Charter starts to book RDOF revenues
Financial numbers linked to Charter Communications' Rural Digital Opportunity Fund (RDOF) commitments began to surface in the operators first quarter 2022 results.
Charter booked about $19 million in RDOF-related revenues in the quarter, with an expectation that just over $9 million per month will be coming in over the next ten years, Jessica Fischer, Charter's chief financial officer, said on today's Q1 2022 earnings call.
Tom Rutledge, Charter's chairman and CEO, said the company has RDOF work underway in all 24 states where it won bids in phase I of the RDOF auction. All told, Charter plans to build fiber and gigabit services to more than 1 million rural, unserved locations. Through RDOF, the company will add more than 100,000 miles of new network infrastructure to its existing 800,000 miles of infrastructure in the coming years.
Rutledge said Charter has already started to win some rural broadband bids at the state level, and expects the company to take part in the broadband component of President Biden's massive infrastructure bill. Rutledge noted that there's another $42 billion in additional funding for rural broadband likely to be distributed in 2023. "That's an opportunity for us to grow," he said.
Government-related activity aside, the exec noted that Charter is also expanding its network proactively where it's economically attractive, but acknowledged that supply chain issues are impacting the pace of new housing developments.
According to MoffettNathanson analyst Craig Moffett, Charter's footprint (excluding RDOF) grew by 1.9% YoY, or about 1 million homes. That's a drop from a recent growth rate of slightly above 2%, and likely due to the aforementioned moderation of household formation growth, he added.
"We expect this growth to accelerate, however, as RDOF construction begins," Moffett added.
Charter's Q1 capital spending included about $232 million for rural construction spending initially focused on design and "make-ready" activities, and has little to do yet with actual network build-outs to homes or business locations.
Alongside its fiber build activity, Charter is also making moves to enhance the performance of its widely deployed hybrid fiber/coax (HFC) network. Charter is making plans for DOCSIS 4.0 (Light Reading will have more details about that work soon), but in the meantime is exploring "high-split" upgrades that dedicate more spectrum to the upstream on existing DOCSIS 3.1 networks.
Charter, Rutledge said, is now referring to that activity as a "spectrum-split" – an apparent nod to the company's Spectrum branding. Most of Charter's modems are already capable of supporting a spectrum-split, he said.
Rutledge said Charter has spectrum-split upgrades underway in "various markets," but didn't identify which areas, when Charter expects to finish the rollout nor how the operator intends to use the upgrades once they are in place.
But he likes the economics. "The interesting thing about our capacity to do these upgrades is that they're quite simple, electronic upgrades and are relatively inexpensive, and we can do them rapidly across as much of our footprint as we need to do," he said. Rutledge reiterated that the use of the spectrum-split/high-split obviates the need to do more expensive physical node splits.
— Jeff Baumgartner, Senior Editor, Light Reading
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