Barclays Group media analyst Kannan Venkateshwar downgraded his ratings on Comcast and Charter Monday in the wake of disappointing Q2 broadband performance, adding that the rapid growth of fixed wireless service from telcos may end up being more of a threat than cable operators think.

Barclays lowered the rating on Comcast to “Equal Weight” from “Overweight” and on Charter to “Underweight” from “Equal Weight,” citing their poor Q2 performance. In addition to non-existent broadband growth in Q2, video subscriber losses at both companies rose significantly during the period -- to 521,000 and 266,000 respectively -- reigniting fears of accelerated cord-cutting for traditional cable. While mobile subscriber growth for both Comcast and Charter exceeded analysts’ consensus estimates for the period, Venkateshwar split from his peers, doubting that wireless will be able to take up the slack. 

Broadband Forecasts Lowered Again

Venkateshwar noted that he now expects Comcast to add about 300,000 broadband customers this year, down from 1.4 million in 2021, and Charter to add about 200,000, down from 1.2 million additions in 2021. He said the debate has shifted to whether or not cable broadband subscribers will actually decline in 2023 and beyond.

The broadband slowdown has weighed on cable stocks for months. So far this year, Comcast stock is down 24%, Charter down 34%, Altice USA fell 35% and Cable One is down 22%. The sector probably will fall even further after Altice USA reports Q2 results on August 3. 

Most analysts have reduced their forecasts for cable broadband subscriber growth again in light of the Q2 results, with Wells Fargo Securities media analyst Steven Cahall cutting his estimates for Comcast and Charter nearly in half. 

Prior to the Q2 results, Cahall had estimated Comcast would add 688,000 broadband customers in 2022 and another 630,000 in 2023. Now, his estimates call for 298,000 residential additions in 2022 and 300,000 in 2023. For Charter, Cahall had estimated residential broadband growth of 499,000 in 2022 and 549,000 additions in 2023. Those predictions have been revised to 152,000 customer additions in 2022 and 295,000 in 2023. 

Fixed Wireless Threat 

The analysts pointed to the potential threat of fixed wireless -- T-Mobile USA added 560,000 fixed wireless subscribers in Q2, far exceeding consensus expectations -- and Comcast’s and Charter’s seeming indifference to that competition. In conference calls with analysts to discuss Q2 results, both Comcast chairman and CEO Brian Roberts and Charter chairman and CEO Tom Rutledge said they believe fixed wireless isn’t much of a threat. 

Roberts called the fixed wireless access Q2 performance a fluke, as excess capacity created a “temporary opportunity targeted at value-oriented customers.” And while he said FWA isn’t having any “discernible impact” on churn, he did acknowledge it was a factor in Comcast’s flat Q2 performance. Not exactly an admission of a threat, but close, even though he added that performance and capacity restraints will likely limit FWA’s overall penetration.

On the call, Rutledge appeared to dismiss the long-term impact of fixed wireless while admitting that it is “an issue affecting growth at the moment.”  

Rutledge said fixed wireless access’s impact is small when compared to Charter’s overall footprint. He said activity levels were the major driver for subscriber losses. And he said that there are other economic factors at play, including low housing occupancy and new construction because of supply chain issues.

“And so we're pretty optimistic, relatively speaking, that as the post-pandemic market activity levels return and normalize, that our share of broadband growth will rise,” Rutledge said on the call. 

Also: Analyst Says Telcos Better Positioned to Chip Away at Cable’s Broadband Lead  

But Venkateshwar warned that fixed wireless could become a factor very quickly, adding that if T-Mobile meets its guidance of 500,000-plus additions each quarter, it will be larger than Altice USA (the fourth largest cable operator in the country) by the end of next year.

Also: Broadband Slowdown Hasn’t Hit Bottom Yet, Analyst Says 

“It is tough to see this not impacting cable structurally when cable [broadband] net adds overall have been [about] 3 million in normal years and T-Mobile and Verizon alone could add 2 million to 2.5 million FWA subs a year,” Venkateshwar wrote. “This is even before the existing DSL base converts to fiber driven by government funding and AT&T’s fiber expansion, which we estimate will result in an additional 20% of cable footprint having fiber overlap.” 

Blame Game

Cable operators have mainly blamed the broadband growth slowdown on lower household moves, an excuse that the Barclays analyst is not buying.

“[T]his is a market share argument and it is not clear why this would drag growth down for the industry as a whole,” Venkateshwar said of slower housing moves. “While cable has gained share vs DSL over time and therefore lower moves would impact growth rates, it is mathematically impossible to get to negative growth as seen last quarter, purely on account of lower move activity. In addition, the decline in move activity is not new and has been going on for years and tends to worsen during recessions. Even if move activity recovers, there are new elements that are likely to reduce cable’s share of gross adds given fiber and FWA entrants.”

