small rural telcos have been doing so for years. 

Housing density	Cost per home passed
40 homes per square mile	$2,000
40 homes per square mile	$800
1,300 homes per square mile	$500

Figures of merit for FTTH construction might range from $1,000 to $1,250 per household at 400 homes per square mile but $1,500 to $2,000 per household at 40 homes per square mile, for example. 

At higher densities of 1,300 homes per square mile, costs might range from $500 to $750 per household. 

The business case also includes less revenue per account potential at lower densities as well. 

All that matters as attacking ISPs and infrastructure investors weigh their odds of success when competing with legacy service providers. To be sure,  FTTH payback models seem to have changed greatly since 2000. 

The economics of connectivity provider fiber to the home have always been daunting, but they are, in some ways, more daunting in 2022 than they were a decade ago. The biggest new hurdle is that expected revenue per account metrics have been cut in half or two thirds. That would be daunting for any supplier in any industry. 

These days, the expected revenue contribution from a home broadband account hovers around $50 per month to $70 per month. Some providers might add linear video, voice or text messaging components to a lesser degree. 

But that is a huge change from revenue expectations in the 1990 to 2015 period, when $150 per customer was the possible revenue target.  

You might well question the payback model for new fiber-to-home networks which assume recurring revenue between $50 and $70 per account, per month, with little voice revenue and close to zero video revenue; take rates in the 40-percent range; and network capital investment between $800 and $1000 per passing and connection costs of perhaps $300 per customer. 

In the face of difficult average revenue per account metrics, co-investment and ancillary revenue contributions have become key. Additional subsidies for home broadband also will reduce FTTH deployment costs. 

The point is that FTTH revenue models, and the ability to sustain a competitive ISP operation, either as an incumbent or attacker, now seem to make possible more competition than was previously thought possible. 

NextLight is a good example.

Unknown "Homes Passed" Data Hampers Revenue Growth Estimates

Some important types of statistics and data are not collected because governments do not force firms or industries to collect it. For example, many governments think it is important to track data on where home broadband exists, where it does not, how fast it operates, who buys and who does not. 

Private firms often have important incentives to track and measure their own revenues, sales, profit margins and growth rates. Financial markets and accounting rules often require measurement of this sort. 

AT&T, for example, reports revenues for mobility, fixed network business revenues and consumer fixed network revenues from internet access, voice and other sources. But those are traditional financial metrics, not operating indices such as penetration or take rates, churn rates and new account gains. 

source: AT&T 

Nobody seemingly believes the same effort should be made to measure the number of home broadband provider locations or dwellings reached by various networks. Better mapping, yes. Metrics on locations passed? No. 

And yet “locations passed” is a basic and essential input to accurately determine take rates (percent of potential customers who actually buy). That input matters quite a lot to observers when evaluating the growth prospects of competitors, even if that figure does not matter much for policymakers, who mainly care about the total degree of home broadband take rates, on an aggregate basis. 

The U.S. Census Bureau, for example, reported some 140.5 million housing units housing units as part of the 2020 census. The estimate for 2021 units is 142.2 million units. Assume 1.5 million additional units added each year, for a 2022 total of about 143.6 million dwelling units. 

Assume vacancy rates of about six percent. That implies about 8.6 million unoccupied units that would not be assumed to be candidates for active home broadband subscriptions. The U.S. Census Bureau, though, estimates there are about 11 million unoccupied units when looking at full-time occupied status. That figure presumably includes vacation homes.

Deducting the unoccupied dwellings gives us a potential home broadband buyer base of about 132.6 million locations. 

More difficult is the degree to which access networks operated by any single contestant actually pass those locations, as firms generally do not report such numbers in quarterly financial or annual reports (they do not have to do so). 

And that is where estimations must be made. AT&T’s 2022 10-K report cites 14.2 million customer locations connected. Assume AT&T has about 20 percent take rates for its home broadband services where it operates. That implies a housing unit coverage of about 71 million dwellings. 

Assume AT&T has a higher take rate of about 39 percent where it operates fixed networks. That implies housing coverage of about 36 million dwellings. 

