Charter is delaying DOCSIS 4.0 again. What happened?

• Charter pushed back its DOCSIS 4.0 deployment schedule for the second time this year
• But that’s not surprising, said Dell’Oro’s Jeff Heynen, as Charter has a lot going on with hurricane recovery and its rural buildout
• Regarding broadband expansion, Charter is feeling good about its RDOF builds but isn’t feeling as bullish for BEAD

Charter’s DOCSIS 4.0 deployment timeline has suffered another setback. The operator disclosed it doesn’t expect to finish upgrading its network with distributed access architecture (DAA) until 2027.

In February, Charter CEO Chris Winfrey pushed back its target completion date to sometime in 2026. When Charter first unveiled its three-phase plan to overhaul its network in December 2022, it was plotting to offer DOCSIS 4.0 by 2025.

So, what’s the deal?

On today’s earnings call, Winfrey said Charter is progressing across its “step two” markets, which involves continuing high-split upgrades while using Remote-PHY to roll out DAA. However, the company has “deliberately slowed these markets to get the software fully certified to our specs.”

“That has pushed back equipment purchasing and operational deployment and we now expect our network evolution initiative project to be completed in 2027,” Winfrey said.

Dell’Oro Group VP Jeff Heynen said in February it’s still pretty difficult for operators like Charter to procure Remote PHY devices in large quantities due to long lead times for certain hardware components. The devices must also undergo certification and interoperability testing before they get the green light for field deployments.

“I’m not surprised that they pushed it back,” Heynen told Fierce this week. Charter has a lot on its plate right now, not only with the upgrades but also hurricane recovery and its rural fiber buildout. “They’ve been stretched pretty thin from a network expansion perspective.”

With respect to Charter’s DAA rollouts, “there are a lot of moving parts” that are going into the interop testing and certification process, the analyst said. Charter has vendor agreements with Harmonic and Vecima. Vecima’s recent acquisition of Falcon V, a developer of network orchestration software for DAA, could also impact the operator’s deployment schedule.

“Keep in mind that they’re also limited in terms of the DOCSIS 4.0 CPE that they have on hand and can get right now,” Heynen said.

Charter also recently touted it would be transparent with how it handles network disruption and even made guarantees as to when service would be restored in the event of an outage.

“The last thing you want to do is go to market with your big network upgrade and have it negatively impact the services of customers,” said Heynen. “So they’re taking their time, rightfully so, and making sure everything is certified.”

Despite the setback, there’s still good news on the upgrade front. Charter launched symmetrical internet service in its “step one” markets, which include Reno, St. Louis, Cincinnati, Dallas Fort Worth, Louisville, Lexington, Minnesota and Rochester, New York, said Winfrey.

“We’re now broadly marketing our symmetrical speeds in seven of these eight markets,” he said. “The high split upgrade process should be largely complete in all of our step one markets by the end of this year.”

Broadband build update

As for Charter’s broadband expansion, CFO Jessica Fischer said the company anticipates completing its Rural Digital Opportunity Fund (RDOF) by the end of 2026 – “two years ahead of schedule.”

For 2024, Charter expects to activate “close to 400,000” new subsidized rural passings. That’s slightly lower than its original target of 450,000 passings “due to shifting construction labor to rebuild activity” in markets impacted by Hurricanes Helene and Milton, she said.

Fischer added she thinks rural construction activity will pick up again by the end of the fourth quarter.

But Charter isn’t feeling as bullish about bidding for the BEAD program. It anticipates its total spend will be “substantially less” than what it’s spending for RDOF builds, said Fischer.

“That lower outlook reflects the most recent broadband map updates in terms of available unserved passings near our network and a little less favorable rules framework in BEAD when compared to RDOF and state grants,” she explained.

Others in the industry have also expressed concerns about the requirements that go into BEAD, from the length it takes to determine eligible locations to Buy America constraints.

Analyst Craig Moffett asked Charter execs if this could open the door for Charter to expand its footprint via “small-scale M&A,” perhaps by scooping up some rural cable operators.

Rumors earlier this year suggested Charter could pursue a takeover of cable competitor Altice USA (who we’d hardly call “small scale”). And Winfrey has hinted that the company could acquire another cable ISP “at the right price.”

Fischer responded to Moffett’s comments in a similar light, and she doesn’t think there’s necessarily a trade-off between BEAD and “doing small-scale M&A.”

“We always say we like cable businesses, we believe we operate them well,” she said. “When there are small-scale opportunities that fit well with our footprint, we will often, go after those.”