Hello, and welcome to the Charter Communications Q4 Conference Call. We ask that you please hold all questions until the completion of the formal remarks, at which time you will be given instructions for the question-and-answer session. Also, as a reminder, this conference is being recorded today.

If you have any objections, please disconnect at this time. I would now like to turn the call over to Stefan Anninger..

Thanks, operator, and welcome everyone. The presentation that accompanies this call can be found on our website ir.charter.com. I would like to remind you that there are a number of risk factors and other cautionary statements contained in our SEC filings, which we encourage you to read carefully.

Various remarks that we make on today's call concerning expectations, predictions, plans and prospects, constitute forward-looking statements, which are subject to risks and uncertainties that may cause actual results to differ from historical or anticipated results.

Any forward-looking statements reflect management's current view only and Charter undertakes no obligation to revise or update such statements. On today's call, we have Chris Winfrey, our President and CEO; and Jessica Fischer, our CFO. With that, let's turn the call over to Chris..

While an inferior product with limited capacity and geographic coverage which is fluid, is often marketed by the phone companies at a perceived lower-priced to their existing customers. We continue to believe the impact from fixed wireless is temporary. Our Internet product is faster and more reliable.

Our pricing is lower when similarly bundled with mobile. Customer bandwidth needs continue to increase. And MNOs will face capacity challenges and will be required to allocate their Spectrum and capital to maintain profitable mobile services. While we can't promise when that happens, I believe bandwidth needs to increase and quality and value win.

On the wireline overbuild front, we continue to compete well. Overbuild impact tends to be limited to a few percentage points of Internet penetration during the first year of a new overbuild vintage coming online. It's painful, but it's tied to the pace of overbuild.

We don't see overbuilders reaching their penetration and ROI goals now -- within our footprint now or in the future.

They don't have the same ubiquitous convergence capabilities as we do, their lower-cost passings have likely been built, some of the planned overbuild was duplicative between operators, meaning less opportunity, and incremental financing cost have increased, putting even more pressure on overbuilder returns.

We also expect BEAD passings will provide better capital allocation and ROI for many of these operators. Our assumption is that our competitors are rational economic players with shareholders and balance sheets, which require adequate return on investment. That isn't within our control.

So, we are focused on the key strategic initiatives that enhance our long-term competitiveness and growth capabilities, and we expect to return to a more normalized Internet growth over time. Just over a year from when we detailed those initiatives, I wanted to remind everyone of the rationale and update you on their status, as laid out in Slide 4.

Our footprint expansion is beating our pacing, penetration, ARPU and ROI targets. New construction will help drive Internet customer growth despite the temporary challenges I mentioned within our existing footprint. 2023 subsidized rural customer growth was already over 100,000.

Our penetration also continues to grow at a better-than-expected pace and we'll cover more -- we'll activate more subsidized rural passings this year, both of which Jessica will cover. BEAD will provide additional opportunities, although the potential is uncertain given our concerns regarding how states will apply NTIA guidelines.

We'll focus BEAD investments in states where the rules are conducive to private investment. Outside of rural, we also have accelerated greenfield, market fill-in and serviceability builds, expanding our existing footprint in both residential and commercial passings.

Penetration curves and returns here are similarly strong and predictable with a lower build cost.

We also remain committed to prioritizing the customer experience via our execution initiative, which is intended to enhance frontline employees' tenure while simultaneously investing in digitization, all to drive better sales yields, higher-quality transactions, lower overall service transactions and higher levels of customer satisfaction.

Our targeted investments in employees over the last two years resulted in a significant reduction in employee attrition in 2023. Our investments in the digitization of service is also driving efficiencies.

In 2024, we have a number of new automated platforms that are launching to facilitate better service for customers and better digital and AI tools for agents to enhance service quality and the quality of their day-to-day jobs.

And finally, our evolution initiative, which includes our network evolution project, our convergence efforts, and video product development all remain on course. We fully launched symmetrical speed tiers in two markets and currently launching in six more, completing our step one markets.

