Stock Buybacks Remind Us That Monopoly ISPs Work for Shareholders, Not Subscribers

Comcast announced at the end of January that it will be expanding its stock repurchasing program to $10 billion for 2022. It’s a reminder that local governments need to be wary about the huge cable and telephone monopolies stopping by their offices and offering generously to solve the digital divide once and for all, if only we give them more taxpayer money.

Doing so has largely been a failed policy, and does a better job of transforming public tax dollars into private wealth than it does in efficiently extending Internet infrastructure to communities that need it most. With all the federal funding on the horizon, and some states already looking like they’re going to listen to monopoly lobbyists rather than their constituents, cities and states would do well to follow along closely.

Business is Good

Stock buybacks by publicly traded companies like Comcast are a commonly used mechanism to transfer wealth from the cash a firm has on hand to the pockets of its shareholders, while also driving up its value. The program expansion from Comcast announces as clear as day that the company’s top priority isn’t connecting Americans; it’s to return the most money for the least investment for its shareholders. 

This is far from the first time the company has announced a buyback. In 2013, the provider repurchased $5 billion in shares. It followed that up with $3 billion more in 2014. In 2015 it bought back $4.25 billion, and in 2016 and 2017 it bought back a total of $10 billion more before taking a break to reduce debt. In 2021 the ISP resumed its repurchased program, spending $4 billion, and then followed that up with the most recent announcement to boost the repurchase program to $10 billion in 2022. That’s at least $36.25 billion over nine years.

Business has been unmistakably good for Comcast recently, having added 1.3 million new broadband subscribers in 2021 alone. But that wasn’t the only cause for its increased earnings. The company told investors that its Earnings before Interest, Taxes, and Depreciation (EBITDA) “increased 11.2 percent [over the past year] and Adjusted EBITDA per Customer Relationship Increased 6.7 [over the same time frame]” – in other words, it became even more efficient at extracting wealth from subscribers and communities. Gross profits on the year? $42 billion, a double-digit increase from the following year and a continuation of an almost-unbroken streak of quarterly growth since 2011.

A Different Set of Motives

The point here isn’t that Comcast - or any private, for-profit ISP - is evil. It’s that they are purpose-built machines designed to squeeze money from households as efficiently as possible. And it has wider implications down the road. Because of Comcast’s success, for instance, it exerts a disproportionate impact on the broadband market, not even including its regular and aggressive lobbying efforts designed to protect its monopoly territories so that it can continue to return the highest possible margins for its investors. We shouldn’t be surprised at this either, because if it didn’t, leadership would quickly be out. 

The point here is that even a company like Comcast – which does more than all the other national monopolies when it comes to connecting low-income families (in fact possibly more than all of them combined) - is ill-suited to totally solve what is in reality a problem of poverty expressing itself as one of broadband adoption. Comcast exists to maximize revenues for shareholders, not solve structural inequalities in the American economy. 

This is, of course, a problem created not only by Comcast. The other regional monopoly providers - Charter Spectrum, Altice, AT&T, and Verizon - have all likewise raised prices regularly and steadily over the past decade, contrary to what some would have us believe. And their profits reflect their success in doing so:

Comcast*

  • 2019: $41.7 billion
  • 2020: $37.3 billion
  • 2021: $42.3 billion

Charter Spectrum

  • 2019: $16.5 billion
  • 2020: $18.2 billion
  • 2021: $20.2 billion

Altice

  • 2019: $6.5 billion
  • 2020: $6.6 billion
  • 2021: $6.7 billion

Verizon

  • 2019: $77.1 billion
  • 2020: $77.1 billion
  • 2021: $77.3 billion

AT&T

  • 2019: $97.1 billion
  • 2020: $91.8 billion
  • 2021: $89.1 billion

Fingers in Several Pies

One important note as you look at the above numbers: these are huge companies, with their fingers in lots of different pies. Lest you feel sorry for, say, AT&T for its declining profits, we’ll remind you of two things. First, that accounting at behemoth corporations is complicated and tilted in their favor by the regulatory landscape. And second, while it’s true that they are sometimes plagued by decisions to try and amass even more power that don’t end up working out, in 2021 AT&T still posted almost 90 billion in profits. This was on the heels of repurchasing $67 million in stock in 2020, and just before management decided to stop connecting new subscribers to its existing DSL network in rural America because it’s not profitable enough. The move will strand tens of thousands of households, leaving them worse, more expensive service options down the road.

Unfortunately, states like Delaware seem not to have gotten this memo, recently announcing that Comcast, Verizon, and Mediacom will get a total of $56 million to extend infrastructure to unserved and underserved households in the state. There are sure to be others that follow. 

To learn more about Comcast, the incentives it has to protect itself from competition, and the array of paths via which it can do so, read our policy brief, “Comcast Spends Big on Local Elections: Would Lose Millions in Revenue from Real Broadband Competition.” Then, check out our infographic detailing some of the ways that the broadband market is broken.

*Comcast profits reflective of the Comcast Cable Division only. 

Header image courtesy of Best Stocks, Attribution-NoDerivatives 4.0 International (CC BY-ND 4.0)

Inline image of lobby protestor courtesy of Wikimedia Commons, Attribution 2.0 Generic (CC BY 2.0) 

Inline image of profit tiles courtesy of Picpedia, Attribution-ShareAlike 3.0 Unported (CC BY-SA 3.0)