Charter Communications, Inc. (CHTR) Earnings Call Transcript & Summary

Hello, and welcome to Charter's Investor Meeting. I'm Stefan Anninger, and I lead Charter's Investor Relations team. Today's event will start with prepared remarks from Chris Winfrey, our President and CEO. Chris will discuss Charter's growth opportunities and strategy. Then Rich DiGeronimo, our President of Product and Technology, will discuss our network evolution path and product development. And finally, Jessica Fischer, our CFO, will discuss our financial outlook and our capital allocation strategy. At the end of prepared remarks, we will post today's slide presentation on our Investor Relations website at ir.charter.com. After the formal remarks, which will last about an hour, there will be a Q&A session. Before we proceed, I would like to remind you that there are a number of risk factors and other cautionary statements contained in our SEC filings, including our most recent 10-K and 10-Q. We will not review those risk factors and other cautionary statements during today's event. However, we encourage you to read them carefully. Various remarks that we make during today's event concerning expectations, predictions, plans and prospects constitute forward-looking statements. These forward-looking statements 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 or to make additional forward-looking statements in the future. During the course of today's event, we will be referring to non-GAAP measures as defined and reconciled in our quarterly results materials, which can be found on our Investor Relations website. These non-GAAP measures, as defined by Charter, may not be comparable to measures with similar titles used by other companies. Please also note that all growth rates noted during today's event and in the presentation are calculated on a year-over-year basis, unless otherwise specified. With that, I'll hand it over to Chris Winfrey.

Thank you, Stefan, and thank you for all of you for being here this afternoon. I'm really thrilled and excited to be Charter's new CEO. And this is a unique time in our industry, both with some new challenges as well as some new opportunities. That's always been the case with the cable industry. If you think back to where it came from, from the 1950s, starting out with broadcast community antenna television to what we're going to talk about today with converged gigabit connectivity. And make that pitch to people when they're coming to work in the industry or coming to work for Charter and say, tell me another industry that's been around, that's existed and has continued to reinvent itself since the 1950s. And you'd say, well, why does that matter? For an employee, it matters because it's not just a job. It's the opportunity to have an entire carrier -- for a fulsome career. And from an investor perspective, it matters as well because it means that we have more opportunities to continue to introduce new products, new revenue streams, new ways to grow. Now the downside to that is investors will say, "Geez, you know it's always with cable and another investment cycle". And I would say, yes, but always with additional growth. And so part of the issue is people take a look at these investment cycles, which generates new product and new revenue and fail to adjust the perpetuity growth, which is really how you generate the shareholder value. And this industry and this company has been very successful with that over the years. None more than -- I would argue Charter, who I think we're extremely well positioned. We have great assets, and we have significant scale. Our network already passes 55 million passings. We have 500 million connected devices to our network every single day, and we have gigabit everywhere we operate. We didn't upgrade just portions of it or where it was attractive. We upgraded everywhere, and that's not what our competitors have done. We have great products. We have the fastest Internet. We have the fastest WiFi, fastest mobile overall speeds and we're the fastest-growing mobile provider. And we get to do all that while we save customers significant amounts of money. It's not good enough just to have great products and pricing. You have to have a high-quality service, and we've made that investment already. Our sales and service functions are essentially fully in-sourced. And we've made the investment as well for the digitization of service, not so that we can just save money, but so that we create higher customer satisfaction, which is driving down transactions and driving down churn -- has a financial benefit for us as well. So if you step back for Charter, we have great assets. We have a consumer-friendly operating model. And as Jessica is going to talk about, we have a long-term oriented capital structure that allows us to execute on opportunities in all economic climates. That doesn't mean that we don't have challenges. As everybody knows, we have fiber overbuilders today. We have for a long time. But these fiber overbuilders have announced significant builds. Some of them are more refocused with recent divestitures and others have been recapitalized and others are more aggressive local overbuilders. Now I've never seen an overbuilder in my years of cable that's