We'll also begin to work in our step two markets with DAA later this year. Excluding the benefit of any savings that result from the project, we continue to expect our network evolution to cost a very low $100 per passing.

And we expect to complete the project in 2026, so fast, ubiquitous, low-cost upgrade of our capabilities, which our competitors can't replicate. Our converged product offering also continues to evolve and grow.

Spectrum One is performing well and offers the fastest connectivity with differentiated features like mobile speed boost and the Spectrum Mobile network. Spectrum One also offers significant savings for customers with market-leading pricing at both promotion and at retail.

And Spectrum One customers reaching their first anniversary are performing ahead of our expectations. We'll continue to evolve our converged offering in 2024 with additional features and capabilities. Finally, turning to the evolution of our video product, in October, we launched the Xumo platform across our entire footprint.

This industry-leading video platform allows our customers to access their linear and direct-to-consumer video content with unified search and discovery within one easy-to-use interface. Combined with our Spectrum TV app, the most viewed linear MVPD streaming service in the U.S., Xumo is our go-to-market platform for new video sales.

We're approaching 1 million deployed Xumo boxes since launch and we've been getting great customer feedback, and we can keep improving our attach rates. In early January, Disney+ became available to all Spectrum TV Select customers nationwide at no additional cost.

And in the next several months, ESPN+ and ViX, a Spanish language DTC product, will both become available to certain TV Select customers at no extra cost. This new hybrid distribution model is good for consumers and we plan to modernize all of our distribution agreements upon renewal.

That means packaging flexibility, value and not asking customers or Charter to pay twice for similar DTC and linear programming.

Our new hybrid distribution model, combined with Xumo's content-forward interface, provides a clear path to solve key customer issues of choice, value and utility with seamless linear, DTC and SVOD integration and advanced search and discovery functionality.

When we reflect on our key initiatives and what we believe are the short-term market challenges, we're acting as long-term Charter shareholders to maximize value. So, we have a posture of expectancy and excitement for the opportunity to execute on initiatives that enhance our long-term growth rate and value for Charter shareholders.

In the short term, we are leaving no stone unturned as it relates to our go-to-market approach. Ultimately, the speed at which we can return to a more normalized broadband growth rate hinges on the assumption that our competitors' capital is not limitless for poor ROI projects and, frankly, our execution on our strategic initiatives.

So, we're keeping our heads down and executing on a clear strategy to ensure we can offer customers the best products and services across our entire footprint, all while saving customers money, not only now, but in the future. And with that, I'll turn the call over to Jessica..

line extensions, network evolution and core CapEx spend. As the slide shows, we expect CapEx spend of just over $12 billion in 2024 to fall to approximately $8 billion by 2027.

Our line extension CapEx includes spending for greenfield, market sell-in and serviceability builds from our legacy footprint, driving continued expansion of residential and commercial passings. In turn, our non-rural passings growth should continue to be robust and similar to 2023 growth, subject to the pace of overall housing growth.

These passings are natural extensions or pocket fill-ins to our network and have a long track record of low cost per passing and reliable penetration trends to contribute to growth at attractive ROI.

We've not included the potential impact of BEAD in the passing figures on Slide 12 or in our CapEx outlook on Slide 11, given the regulatory and bidding uncertainty associated with the program. We don't expect any potential BEAD build subject to acceptable guidelines, as Chris mentioned, to begin until 2025.

And similar to our peers and competitors, our success in BEAD will be an overlay to our capital expenditure outlook. Turning to network evolution, where our long-term capital expenditures outlook remains essentially unchanged, we continue to expect to spend approximately $100 per passing to evolve our network to offer multi-gigabit speeds.

Finally, core capital expenditures, which excludes line extensions and network evolution, has remained consistent as a percentage of revenue since 2021.