The estimate of 71 million home passings strikes me as too high, but the estimate of 36 million seems too low. In the past I have used the figure of 62 million homes passed for AT&T. 

Assume Verizon has about 10 million home broadband accounts, with a take rate of 40 percent (a bit high, probably, if we include copper access). That implies housing coverage of some 25.3 million dwellings. 

Leichtman Research Group has estimates of home broadband accounts that vary from company reports. LRG estimates that AT&T has some 15.4 million internet access accounts. The variance might come from business accounts not enumerated. 

Verizon’s consumer accounts might be overstated, as LRG estimates Verizon has about 7.5 million home broadband accounts, not 10 million. Using the LRG account figures, we might estimate Verizon home coverage of about 18.8 million homes, on the high side. 

ISPs

Subscribers at end of 2022

Net Adds in 2022

Cable Companies
Comcast	32,151,000	250,000
Charter	30,433,000	344,000
Cox*	5,560,000	30,000
Altice	4,282,900	(103,300)
Mediacom*	1,468,000	5,000
Cable One**	1,060,400	14,400
Breezeline**	693,781	(22,997)

Total Top Cable

75,649,081

517,103

Wireline Phone Companies
AT&T	15,386,000	(118,000)
Verizon	7,484,000	119,000
Lumen^	3,037,000	(253,000)
Frontier	2,839,000	40,000
Windstream*	1,175,000	10,300
TDS	510,000	19,700
Consolidated**	367,458	724

Total Top Wireline Phone

30,798,458

(181,276)

Fixed Wireless Services
T-Mobile	2,646,000	2,000,000
Verizon	1,452,000	1,171,000

Total Top Fixed Wireless

4,098,000

3,171,000

Total Top Broadband

110,545,539

3,506,827

source: Leichtman Research Group 

Assume Comcast has 31.2 million accounts, with take rates for home broadband of about 52 percent. That implies something on the order of 60 million households. 

Assume Charter Communications has a take rate of about 45.5 percent where it operates fixed networks. Assume Charter has approximately 30.8 million home broadband accounts. That implies a homes-passed figure of about 67.7 million homes. 

If there are 132.6 million U.S. occupied home locations, then Comcast and Charter can reach about 127.7 million of those locations, or about 96 percent of total, as Comcast and Charter essentially have unduplicated networks, not competing in the same geographies. 

That strikes me as unlikely, on the high side. An older rule of thumb is that Comcast and Charter reach about a third of total U.S. locations, each, for a possible reach of up to 66 percent of total U.S. home locations. 

Using different methodologies, I have in the past estimated that Comcast has (can actually sell service to ) about 57 million homes passed, while the Charter Communications network passes about 50 million homes, the number of potential customer locations it can sell to.

Verizon homes passed might number 18.6 to 20 million. To be generous, use the 20 million figure. 

AT&T’s fixed network represents perhaps 62 million U.S. homes passed. CenturyLink never reports its homes passed figures, but likely has 20-million or so consumer locations it can market services to. 

Ignoring the variance in potential customer locations passed, AT&T would seem to have the greatest opportunity in the home broadband space, if it can build optical access connections faster, as has the biggest home footprint and low home broadband market share. 

On the other hand, AT&T revenue is driven by mobility, not the consumer fixed network. So then the question has to be posed as "how much to invest in the consumer fixed network?" compared to other oportunities. A rational person might argue that answer is "not so much."

Capital availability--and financial returns--are always the issue. Even if it dramatically escalated fiber-to-home capital investment, it is not clear AT&T would gain as much new revenue, compared to investing in mobility or business services, for example.

The point of the wider exercise is that we are forced to guess about how many homes each of the major fixed network contestants actually can reach. That, in turn, affects our ability to estimate adoption rates and potential growth opportunities. 

The key point is that the estimates are imprecise. Pinning down the “homes passed” figure, essential as the denominator in any calculation of take rates, requires estimations with variable degrees of uncertainty, especially for the larger networks.