April greetings from Cedar Rapids, Jefferson City, and Kansas City. This week’s pic is from our Easter gathering with three generations of Pattersons. Hope your holiday was filled with family and fellowship.
After a full market commentary, we analyze the question posed in the title. The cable industry faces it’s greatest challenges today – account, revenue and cash flow growth. Below we analyze the key success drivers and examine several ways they can combat market share challenges from fiber to the home (FTTH) and fixed wireless providers.
The Fortnight That Was
Over the last two weeks, the Fab Five have recovered $1.47 trillion in market capitalization, while the Telco Top Five have lost $55 billion. Alphabet and Amazon are both up for 2026, and Meta and Apple are not far behind. Verizon and AT&T are also up in 2026, as well as Charter (for reasons discussed in detail below). The last time the Fab Five had a YTD loss less than a trillion dollars was mid-February. Not at +$2 trillion yet, but definitely better.
Outside of the Iran war developments, these equity values are driven macroeconomic news, and there was plenty of it to start April. The most important metric impacting consumer behavior is inflation, and there was a fresh Consumer Price Index report out on Friday (see nearby chart) which clearly delineated the impacts of the war. Per the report (here):
“The index for all items less food and energy rose 0.2 percent in March. Indexes that increased over the month include airline fares, apparel, household furnishings and operations, education, and new vehicles. Conversely, the indexes for medical care, personal care, and used cars and trucks were among the major indexes that decreased in March.”
The knock-on effects from increased petroleum costs are clear: higher jet fuel drives up airline ticket prices (and schedule shrinkages, see Tavel & Leisure article here), clothing with a polyester or synthetic blend is going to rise with increased oil, and shipping costs are going to rise to transport everything. Even as those effects began to materialize in March, the “less food and energy” category remained low at +0.2%. Without a doubt, consumer discretionary spending will decrease in 2Q because of higher fuel costs (through February, although, retail sales were good – see link here), but annualized increases in certain import categories impacted by Liberation Day 2025 should be muted.
We do not think that any of the recent developments trigger long-term stagflation (high inflation with low/no growth). But lower consumer spending will certainly diminish the growth rate, which should in turn lower price pressures (and eventually translate into lower interest rates). Housing affordability and home ownership remain the largest inhibitor (after war) to long-term growth, and solutions are scarce. That has a direct impact on the broadband side of the telecom industry (less growth, fewer switching opportunities).
Job growth, however, has remained positive for the year, with private (non-government) employment up 403,000 over the last 12 months. Here is the five-year chart from the Federal Reserve (FRED) database:
From March 2023 to 2024, private payrolls increased 1.62 million. From March 2024 to March 2025, that figure is 648,000. The trend is clear: private payroll growth has slowed after the last three years but is still positive. Government employee growth (state + local + federal) is down 242,000 over the last 12 months, thanks to 330,000 fewer federal employees.
The picture by state/ region is very different. One of our favorite reports was released by the Bureau of Labor Statistics earlier this month showing employment growth by state. For those of you who are new to this column, we like employment growth more than changes to unemployment as it indicates which taxpayer base is growing fastest.
Within that figure, however, there are a small but growing number of states who are growing both construction and manufacturing jobs (versus health care, leisure/ tourism, and government). They are as follows:
Other states are growing construction OR manufacturing, but there are only five that grew both from January 2025 to January 2026. Texas, for example, grew total employment by 113K and construction by 30K over the last twelve months, but manufacturing slipped over that period by 8K. Other states such as Florida are growing manufacturing but down on construction (-21K overall, -9K construction, +1 manufacturing). Construction growth begets community and services growth, and manufacturing growth is the objective of the current administration’s tariff policy. We will continue to watch these reports to see how states are increasing their employment rolls. More growth in Texas, Florida, and the South has been the previous trend, but it appears that growth is occurring more broadly.
Before diving into cable industry dynamics, it’s worth taking a close look at Amazon’s annual letter to shareholders released earlier this month (here). CEO Andy Jassy outlines five lessons that Amazon has learned over the years that have contributed to their success. They are:
- Wherever possible, invent the next inflections.
- Be willing to pursue parallel paths when it’s unclear what’ll best drive the desired trajectory (2 > 0).
- When you identify disproportionate inflections, bet big.
- Accept going back to the starting line to redirect the trajectory.
- Cultivate a culture that can cope with squiggly lines.
The third point provides the basis for Amazon’s CEO to talk about Artificial Intelligence (AI) capital expenditures. Here is his excerpt from that section:
“The way AWS’s cash cycle works is that the faster AWS grows, the more short-term capex we’ll spend. AWS has to lay out cash for land, power, buildings, chips, servers, and networking gear in advance of when we can monetize it (typically 6-24 months before we start billing customers, depending on the component). However, these capex investments fund assets with many-year useful lives (30+ years for datacenters; 5-6 years for chips, servers, and networking gear). The FCF and ROIC for these investments are cumulatively quite attractive a couple years after being in service; however, in times of very high growth (like now), where the capex growth meaningfully outpaces the revenue growth, the early-years FCF is challenged until these initial tranches of capacity are being monetized and revenue growth out-paces capex growth. We’ve been through this cycle with the first big AWS growth wave, and liked the results. We expect to feel similarly about this next wave, with much larger potential downstream revenue and FCF.”
CellSite Solutions (our current home) is a beneficiary of this spending cycle, providing mini-data center infrastructure to companies that work with hyperscalers (and, in a few cases, the hyperscalers themselves). The demand for modular infrastructure (versus multi Megawatt data centers) is growing rapidly.
For Amazon, when subscriber usage growth begins to plateau, cash flow will follow. We think that most capital spending being undertaken today is directly linked to usage increases – as described at a different point in the letter, the adoption curve of AI services has been swift and new use cases are discovered daily. The entire letter, themed around the concept of “growth is rarely a straight line,” is thought provoking and recommended reading.