And following the completion of our network evolution initiative, capital expenditures, excluding line extensions as a percentage of revenue, should decline below 2022 level, which has important long-term cash flow implications. Turning to free cash flow on Slide 14.

Free cash flow in the fourth quarter totaled $1.1 billion, a decrease of $75 million compared to last year. The decline was primarily driven by less favorable change in accrued expenses related to capital expenditures, partly offset by an increase in net cash flows from operating activities and a decrease in capital expenditures.

Just a brief comment on cash taxes for 2024 before turning to the balance sheet. We currently expect our calendar year 2024 cash tax payments under current legislation to land between $1.5 billion and $1.9 billion, depending on a number of factors. We finished the quarter with $97.6 billion in debt principle.

In the first weeks of 2024, we redeemed all of our outstanding 2024 senior secured floating rate notes and paid in full all of our outstanding 2024 senior secured notes. So, we no longer have any significant debt maturities due in 2024. Our current run rate annualized cash interest is $5.2 billion.

Given our long-dated and 86% fixed rate debt structure, our sensitivity to higher rates is relatively low. If we refinanced all of our debt in the next three years at current rates, the impact to our run rate interest expense would be less than $90 million or 2% of that run rate interest expense.

As of the end of the fourth quarter, our ratio of net debt to last 12-month adjusted EBITDA was 4.42 times, and we intend to stay at or just below the high end of our 4 times to 4.5 times target leverage range.

During the quarter, we repurchased 3.2 million Charter shares and Charter Holdings common units totaling $1.3 billion at an average price of $419 per share. Before turning the call over to Q&A, I want to make a few comments regarding the Affordable Connectivity Program for Internet and mobile customers.

While we still hope the ACP program will be allocated additional funding, we're well aware that the program could end this spring, and we're designing programs to assist those that are on the ACP program. There is no doubt that the end of the program would be disruptive for many.

Nonetheless, we will have the full benefit of our high-quality sales and retention force as well as our mobile product, which saves customers hundreds of dollars to preserve connections. With the continued temporary impact from fixed wireless and the potential end of ACP, we may continue to face short-term customer growth headwinds as we enter 2024.

Despite those short-term challenges, we are competing well and are focused on driving healthy EBITDA growth in 2024. A component of that has been to reflect inflation in our pricing while preserving value to our customers.

We're also actively managing expenses, and we believe we can do so without impacting our sales, service and broader growth initiatives. But most importantly, we remain focused on long term and a return to more normalized Internet growth.

We have what we believe are the best products at the best prices in our industry and we remain underpenetrated relative to our long-term potential. Taking advantage of that opportunity is what will ultimately create the most shareholder value. Operator, we're now ready for Q&A..

[Operator Instructions] Our first question will come from Jonathan Chaplin with New Street Research. Your line is now open..

Thanks, guys. One for Chris and one for Jessica. For Chris, I'm wondering if you can give us some context on whether there was a change in competitive dynamics in the fourth quarter.

As we look out across the fixed wireless guys and the fiber guys, it seemed pretty steady over the course of the last few quarters, sort of competitive pressures that seem to stabilize.

And I'm wondering if there was just a bigger focus on -- from fixed wireless or potentially fiber in newer markets specifically? And then, for Jessica, the cash tax guidance is great. If bonus depreciation is expanded -- extended this year, how much of that cash tax go down by? Thank you..

Good. So, in terms of the competitive environment in the fourth quarter, as you mentioned, we saw some continued expansion of fixed wireless footprint within the quarter. We also saw heavier competitive marketing and some aggressive promotions from both fixed wireless and from the overbuilders.

And as you know, Jonathan, slight impacts to gross adds and churn, in this case, it was particularly on the gross adds front, can drive what appear to be outsized changes to net adds, especially when net adds are slightly positive or slightly negative, really has an outsized impact.

As you know, we're, of course, focused very much on the long term, but that doesn't mean that we're not focused on the short term either, particularly what was going on inside of the fourth quarter.