actually had a great ROI but history has a tendency to repeat itself, and that's what we're witnessing today. The second category here shown on this slide is that inferior and limited fixed wireless alternatives, they're new -- which is the challenge. The reality is, I think, in every bit of work that we've done, is that their ability to scale either from a penetration or usage perspective is going to be limited. In the meantime, it is a new entrant into the footprint, and we're dealing with it. The biggest driver to our market -- to our growth today really has been the fact that we pulled forward so much demand inside of COVID and then met on the back end with very low market activity, which just really translates to lower selling opportunities. So the last 2 points on this slide, I think, take care of themselves over time. And fiber overbuild is not new, but we've always faced competition. And so the speed and the quality of our response matters. The next slide shows how that's developed over time. So if you take a look, this is the gigabit overlap inside of our footprint now at 44%. The key difference for us is that, as I mentioned, we're a gigabit everywhere we operate. We didn’t red line. We didn't take the most attractive pieces. We provide gigabit service everywhere we operate. And as you're going to hear a lot about today, we have a faster and lower cost path to upgrade. Now that's great. But what that suggests is that what matters is the speed to the modem. And if it were 15 years ago, and I'd asked you what's the speed at your house, you would have gone with an Ethernet cable to the back of your computer, and you would have been right, that was the speed of your Internet. But if I had asked you 5 to 10 years ago, 5 years ago even, what's the speed? You're going to sit on your couch, or out on your porch and you would have said that's the speed of my WiFi. If I ask you today, as you're pulling out of the garage and moving down the road, who's your Internet provider right now? Where are you getting your connectivity from? Your answer might be I don't care. I don't know. It just has to work and it has to be fast. And if that is the definition of connectivity -- seamless connectivity or as Rich is going to talk about gigabit wireless, then there's only one provider inside of our footprint that can provide that service and it's Charter. And so to give you a sense of how we're trying to educate the market about convergence, about the seamless connectivity, let's take a look at the spot that those of you in footprint, I'm sure you've seen before. [Presentation]

So for those of you that haven't seen that, I hope you enjoyed it. But the key message here is that we have a product set and network capability that none of our competitors can really match. We have a structural advantage. We have the ability to go gigabit wireless everywhere we operate. Our largest competitors, they have wireless marketed nationwide. But the reality is they don't have a wireline footprint or a sufficient wireline footprint to be able to marry it up and provide that converged product. Take AT&T, big national wireless operator, but their wireline coverage, what, maybe 40% of which 1/3 maybe is upgraded. So they don't have a path to a ubiquitously converged product today. As far as I can see, they don't have a path to that in the future. And even if they could, Remember, 70% roughly of their revenue is tied to mobile at very high prices. So it's very difficult for them to follow where we go. If you think about the other LECs or the other overbuilders, they either have an even greater wireline footprint problem or don't have a mobile product in the beginning. So if seamless connectivity is what customers demand and I would argue that it is, convergence is what we offer and we can. And if that's the definition of the new definition of connectivity or Internet, there's only 3 million of our 55 million passings that have that product today. And that's really the growth opportunity for Charter going forward. And even prior to convergence, even prior to the seamless connectivity, our strategy is working in the marketplace. We have a better mobile product, a faster mobile product in the marketplace, and we have a better price. So if you take a look at the graph, what you'll see is that we are the fastest-growing mobile operator inside of our footprint today prior to what we call Spectrum One. The way we do that is by what I said, having faster speeds and having better price. If you were AT&T or Verizon customer, the typical 2-line household is going to spend $140, $150 a month. At Charter, those 2 lines are $60 a month. And so we save customers roughly $1,000 a year with what I would argue is a better product, pretty compelling. Now as an incoming CEO, people say, what's your new initiatives? What are you going to do fundamentally different? I started out this conversation by saying we have a really good, high-quality operating strategy. And fundamentally, we're not changing anything major. We are, however, going to accelerate certain initiatives, and that's what I'd like to go through today. First and foremost, evolution, then expansion and then execution, 3 big buckets that we're going to talk about today. In evolution, it's