A transformation led by competitive threats and government stimulus is taking place in the cable business, and it is unlikely the industry will ever return to predictable cycles of growth and retraction, some analysts believe.

Historically, cable companies experienced bursts and declines related to seasons. College students would add significantly to disconnection and connection numbers in the second and third quarters, respectively, as they left and returned to school. However, with remote work and learning, the concept of seasonality no longer exists to the same degree in the cable industry, analysts say.

"I don't think we can speak of cable seasonality anymore," said Tony Lenoir, senior research analyst at Kagan, a media research group within S&P Global Market Intelligence. "The business has evolved, with broadband now its primary product — a service for which college attendance doesn't really make a difference since students rely on campus broadband and their mobile devices for their connectivity needs."

To everything, there is a season

Cable providers Comcast Corp. and Charter Communications Inc. both had fewer internet net adds in the third quarter of 2021 compared to 2020. For the third quarter, Comcast reported 300,000 net adds in broadband customers. In the same quarter of 2020, the company gained 633,000 customers. At Charter, broadband customer net adds totaled 265,000 for the third quarter, compared to 537,000 in the third quarter of 2020.

But MoffettNathanson analyst Craig Moffett noted that both operators saw fewer disconnects in the second quarter of 2021.

"It appears that we didn't see as many school reconnects in Q3 because we didn't see as many disconnects in Q2; they couldn't reconnect if they never disconnected in the first place," Moffett wrote in a research note.

With this in mind, Moffett sees investors putting too much emphasis on third-quarter results when instead they should be looking at the "middle six months," or the second and third quarters together.

For Comcast, Moffet said, "In total, the 'middle six months' delivered 11% more subscribers in 2021 than 2020 … hardly a sign of a slowdown."

Competitive landscape

Altice USA Inc. CEO Dexter Goei said students returning to campus gave college markets activity level boosts, but he called the current broadband landscape "competitive" due to decreasing activity levels overall.

"As things stand, we still expect to return to broadband customer growth in quarter four and therefore, grow slightly for the full year," Goei said.

Before this year's third-quarter earnings results were announced, Raymond James analysts Rob Palmisano and Frank Louthan IV lowered their ratings on Charter and Comcast to "market perform" from "market outperform" due to perceived competitive expansion from telco fiber rollouts, among other factors.

"As always, the rate of change is slow, but we believe the increasing competitive issues impacting subs will be a drag on the names," the analysts said.

Feeling stimulated

WideOpenWest Inc., which serves mainly the Southeastern U.S., continues to place emphasis on its "broadband-first" strategy. It ended the third quarter with approximately 509,500 internet customers, compared to about 496,600 in the same quarter of last year. During its third-quarter earnings call, WideOpenWest CEO Teresa Elder said the company has about 8,000 customers benefiting from the Emergency Broadband Benefit Program. She said the company plans to take advantage of the infrastructure bill to retain customers.

About $65 billion of the $1.2 trillion bill is allotted to strengthening broadband infrastructure and investing in rural connectivity. It is likely that states will be unable to utilize this funding for at least a few more months.

NCTA-The Internet and Television Association, a group that represents major broadband providers, released a statement in support of the bill.

"While much work remains to ensure that government funds remain properly focused and are efficiently administered consistent with Congressional intent, this package advances our national imperative to get everyone connected to robust and reliable broadband service," NCTA President and CEO Michael Powell said in a statement. "With cable broadband providers already expanding our networks to reach unconnected homes and working with community partners to encourage broadband adoption, these funds can accelerate the types of public–private partnerships that can achieve real results in more communities."