And so, as I mentioned in the prepared remarks, we're really leaving no stone unturned on potential ways to improve go-to-market in the short term, particularly addressing gross adds in the existing footprint.

We're doing all that though, looking at all aspects, but trying to make sure that we do that in a controlled fashion and don't overreact either given that it is small changes that are driving an outsized impact here..

Yeah. And I'd add on, the environment wasn't consistent through the quarter. Early on, we had some carryover from the Disney dispute in the August rate event that we talked about in last quarter's call. We had expected November and December to recover to the levels that we had seen going into that event, and they didn't.

But as we exited the quarter, we saw December slightly negative, and January net adds are consistent with what we saw in December. So that environment does continue. On the cash tax side, Jonathan, it's not just bonus, it's also R&D and interest expense deductions that will impact us.

But I would say the reforms that are being considered support the economics of our investments in connecting rural America and upgrading the network. And so, we are fully in support of them. I think it's a little premature to adjust our guidance.

But given the investments that we're making, we do expect there to be a material benefit to cash taxes if the legislation were to go through..

Great. Thanks, guys..

Thanks, Jonathan. Luke, we'll take our next question, please..

Our next question will come from the line of Craig Moffett with MoffettNathanson. Your line is now open..

Hi, thank you. A couple of questions. Jessica, thank you for the comments you made about ACP. I'm wondering if you can just try to quantify a little bit more for us the number of ACP subscribers that you have, and if you have insight into how many of those are new subscribers versus previously were paying subscribers.

And then, I wonder if you could also just comment about T-Mobile indicated that they expect 100,000 to 150,000 fewer net adds per quarter in fixed wireless.

How do you think about that flowing into your footprint? And does that inform the way you think about the broadband growth rate going forward?.

So maybe I'll start off with ACP and just take a step back, and then Jessica can answer what you were requesting. ACP program, I think as everybody knows, it really has brought Internet connectivity to customers who would not have been able to have access to broadband otherwise.

But more importantly, it's allowed customers who would have been coming in and out of the broadband marketplace given affordability issues to remain connected consistently. So, we really think, as you know, it's been an effective program. We're proud to be the largest ACP provider in the country.

We still -- we're hopeful that the ACP can be refunded in order to keep households that are in the program today connected to the Internet. But if it's not refunded, Craig, we're going to work very hard to keep customers connected. And we've been working on this possibility for some time.

We have significant tools to save customers hundreds or even thousands of dollars, as Jessica mentioned. And I'd highlight that, keep in mind, most of our ACP customers were Internet customers before the ACP program began.

And in the meantime, having said all that, it's actually pretty challenging for us to predict the impact that a potential end of the program is going to have to our customer disconnects, but we're going to report that consistently over time..

Yeah. So, on the numbers side, Craig, we have a little over 5 million households that received the ACP benefit, all for wireline Internet. Very few of those customers used ACP to upgrade to higher speeds or take more PSUs when they began receiving the benefit. But many do have our flagship speed or higher or do take other services from us.

And I guess, the funding will continue through April. We'll try to keep people informed as we move through the process. But from our perspective, there's not a lot of visibility at this point as to anything that might happen when the program ends..

In the end, we're still focused on trying to make sure that ACP is refunded, and I still think there's a strong possibility that could be the case..

Yes.

Do you want to talk to the fixed wireless lower net add guidance?.

Sure. So, we noted the same thing that you saw, Craig. I think the bigger point there is that there is a rational approach to the marketplace and the utilization of Spectrum. And I believe a recognition that there's a limited amount of capacity, the bandwidth needs are increasing. I think that was the bigger takeaway from us.

It's very difficult for us to sit back and take a look at the geographic footprint of fixed wireless access because it almost changes by the day in terms of sector availability on radius in terms of capacity and where they're actively marketing and where they're not.