network evolution, which is the upgrade of our network through high split and DOCSIS 4.0, seamless connectivity, which is converged gigabit wireless and then video transformation that we're going to talk about as well. In the expansion side, it's network expansion through both the rural footprint through RDOF and all the additional subsidy funding that's coming through. But also inside of our existing markets where there are opportunities that given the returns that we have, that we have new opportunities go build inside of our existing footprint. The third bucket is execution. So you can have great products and have great pricing, but if you don't have great service, it's not going to work. And so we'll continue to invest in our service infrastructure and that hasn't changed. That includes investing in our employees as well as our digital infrastructure. On network evolution, the first piece of evolution, Rich DiGeronimo is going to spend a fair amount of time talking about our highly flexible network evolution path. The key points I want you to get from me is we're targeting to be done with that in the next 3 years. The second piece is that we're going to start off with 2 gig by 1 gig speeds and that we're going to have network capabilities of going to 10 gigabit per second through DOCSIS 4.0, and we're going to be able to get all of that with -- at a targeted cost of $100 per passing. Some of you are doing the math, and you're saying, Chris, I get it $100 per passing. That's so much better. That's a fraction of the cost of your competitors, and you're right. But you've got 55 million passing. So isn't that $5.5 billion? And the answer is yes. It's a lot of money. But in the context of our overall revenue, in the context of the overall size of the company, the fact that it's going to occur over 3 years and what we get for it, really low cost compared to the value that we get. We think it's worth it, and we think everyone else would agree as well. Finally, as network evolution. Today, we are providing 100-gig -- we're selling 100 gigabit services on the increment, symmetrical for our enterprise clients. and that upgrade to make it ubiquitously available across our entire footprint. That will be complete by the end of 2024. So we have a powerful enterprise product, 100 gigabits per second symmetrical, the ability to sell that across our entire footprint. So the key is our network is able to remain flexible, fast and very cost efficient, and it's way more competitive in terms of our speed and cost to get there than any of our competitors can provide. And we do it everywhere. On Evolution, the piece I talked about already was the transition to seamless connectivity offerings, gigabit wireless, which Rich is going to talk about more. But you've seen the commercials, and I'm going to show 1 in a second, but what is Spectrum One? Spectrum One is flagship Internet, advanced WiFi and our unlimited mobile line all for the price point of $49.99 in year 1. It already offers an integrated set of products that work better together. It's faster, it's more reliable and it has a better and more secure connection. And it allows us to offer this product nationwide, not just in pockets, nationwide to have this gigabit wireless everywhere we operate. We're going to talk about more product features because this is just the beginning. You'll hear more about Mobile Speed Boost, Spectrum Mobile network, which is a very small portion of our footprint that have those services today, but it's going to expand very quickly, which is going to bring more value into the converged bundle that we're providing. Now Spectrum One, is that the brand forever? Is the pricing and packaging going to be exactly where we land for the longer term? I don't know. Right now, it's working very well. But that doesn't mean that we're not going to pivot and modify it along the way. But so far, it's working well, and we're going to be flexible. The key point is we have the key assets, and we have the ability to go to market in a way that I think is really attractive and very, very competitive. So let's take a look at the way that we go to market specifically with direct consumer advertising. [Presentation]

Pretty compelling, right? And so if that's the product and pricing and packaging that we can offer in the marketplace, I think that's what we all want. It's what we all expect from connectivity. And so while, yes, we have significant upside in Internet penetration today, we're only at 55%. And with the speed that we have today, gigabit everywhere and the speeds of where we're going. I think that is going to continue to increase. But if the real product is the seamless connectivity, only 5% penetrated, and that's the pie chart in the middle here. So significant opportunity, another way to think about it is the amount of communication services that we earn out of the household. As you see on the far right, it's pretty small. So we have a big opportunity to continue to grow here by providing high-quality products, pricing and packaging that our competitors can't replicate and marrying that with high-quality service and continuing to invest in our network. Now I haven't talked about video. Does that mean that video is no longer relevant? It