Can Cable Grow Again?
In our last full Brief, we outlined one word to describe the main theme of AT&T’s (“converged”), Verizon’s (“turnaround”), and T-Mobile’s (“accounts”) upcoming conference calls. Since that writeup, AT&T has introduced a converged product offering which Roger Entner (a great friend of the Brief) called a “total war on cable.” We agree and wrote about the OneConnect offers in last week’s Interim Brief (here).
In keeping with those words, our focus will be on cable’s ability to grow multi-product converged accounts. Here is the current situation for Comcast and (pre-Cox) Charter:
Charter and Comcast start 2026 with nearly the same number of residential and business passings. Comcast has a domestic residential customer relationship with 52% of their passed base while that figure for Charter is 51%. At the beginning of 2024, those figures were 56% for Comcast and 55% for Charter. While all competition is local, and the mix of competitors is different between the two companies, the result is about the same – 0.50% lost penetration per quarter, on average, for the last eight quarters.
To have a successful mobile offering, existing and prospective customers need to have a positive view of their broadband experience, especially if a FTTH offering to the same home exists. That impression directly relates to the age and maintenance of the plant from the local router to the home. In many (but not all) cases, the fiber plant is newer than the cable connection. As a result, the upload and download speeds shown nearby (slightly) favor fiber providers over cable (Ookla data here).
AT&T has standardized their OneConnect offerings around a 1 Gbps fiber to the home symmetric speed. We think this is a wise choice for many reasons, the most important of which is that more adoption of this speed tier will result in higher speed test scores (e.g., if all subscribers were at a 300 Mbps tier, the median download and upload speeds would be lower). Our first piece of advice is to reward converged families with a higher speed tier. This makes sense for many reasons and has a lower marginal cost than many other solutions.
Eight quarters of offering faster speed tiers will drive up overall speeds and increase customer satisfaction. Note that the difference in the median download speed between the best fiber provider (Frontier – 383.71 Mbps) and the worst broadband provider (Cox – 301 Mbps) is not dramatic. A simple mix change could narrow that gap considerably.
Without faster and more consistent broadband speeds, cable providers will be driven to service level guarantees. We don’t think that is the best alternative as cable broadband is likely to have more outages (especially where plant is aging) than their FTTH counterparts. Having one or two credits per year is one thing, but more than that, regardless of the amount or frequency, will trigger defections. The best (and likely one of the cheapest) ways to grow market share is to increase the bandwidth for each home without being asked.
With a comparable (if not superior) home broadband offering, Comcast and Charter can increase their home “wallet” share through improved mobile bundling. As we have mentioned in previous columns, the “incremental” approach taken by cable companies has resulted in greater account fragility: cost-conscious families willing to switch between cable and other providers when compelling offers arise.
Nearby is the chart of net additions growth for Charter, Comcast and Optimum over the previous several quarters. Using the passings figures shown in the previous chart, Comcast stands at about 7-8% total market share and Spectrum at 9-10% share. 2026 is the ninth year Xfinity Mobile has been in market and the eighth year for Spectrum Mobile. This is not even close to the trajectory AT&T (or Frontier or any other FTTH provider) is on for fiber penetration. Both Comcast and Charter need to be delivering 800-900K mobile net additions to create an equilibrium stare. That’s a big gap to make up.
Cable can make up this gap by developing better device expertise and doing things that improve the customer experience. They have already improved the porting and data/ picture/ message/ app transfer process – still some additional items left to go, but they are on their way. The product offering (to use the previous Time Warner Cable phrase) needs to be “All the Best.”
Cable should hit at the high end/ premium offering in addition to value-conscious customers. And what better way to do that than with (a super-premium) Peacock or Gemini Pro or Spotify – products that improve the account experience, at home and about town. Our understanding is that Premium Peacock is offered only to 1 Gbps Xfinity broadband customers today (or those with Diamond/ Platinum account status).
Finally, cable still has video, and Charter has pioneered “at home and on the go” into nearly every new video customer. Nearby is one of their video packages which includes (mostly) ad versions of ESPN, HBO, Disney+, Hulu, Paramount+, and other offerings. While these do not include Netflix (and T-Mobile and Verizon’s packages do), they still represent a very robust offering. We think that Charter in particular has a unique opportunity to knit a product that exceeds the requirements of AT&T’s OneConnect because of content integration.
Cable can grow again. Here’s how:
- Match or exceed 1 Gbps speed as the base rate (except for income-driven $30/ mo. offers). Do it without being asked – surprise the customer with faster speeds.
- Set higher growth goals (higher gross additions, lower churn standards) for mobile. Give them the budget to do it. Create products and services that exceed high-end offerings from Verizon and T-Mobile.
- Use the video app arsenal Charter pioneered to save money and improve experiences on streamed services. (This tactic may pay for itself through increased home video penetration).
Even with an increased sense of urgency (which we think is real), even more focus needs to be on rapid development and response. Cable has a history of deliberation – this is not the time to be overanalytical. To quote the Andy Jassy article referenced earlier in this Brief, “be willing to pursue parallel paths when it’s unclear what’ll best drive the desired trajectory (2 > 0).”
That’s it for this week. By the next full Brief, earnings season will have begun and we will have plenty of analysis. In the meantime, if you have friends who are interested in being notified each time we publish a Brief, please have them sign up at www.sundaybrief.com.
Go Royals and Sporting KC!
Important disclosure: The opinions expressed in The Sunday Brief are those of Jim Patterson and Patterson Advisory Group, LLC, and do not reflect those of CellSite Solutions, LLC, or Fort Point Capital.