And then, you have the additional rural footprint versus urban and suburban, and what would be off-footprint for us versus on-footprint and the split between residential and commercial, which makes it pretty difficult to mathematically cascade that into an impact for us.

But I thought it was rational what we said, and I thought it made a lot of sense, and I think it's consistent with what we've always thought. Frankly, the piece that's been more difficult is just the timing in terms of where that capacity is reached, and it's been a little bit harder to predict than we would like.

But I took that as the same way that you did that it should have some positive impact on our existing footprint..

Thank you..

Thanks, Craig. Luke, we'll take our next question, pleas..

Our next question will come from the line of Benjamin Swinburne with Morgan Stanley. Your line is now open..

Good morning. Chris, question for you on CapEx, and then I want to ask Jessica about sort of EBITDA growth. Chris, you've been around the cable industry for a long time. So, I know you are aware that kind of investment priorities can change over time.

And I'm just curious why you felt it made sense to sort of guide out to 2027, just because you're in a competitive dynamic industry and want to evolve your strategy over time. And it did seem like you guys have -- and you can disagree, but it seems like you've prioritized the line extensions over getting network evolution done by '25.

So, I know we thought it might slip into '26, but now it's definitely slipping into '26. Just wanted to understand your thought process there.

If that was tied to kind of equipment availability or just a strategic decision? And then, Jessica, there's an expectation that '24 is a good EBITDA growth year for Charter given the investments you've made in OpEx. I think you cited 3.5% growth in Q4 ex advertising.

Anything you can tell us to help us think about financial performance for the business in '24 would be appreciated. Thanks everyone..

Sure. So, Ben, I think leading into the last earnings call, we had been listening to shareholder feedback about the difficulty people were having of projecting long-term CapEx trends given the significant capital investment opportunities that we have.

And you're right, typically, we would never provide a multiyear outlook and we've -- about the only guidance that we've historically provided is in-year CapEx guidance. But these are unique opportunities that don't come around very often.

The opportunity to have subsidized rural build, having the largest expansion of broadband and cable footprint really since the 1980s is unique and it's generational.

And I think we felt that investors needed to see, A, the size and magnitude of what we were already committed to, and B, to have a very articulated outline of the returns of those investments, which Jessica has provided.

We've been providing that, all that information is essentially what we provided over the past two years, but to do it in a single spot so people could wrap their heads around both the quantum that exist, the investment returns that are attached to that investment and that it doesn't go on into perpetuity, and that there is a real nice setup for what this is all about, which is free cash flow growth.

And so, while we typically like to keep our cards close to our chest to preserve both flexibility and to maintain our competitive posture, I felt there was a trade-off here to make sure that our shareholders were with us and that people understood the value of the returns to the investment that we're making.

And so, there's a balance here between, on one hand, having the flexibility to always make the right decisions to generate long-term free cash flow, and making sure that we're responsive to shareholder feedback along the way and that we can demonstrate the long-term value, so people take comfort with that.

In terms of the prioritization of line extensions over the DAA or DOCSIS 4 upgrade, it wasn't so much about prioritization. It was really about certification of the DAA equipment taking a little bit longer, which was pushing out the timeline for the rollout.

And so, the trade-off we had is could you do it the 1.2 gigahertz high-split upgrade under, what we call, an integrated CMTS environment.

And do more of that footprint to keep the original pace or should we slow it down just a tad to make sure that we allowed for a catch-up of the DAA certification process so that you can move to high split with distributed access architecture as well as the 1.8 gigahertz and the rollout of DOCSIS 4.0, we chose the latter to make sure that we were having as much of the footprint with the full capabilities of DOCSIS 4.0 over time.

The caveat is, if we get into couple of years from now, we see opportunities to pull capital forward. We'll of course do that, but this is our best view of where we're going to spend capital.

And we thought it was worthwhile to show that to make sure people understand that it doesn't -- that higher level of capital expenditure doesn't go on into perpetuity..

Thank you..