doesn't matter to us? No, that's not the case. Video is very important to us. In fact, having a high-quality video product is critical for us to be able to have a connectivity service that customers want to take and keep because about 50% of our customers today, our connectivity customers, they still take video. And I would argue that inside of our footprint, we have by far the best video product of anybody in the marketplace. Why do I say that? Well, expanded basic. You want that on a traditional set-top box. Of course, you can have that. You want premium channels, you want it available inside the home on all your iOS devices, Android devices, gaming system. You want Mi Plan Latino, you want Choice 15, you want Essentials. You want to have all that content inside the home, outside the home on various devices aggregated together with apps on Spectrum Guide and have an ability to pick your package and pricing the way that you would like. I can't think of anybody else in the marketplace that provides that high-quality video service. The problem we've had isn't so much the quality of the product. The problem we've had is affordability. And when customers can't afford it, they start to move into a different space. And so we see where the puck is moving and we watch into an app-driven world. And so we put together a joint venture together with Comcast, which has been labeled or branded as Xumo. And together with Comcast, we'll be deploying that later on. The idea there is to combine the app platforms that exist in an operating system, whether that's on a retail TV or whether it's on an IP set-top box that we need it anyway. And to marry that together with different apps for unified search and discovery, allows us to participate in the advertising revenue of these apps as well as subscription revenue as well from some of the direct-to-consumer products. And at the same time, to be able to marry that with live video television. And so at the end of the day, whether that customer at the beginning or later on takes our video product, and it gives us a different type of relationship to be able to solve the video equation for that customer according to their budget. And so it's an opportunity to continue to participate in the video space and add value to our connectivity services. Let's talk a little bit about expansion. So why do we enter into RDOF? And why are we willing to spend this kind of capital into this program? I think you have to take a look at rural construction similar to the way that we think about M&A. We're building new passings. We're expanding our growth opportunities. We're filling out our DMAs. We had a unique moment in time. It's even bigger coming down the next few years to be a scaled operator, construct at this pace and to cooperate with our local communities, state and federal government to actually bring broadband infrastructure to areas that don't have it today. So we have a great return as well, most importantly, we're able to earn mid- to high-teen IRRs inside of these builds. And at the same time, that doesn't include the opportunity that some of this rural build that we're doing today is going to turn into suburban footprint. And some of that footprint that we build out today is going to feed the next wave of construction opportunities and future growth for us as well. So this has a longer payback, cash-on-cash payback than we typically had gone with in the past. But given the internal rate of returns and the certainty around penetration and what we're able to get out of this over time, it made sense for us and made sense for our communities and it's going to be a great project for us. There's more of it coming. And so not only do we have RDOF, which was $5 billion of build for us, of which $1 billion was subsidized but there's more coming down the pipe. And Charter is the largest rural builder inside of the country today. We're the largest winner -- successful winner of RDOF, and we had a lot of experience and confidence already coming from the New York State upstate build. So we have a machine that's up and running, and we've been able to participate in ARPA programs, state grants, and we're getting prepared for the $42.5 billion of BEAD infrastructure funding. So that's on the rural side. We also have nonrural construction where, as I mentioned before, there are opportunities for us to expand our existing network inside of our existing footprint at relatively low cost because of the type of penetration that we know we can get. And so we've already started to ramp up residential SMB greenfield new market fill-in with inside of our existing footprint as well. The map that you're going to take a look at here, it really excites me. So this is our RDOF footprint. Just to step back for a second. This is the Charter footprint in dark blue. It's 800,000 miles of infrastructure. If you take a look at the light blue that's on this map, it's over 100,000 -- 115,000 miles of new infrastructure fiber-to-the-home build as part of the RDOF plan. The light green is actually the new stuff that we've won through ARPA and through state grants. We've got another 20,000 miles. So when you think about the 115,000 miles and the 20,000 miles in the context of our existing 800,000 miles of