Going Mobile 

Other analysts have seemed to side, partly, with cable operators' view on fixed wireless access. In a research note Friday, MoffettNathanson senior analyst Craig Moffett said that while investors will likely focus on broadband performance for a while going forward, they will eventually come around to the thesis that wireless is the new growth engine for cable. According to Moffett, if video was Act I for cable operators and broadband was Act II, wireless is poised to be the industry’s third Act..

Charter added 340,000 wireless customers in Q2, ending the period with 4.3 million customers. Mobile now accounts for 5.5% of Charter’s total revenue. Though the segment isn’t profitable yet, once Charter’s CBRS offload initiatives are completed in the next few years, it will be more profitable than most could imagine, according to Moffett.

The same holds true for Comcast. The largest cable operator in the country added 317,000 wireless customers in Q2, ending with 4.6 million customers. Wireless makes up about 4.9% of Comcast’s total cable revenue and is growing at a 30% annual rate.

“[W]e believe wireless growth remains underappreciated,” Moffett wrote. 

Wells Fargo Securities' Cahall said the jury was still out on mobile valuations, and while unit economics are positive, they don’t yet exceed the cost of service. On the other hand, increased capital spending on wireless could make operators less  reliant on MVNO partnerships and more competitive with telcos. 

“Add it all up, and it's a very logical strategy, but we think the value is too uncertain at flattish adjusted EBITDA margins to offset the [broadband and capex] challenges,” Cahall wrote.

Venkateshwar also was impressed by cable’s wireless performance, but he added that any war between cable wireless and telco FWA will be won by the telcos. 

“Telecom operators have their own issues but their narrative around new revenue sources like FWA is more feasible, at least over the short term, because it is backed by significant capital investments in a fixed cost infrastructure that should provide operating leverage over time,” Venkateshwar wrote. “Cable companies on the other hand have no plans to invest in a full infrastructure based offering, but still believe they can do better with an MVNO model than operators elsewhere in the world have managed. This strategy makes sense to test out the market and launch a service, but to anchor [a] long term strategic pivot of the scale that cable companies are attempting on someone else’s network is not viable in our view.” ■

MYRNA SOTO

TITLE: Senior Vice President and Global Chief Information Security Officer

COMPANY: Comcast Corp.

CAREER HIGHLIGHTS: Prior to joining Comcast, Soto held key information and security roles at MGM Resorts International, American Express, Royal Caribbean Cruise Line, Norwegian Cruise Lines and Kemper Insurance. She holds a bachelor’s degree from Florida International University, a Master of Science degree in Industrial Psychology, and a Master of Business Administration degree from Nova Southeastern University, as well as a Masters Certification in Project Management from George Washington University.

QUOTABLE: “You’re never done. You’re constantly tuning and constantly adding more things that you could protect or monitor or respond to.”

Read More >Celebrating Media's Influential Women: The 'MCN' Wonder Women Class of 2017|Meet 2017's 12 'MCN' Women to Watch|The 'MCN' Wonder Women Online Archive

Myrna Soto has been ensconced in high-level technology and cybersecurity circles for more than 25 years, but her successful career track wasn’t blazed in that direction by design, at least early on.

“The reality is that my interest in technology and security were both a little by accident,” Soto said. “They were not my prescribed educational tracks.”

But those tracks eventually led Soto to where she is today, serving in the important role at Comcast in which she’s not just in charge of protecting Comcast’s cable business, but all facets of the company, including NBCUniversal, Comcast Spectacor and Comcast Platform Services.

The knowledge, expertise and skill set Soto has accumulated during her career have enabled her to serve in leading roles across several different and diverse industries, including financial services, travel, hospitality/gaming and, now, for cable, media and entertainment at Comcast.

Soto’s leadership at Comcast — in her day-to-day role there as well as with other organizations within the company — is a key reason why Multichannel News is recognizing her in this year’s class of Wonder Women.

‘A FANTASTIC LEADER’

“Myrna is highly deserving of this honor,” Michael Cavanagh, senior executive VP and chief financial officer at Comcast, said. “She is a fantastic leader and has made significant contributions to Comcast, the industry, and the information security and technology community.”

Soto joined Comcast in 2009, initially focused on the company’s cable business. Her scope of responsibility has since broadened to include developing and implementing cyber security, network/infrastructure, and data security strategies that span Comcast.

It’s been Soto’s ability and desire to speak up, to learn and to pursue new challenges that have been the hallmarks of a career that didn’t initially focus on technology and security.

Soto’s college education centered on psychology and organizational psychology (the study of how psychology is applied to workplace issues), alongside an MBA focused on what was then referred to as management information systems.

That helped to set the stage for the early part of Soto’s career, when she ran a call center for a cruise line. Back then, cruise line companies had “underinvested in technology,” as they were instead laser-focused on other things like building ships alongside a “get it done” attitude with respect to getting customers ticketed and on board, she recalled.

That setup made it tough for Soto to achieve all of her goals without adding automation to the mix. “So I did something that I don’t advise my mentees to do today. … I was a really big, squeaky wheel about the need for technology,” she said.

Soto advocated strongly for new technologies and procedures that, she believed, would enable the call center to become more efficient and make significant contributions to the overall business.

The company gave her an opportunity, providing Soto support to manage a project on her own, but without much help from the company’s IT team. Soto then reached out to some partners who were pitching ideas to her, resulting in a small proof of concept for an interactive voice response (IVR) system that made way for more (and bigger) initiatives.

And, like technology and IT, her entry point into the world of cybersecurity came by way of an opportunity. When Soto later joined MGM Mirage, she was convinced by the CIO at the time to shift her responsibilities from software-enablement and other revenue-producing projects to those centered on cybersecurity.

Though Soto was a bit reluctant to take on such a specialized role, being urged to enter a new field and to run that team “was the best thing that ever happened in my career,”

Soto said. Soto said it’s a special challenge to keep Comcast’s businesses safe while also staying a step ahead of potential adversaries that have access to a broadening set of tools and techniques.

“There are things we are paying attention to that are happening out there in the greater world that may not necessarily look and feel like a concern for Comcast,” she said.

Cybersecurity, she explained, is more art than science in some ways. “It is an art, but it is an art that’s backed up with good data and a good understanding of your capabilities.”

Soto is also a leader in other ways at Comcast. For example, she’s an executive champion for Unidos, an affinity group focused on the company’s Hispanic employee base.

“There was an immediate gravitation for me to be part of Unidos because it represents our goals around diversity and opening up for people of diverse backgrounds, and an opportunity to build, mature and develop our Hispanic employee base into upper levels of the organization,” she said.

PINING FOR A VINEYARD

When Soto isn’t protecting Comcast from hackers, you might find her on the links, as golf is her number one interest outside of work. Her handicap’s been a “steady 13” for years.

She’s also a wine enthusiast — down to studying the wide array of regions and the wine-making process — and admits to having visions of retiring and running a vineyard.

“I’ll probably never do that because I’ll be bankrupt … because I’d drink all the profits,” she joked.

Among other passions, she’s also a self-proclaimed politico. And keeping tabs on that fiery arena is also a good fit with her career, given that security is so heavily regulated.

Though there’s been significant improvement in recent years, engineering and technology remains a male-dominated field. As a role model for other women who are interested in that sector, Soto’s advice is this: “Really stretch yourself … and take some big risks.”

Women, she said, should not automatically feel intimidated about a tech-facing career. “Don’t limit yourself,” Soto explained. “Sometimes it’s not a straight line. Sometimes it’s about getting into a business area that has a technology spin to it.”

Comcast said it has promoted Lynn Charytan to executive vice president and general counsel of Comcast Cable, where she will oversee the legal affairs of the operator and its technologies, products and services.

Charytan, formerly SVP of legal regulatory affairs and senior deputy general counsel for Comcast Corp., will also continue to oversee regulatory compliance with the NBCUniversal transaction requirements. She reports to Comcast Cable CEO Neil Smit, with a dotted line reporting relationship to David Cohen, Comcast Corp.’s senior executive vice president, in connection with her continuing regulatory oversight responsibilities.

She will be based at Comcast’s headquarters in Philadelphia and will also work at the company’s office in Washington, DC.

Charytan joined Comcast in 2010 after 17 years at WilmerHale in Washington, DC, where she served as the chair of its Communications, Privacy and Internet Law Practice Group.  During her tenure at the firm, she counseled clients in all sectors of the communications industry on law matters pertaining to telecommunications, privacy, security, and the Internet. Prior to joining WilmerHale in 1993, Charytan spent two years as in-house counsel to The Washington Post.  She also clerked for Judge Stanley Sporkin on the U.S. District Court for the District of Columbia. 

Charytan was one of 13 execs named to the Multichannel News 2015 class of Wonder Women.

“Lynn’s success in partnering with many of our business teams, her broad and deep experience as inside corporate counsel for Comcast, combined with her decades of work on regulatory matters as outside counsel in the communications and entertainment industries, makes her the ideal leader to assume this role,” Smit said, in a statement.

 “Lynn has done an outstanding job leading our company’s legal regulatory affairs function as well as assisting Comcast Cable on many business activities,” Cohen added. “She is highly respected throughout our company and in the cable and telecommunications industries, and it gives me great pride to see her continue her rapid career growth at Comcast.”