Yeah. On the EBITDA performance inside of 2024, I guess -- I'm not going to give EBITDA guidance, but I think we can talk about the few things. So, you do have a political advertising year, that is a tailwind. We have -- so we've fully lapped the investments that we made in the employee population.

And from an expense outlook perspective, I think my expectation is that we'll be able to keep cost to serve essentially flat on an absolute basis. And in sales and marketing, you might have some growth, but it will be small in the 2% to 3% range.

And we continue -- as I said in my remarks, we're taking a look at expenses all across the business to identify areas where we can be more efficient and reduce costs without impacting our service levels and our sales capability.

And so, we fully understand that we need to maintain EBITDA growth in this environment and strong EBITDA growth coming into what, as you note, should be a stronger year in order to be able to continue focusing on what we want for the long term, which is to be able to invest to grow in the long term and to return to that sort of Internet customer growth in the long term.

So, I think the dynamics in the background are happening to make that growth happen. That's where we are..

Okay. Thank you..

Thanks, Ben..

Thanks, Ben. Luke, we'll take our next question, please..

Our next question will come from the line of John Hodulik with UBS. Your line is now open..

Great. Thanks for that color, Jessica. Just a follow-up on EBITDA growth and one of the components, revenue per customer. It's been relatively flat for the last couple of quarters and there's a lot of moving parts in terms of pricing and customers rolling-off Spectrum One.

But, how should we think about progressing through '24, especially with the -- I think the most recent data price increase in August? And do you believe your pricing power in the broadband market has changed given the new sort of competitive landscape we have, or can you continue to push pricing as that lapse mid-year? Number one.

And then, on the mobile strategy, anything you can tell us about what mobile is doing in terms of lowering churn in the broadband market? Is it also helping you in terms of new connection and driving new subscribers or just really churn reduction? And then, anything we should expect to change as you sort of proceed with some of the build out measures you're taking to add your own capacity?.

Yeah. So, I'll start with ARPU. When you look at average revenue per customer overall, John, the biggest factor that's keeping it flat is the rate of video penetration. So, what matters there is the extent to which we can retain video customers with some of the package and pricing strategies that we have.

If you isolate and you sort of pull out Internet ARPU, you can see even in the remarks that I made on the quarter that Internet ARPU continues to grow, and when you pull out the Spectrum One Mobile allocation, continues to grow at a rate that's consistent or even a little higher than historical level.

On the mobile side, I talked about it on the last call. As you have -- so because we've sort of lapsed the free line offer, the number of free lines that we have in the system over the course of 2024 is more steady than it was in 2023. So, you'll also see that the impact of that mobile allocation over to the Internet should steady over time.

And you'll have, just as a matter of math, more paying customers in the base as a proportion relative to the free lines. So, I think that's the piece there.

I don't know, Chris, do you want to talk about pricing power?.

Sure. In broadband, our fundamental view hasn't changed that in the long term, keeping your prices as low as you can both enhances your ability to grow, and that's still our long-term objective, it reduces churn, and it reduces the likelihood that somebody views you as an attractive overbuilt candidate. So, our fundamental views haven't changed.

Having said that, we've had inflationary pressures, and we've been passing that through to the best of our ability. To the extent that our pricing is lower and it is for the most part across the industry, I view that as a positive long-term capacity question and from an ability to grow. But it doesn't mean that we're immune to inflation.

It doesn't mean that we're not willing to pass-through increases as we need to.

And there's a balance here as well that in an environment where we're investing so much into expansion and making sure that we do maintain EBITDA growth rate so that we can keep that engine going, it matters to us and it matters to our shareholders, and we're focused on that in parallel. So, there's a balance that's taking place.

And I think we're in a not only in a good position overall, but I think a very good relative position. In terms of the overall market, you've seen different operators across the sector moving their prices up over time as well. And I think that demonstrates that there's real value to the product, and there's a need to recover cost along the way.

It's a capital-intensive business. And then, your last question on -- John, is mobile churn.