plant, this is a very big build. And as you'll see on this slide, what it really does is it opens up the opportunity, not just for growth, I've blown up the east side of the country here. Not only does it open the opportunity for new homes, penetration inside the light blue and the green but it really creates the opportunity for additional expansion down the road. Here's a slide that I think is really helpful to take a look at. This is a market where we have a great footprint. That's our existing footprint today. If you take a look at this, you'll see the blue that's RDOF. And if you take a look at the gold, that is a state grant where we have fill in. So what you see by this is that when we have the gray footprint, our existing footprint, we were able to design connectivity and bid on these areas because we knew that we'd have connectivity, and we could expand our footprint. And then the other pieces weren't available at the time, but then the state grants came around and we use that to fill in the additional pockets. So that's one way of looking at this. The other way of looking at it is if we didn't build it, somebody else would. And so we'd have a gray area with a bunch of different colors that I don't think any of us would like to see. So I prefer the gold and the blue. On execution, Jessica is going to spend a little more time on this as we get into it and really tie it to the financial benefits. But we continue to invest in digitization of our service. We're at the very early stages of where this can go, artificial intelligence, machine learning and meeting the customer with self-service wherever they want to be. At the same time, we continue to invest in our physical service infrastructure. It's really important to us, and that includes investing in our employees. Proactive maintenance, so most people are familiar that we have proactive outage management, which lets you know if there's an outage in your area, here's the outage, here's the estimated time for repair. No need to give us a call. We'll give you a call when it's repaired. If you want all that available through our app, through portals through telephone, whichever way you want to communicate, that's not what this is. Proactive maintenance is before you even have an issue, you may have an impairment in your home that you don't even know exist. We're going to give you a call, send you a text, send you an e-mail, notify you through the app, whichever the way that you've notified us that you'd like to be communicated with. And we're going to tell you, we know you don't have an issue today, but we see an impairment. It's either in your drop, in your in-home wiring or your CPE. We now have the telemetry that can tell us exactly where that problem is, and we're going to schedule a trouble call at your convenience to go address that impairment before it ever becomes an outage. It's a fundamentally different experience for the customer. Did 600,000 of those this year, we're probably going to double that next year to be more proactive on this. Finally, on this page, is investing in systems. And while this may not be the most attractive piece, it really is important in terms of accelerating our speed and removing the opportunities for us to have points of failure and execution. The basic point here is we did a great job, the world's largest ever cable integration as far as I know, maybe the world's largest telco integration ever. And what we did is we unified all of our front-end systems for the benefit of our customers and for our service agents, so we operate as one company. Underneath, we have legacy systems that sit and so we're going to invest the time and we're going to invest effort and some money along the way. It's a multiyear period to allow us just to go faster and to have even better execution in our service. So there are other value drivers here at Charter, and I won't have the time to go spend time on Spectrum Enterprise, Spectrum Networks, Spectrum Reach, which is our advertising group. But there are a couple of things I do want to mention, community affairs, our network product or pricing or service has a significant impact in the communities that we serve. And that's at the local level, the state level and the federal level. And the way we act and the things that we do has an impact and it goes -- goes both directions. So we pay attention to how we impact our community really in every operating decision that we make. From a balance sheet standpoint, because we have a high-quality cash flow, sustainable cash flow and growth, our operating model permits a balance sheet strategy that has been and will be a significant contributor to our value creation. And finally, on this slide, M&A. So if attractive M&A presents itself -- we've done plenty of it before successfully. If it presents itself, we're going to do it if it's at an attractive price. And if it's not there and if it's not an attractive price, we'll stay disciplined and we'll continue to go run our operating model, which has proven to create shareholder value. We have other ways to grow through organic investment like build-outs, which is pretty similar to M&A. So as I wrap it up here, I just want to let you know, we are dedicated to long-term shareholder value creation. