Charter Communications Is Bringing Broadband Access to Rural Communities

The pandemic has underscored the extent of the digital divide in the United States, where only 65 percent of the rural population have fixed, high-speed internet access, according to the Federal Communications Commission (FCC).

May 2021

The pandemic has highlighted the consequences of the digital divide in the United States. Only 65 percent of people who live in rural areas have fixed, high-speed internet access, according to the Federal Communications Commission (FCC). That is significantly below the 97 percent of people for urban areas.1

That gap has meant 30 million Americans have not been able to fully participate in the digital age. The pandemic only worsened the problem. Many schools switched to virtual classes, and remote work went from a rarity to a widespread practice. Medical care providers began offering telehealth services to spare people from visiting crowded doctors’ offices and hospitals. This forced digitalization of the economy, education, and healthcare systems quickly elevated the importance of a fast, reliable home internet connection.

A $5 Billion Investment in Broadband Infrastructure

 Charter Communications is helping to bridge the digital divide. The cable operator is one of the many companies the FCC chose to receive investments from the Rural Digital Opportunity Fund (RDOF). Through that fund, the FCC plans to grant $20.4 billion over the next 10 years to companies that will bring broadband networks to rural communities.

In February, Charter announced it will put the $1.2 billion grant it receives from the FCC toward a $5 billion investment to build the infrastructure needed to bring broadband access to underserved rural communities.

Through these efforts, Charter will expand its reach by 1 million customers in 24 states. Charter’s chairman and chief executive, Tom Rutledge, noted that, “The pandemic has further highlighted the need for broadband availability and adoption, and Charter is committed to furthering its efforts as part of the comprehensive solution needed to address these challenges.” Charter plans to hire 2,000 employees and contractors to help with the buildout of broadband networks across the 24 states. The network Charter plans to build in these rural areas will offer one-gigabit high-speed broadband access to newly served customer locations, with minimum speeds of 200 megabits. That will better enable residents of rural areas to engage in remote learning, work, telemedicine, and other applications that require high-bandwidth connectivity.

A Compassionate Approach to the Crisis

 The commitment to building broadband infrastructure for rural communities is an extension of Charter’s determination to help people manage the harsh realities of the pandemic.

Charter was one of the firms that accepted the FCC’s Keep Americans Connected pledge. It chose not to terminate services for any residential or small-business customers that stopped paying their cable bills, if their inability to pay stemmed from a disruption caused by the pandemic. It also waived late fees for customers if they couldn’t pay a bill on time because of economic circumstances related to the crisis.

Charter took the pledge a step further with its Remote Education Offer. When the pandemic hit the United States in March 2020, Charter made broadband services free to new customers for 60 days if there was a teacher or a K-12 or college student in the household.

The firm partnered with schools to ensure communities were aware of these benefits. It also made Wi-Fi hotspots available in certain public areas.

Through its Spectrum brand, the firm also continues to offer Spectrum Internet Assist, which makes broadband access available to lower-income families at a reduced monthly cost. Charter has recognized how severely people’s lives have been affected, and it has been determined to do its part to make the pandemic more manageable for its customers.

A Social Conscience That Serves All of the Firm’s Stakeholders

In an example of the truism that companies can do well by doing good, Charter’s community-oriented efforts could also serve the company’s business and the interests of its investors. Through the RDOF, the FCC is granting exclusive rights to companies that bring broadband services to specific rural areas. That will give the firms like Charter that enter these areas first a competitive advantage as the incumbent provider, as those communities expand and develop.

Many of the regions where Charter has been asked to build infrastructure are on the periphery of markets it already serves. The new rural areas where it can operate for a time as the sole broadband provider will effectively serve as a moat, in our view, preventing incursions from competitors into territories where the firm is already the dominant provider.

This commitment to serving rural communities could put Charter in a much stronger competitive position over the long term, to the benefit of the firm and its investors.

Sustainable Development Goals

The Sands Capital six investment criteria tend to lead us to businesses that are innovators or vital facilitators of change in industries undergoing significant transformation. Charter is one of many portfolio businesses that create impact by addressing at least one major social or environmental challenge identified by the United Nations Sustainable Development Goals (SDGs). The SDGs to which Charter contributes with the efforts described here include SDG 3, Good Health and Well Being; SDG 4, Quality Education; SDG 9, Industry, Innovation and Infrastructure; and SDG 10, Reduced Inequalities.

1https://www.fcc.gov/about-fcc/fcc-initiatives/bridging-digital-divide-all-americans

Disclosures:

The business profiled was selected based on its reported alignment with one or more U.N. Sustainable Development Goals. The views expressed are the opinion of Sands Capital Management and are not intended as a forecast, a guarantee of future results, investment recommendations, or an offer to buy or sell any securities. The views expressed were current as of the date indicated and are subject to change. This material may contain forward-looking statements, which are subject to uncertainty and contingencies outside of Sands Capital’s control. Readers should not place undue reliance upon these forward-looking statements. There is no guarantee that Sands Capital will meet its stated goals. Past performance is not indicative of future results. A company’s fundamentals or earnings growth is no guarantee that its share price will increase. Forward earnings projections are not predictors of stock price or investment performance, and do not represent past performance. The specific securities identified and described do not represent all of the securities purchased, sold, or recommended for advisory clients. There is no assurance that any security will continue to be owned by Sands Capital Management. You should not assume that any investment is or will be profitable. All company logos and website images are used for illustrative purposes only and were obtained directly from the company websites. Company logos and website images are trademarks or registered trademarks of their respective owners and use of a logo does not imply any connection between Sands Capital and the company. GIPS® reports and additional disclosures for the related composites may be found at Sands Capital Annual Disclosure Presentation. PT # 20210074

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