The contribution of mobile to the broadband business, the biggest factor so far as you highlighted really has been a significant and a very material amount of churn reduction that takes place on those customers who attach mobile, as I mentioned, it's only 13% of our base today. And I'd offer you two pieces.

One is on the positive side, it is dramatic, the churn reduction. On the -- just to be balanced, there's still self-selection that exists inside that base. So, I want to be careful that we don't overplay the benefit there on what's still a relatively small portion of our Internet base and growing and has big upside.

The new connects, those new Internet connects who take mobile, a percentage of our mobile acquisition mix that comes from new customers has risen over the years.

Is that because we do a better job of selling it to call center and attaching or is it because mobile is actually driving gross adds? In this environment, we have so many different moving parts. I'm not comfortable telling you that it's been a big driver as of yet of new sales.

But I think that's the opportunity, not only for churn reduction, but as convergence continues to take hold as these products work together in a way that our competitors can't replicate, the ability to use Spectrum One, a combination of broadband, Internet, WiFi and 5G is our backup radio.

It's the slowest portion of our network, and have the fastest overall connectivity service and seamless connectivity, I think, it's powerful. And I think it has the ability not just to reduce churn, which it's already doing today, but to actually drive acquisition over time. And so, we're early on, but still very exciting..

Okay. Thank you..

Thanks, John. Luke, we'll take our next question, please. Thanks.

Luke?.

Our next question will come from the line of Peter Supino with Wolfe Research. Your line is now open..

Good morning. I have a couple of questions on the subject of growth investment. Slide 11 discusses cost per core passing in your forecast of $2,000 to $2,500 and that struck me as high relative to historical core passings and even relative to fiber expansion.

So, I wanted to see what you could share about your assumptions for penetration and ARPU in that footprint.

And then, on a related note, again, on core growth investment, but moving over to BEAD, we've seen big increases over the last couple of years since the money for BEAD was allocated in the availability and uptake of fixed wireless services over midband.

We expect more increases in the availability of LEO satellite services, not just Starlink, but Amazon's product. And so, I'm wondering if your outlook for penetration in that potential BEAD footprint is moderating and if that affects your appetite at all. Thank you..

Yeah. So, I'll start on the cost per passing question. What you see there is related to the mix between commercial and even enterprise passings and residential passing. So, the cost per resi passing that lives inside of that is closer to $1,500.

What's happening is that there are, I'm going to say, a smaller number, but a larger dollar amount of commercial passings that are included in the mix that drive the average cost per passing to be a little bit higher.

And we're just trying to give enough information there to get you to a reasonable passings estimate so that -- so you can model off of that what gains you would generate from the build..

And then, in terms of the penetration, Peter, there's very different types of build that sits in there. I mean, serviceability, which is where a customer calls us effectively for a one-off or two or three additional line extensions, the penetration on that is 85%, as it should be.

And other areas where greenfield or market fill-in where penetrations can range anywhere between 45% and 70%, at a lower cost per passing, as Jessica highlighted, than some of the other extension build that we do. So, the returns are very, very attractive. They always have been. There's nothing really new there.

And somewhat tied to that, you asked about our views on penetration generally, but in the context of BEAD with fixed wireless access or low Earth orbit satellite, LEO. I think the -- let me start with LEO. This is an expensive offering on a month per month basis, expensive from a CPE standpoint.

And it needs to be because the -- if I told you our network was going to fall to the ground every six to eight years and burn up, you'd tell me that's a pretty capital-intensive business that needs to be priced appropriately, and it is.

I think LEO has a really good use in certain cases, but it's typically not going to be where our fiber-based network is deployed. And so, it's not something that really has risen too much in terms of our thinking in penetration.

Fixed wireless access, it's shown us that you can have lower quality and inferior service at a low price or low incremental price, and there's a market for that.

