U.S. cable customers are asking for faster internet speeds amid the coronavirus pandemic, and analysts say the behavioral change could result in continued higher growth in average revenue per user.
Though many broadband consumers were already opting for higher speeds before the pandemic, with the COVID-19 crisis forcing events, work and school online, it has provided an extra boost to the organic upward trend, according to Kagan analyst Tony Lenoir. Kagan is a media research group within S&P Global Market Intelligence.
"I can already see a nice jump in ARPUs across the board here in Q1, and I expect [it] to extend into Q2, obviously," Lenoir said in an interview.
Both broadband revenue and ARPU in the first quarter of 2020 were up at each of the three major U.S. cable operators, with voluntary tier upgrades being a key contributing factor, according to the companies.
Altice USA Inc. reported record year-over-year broadband revenue growth of 14.2% in the first quarter of 2020.
"The pace of voluntary broadband speed upgrades almost doubled in March month on month, and we saw a 24% increase in network data usage," Altice USA CEO Dexter Goei said during the company's April 30 earnings call.
For the first quarter of 2020, Altice's monthly broadband ARPU totaled $90.21, up 9% year over year, according to S&P Global Market Intelligence calculations.
At Charter Communications Inc., internet revenue in the first quarter was up 9.5% year over year, which the company attributed to growth in internet customers, rate adjustments and promotions ending.
For the first quarter of 2020, Charter's monthly broadband ARPU totaled $66.10, up 2.5% year over year.
Speaking on the company's first-quarter earnings call on May 1, Charter CEO Tom Rutledge noted that the company saw an increase in the number of both residential and business customers upgrading their speeds.
Comcast Corp.'s first-quarter high-speed internet revenue was up 9.3% year over year, driven by an increase in the number of residential high-speed internet customers, and an increase in average rates.
In the first quarter, Comcast's monthly broadband ARPU totaled $80.67, up 3.3% year over year.
Speaking on the company's first-quarter earnings call on April 30, Comcast CFO Michael Cavanagh also said the company expects business services revenue growth at low single-digit year-over-year levels for the second quarter, in part because of business customers requesting higher tiers as they remain open, often in a remote fashion.
Lenoir said he does not expect this growth trend to stop anytime soon, with more and more services moving online. "We only had about, what, a couple weeks of [the] COVID-19 crisis baked into the first quarter? So the bulk of it is going to be the second quarter."
Mark Trudeau, founder and CEO of OpenVault LLC, which provides technology and industry analytics for broadband operators, said in an email that as "operators tend to charge more for faster speeds, we would certainly expect ARPU growth resulting from upgrades."
Trudeau expects customer speed upgrade requests to continue as cord cutting accelerates and more streaming options become available as well. "Subscribers appear to be cutting traditional video and replacing that expense with higher broadband packages," he said in an email.
Kagan data shows that consumers have had a preference for higher tiers since before the pandemic. Kagan estimates that at the end of 2019, an estimated 82.3% of total residential cable broadband households received download speeds of 100 Mbps or higher.
Cable operators are unlikely to take advantage of the COVID-19 pandemic to deploy additional broadband monetization strategies, Lenoir said, but he noted that in the long run, the industry could see more conversation around data caps as usage continues to grow.