But our penetration expectations for RDOF and for subsidized rural and what will feed into BEAD were already low in terms of what we've built into our models compared to what I think ultimately we'll achieve. And so, I think that's already reflected inside of our penetrations.

If you think about just at the 12-month mark, where we're approaching close to 50% in the subsidized rural passings, our initial thoughts were we'd be at half of that within a year. And so, we're way ahead of that.

And I think the terminal penetration will be higher than what we thought at RDOF, despite the fact that there's an admittedly stronger fixed wireless access presence now than there was three, four years ago when we made those commitments. So, all a big roundabout way to say, I think it's factored into all of our thinking.

And I don't think it changes our view in terms of where we'll ultimately get to for terminal penetration, because we weren't overly aggressive in what we assumed..

Yeah. And....

That's helpful. Thank you..

We mentioned the less than 50% -- or the 50% or so at about the 12-month-plus mark. But as you can see and what we provided and all of the cohorts that we are seeing, we're still growing at a good rate at that point. So, it's not as though you've reached the customers who are going to get your product and then we're not seeing additional growth.

We're still seeing good growth in those markets even at that vantage..

It's early. It's going well..

Operator, we'll take our next question, please..

Our next question comes from the line of Sebastiano Petti with JPMorgan. Your line is now open..

Hi, thanks for taking the question. I just wanted to follow-up on the competitive environment, just based upon the previous response.

Just any help on thinking about the fixed wireless impact in terms of your -- is that just isolated or the competitive environment that has perhaps shifted in 4Q and persisted into January? Is that isolated in your non-fiber overlap territories or you're seeing that as well be somewhat impactful in terms of share as well in the 1-gig market? And a quick follow-up to that.

Any update we can get on overlap for fiber as it stands exiting the year? And then, on the CBRS build out, obviously, your peer Comcast has been testing along with you for quite a while, but they're live in Philadelphia as perhaps as well as some other markets.

Any update on how the team is thinking about CBRS and how you'll perhaps offload strategy over the next several years? Thank you..

There's a lot there, Sebastiano. But here we go. So, fixed wireless impact, it is where they've deployed and it's in both fiber and non-fiber overlap. It's more acute in the non-fiber overlap, because it's the first time that somebody's had what they view as an alternative other than DSL.

And so, it has a novelty factor in the non-overbuild footprint that is similar to a fiber overbuild that has an immediate short-term impact when it's new into the marketplace. So, it has a more pronounced impact there.

But I think the overbuilders, the wireline overbuilders would tell you that fixed wireless access probably has had an impact on them as well. So, it's not that it doesn't have an impact in an overbuild territory. It's just much more pronounced in an area where the overbuild doesn't exist.

Our overbuild percentage, in our 10-K today, I think, we disclosed as well that it's roughly 50% in terms of overbuild. And then, as it relates to CBRS, we are fully deployed and active with thousands of radio access networks out on the strand and MDUs in one large market today, and we're expanding into another market at some point this year.

And that's going very well. And the pacing of that really is dictated by a few things. One is, our relationship with Verizon is good and strong. The economics are great. And this is an ROI-based deployment. So, it'll be there -- the returns will be there when we deploy. But interestingly, the more penetrated we become, the more attractive the returns get.

And so, from a deployment of capital perspective, CBRS is very exciting. It's a very clear mathematical return.

But in an environment where we're deploying as much capital as we are and we have so much active activity on the outside plant in terms of high-split upgrade and construction of new networks, we're just pacing it along the way to manage all those factors in the way that we think about deployment of CBRS. But we're going to fully deploy it.

It's exciting. It has a great return. The depth at which we employed in each market, it really is a function of utilization on a geographically specific area, and the attractive agreement and the great relationship that we have with Verizon today. So, that's strategic to us. So, all those factors play into the timing..

Thank you..

Thank you. That was our last question. I'll now turn the call back over to Stefan Anninger..

Thanks, operator. Thanks, everyone. We'll see you next quarter..

Thank you very much..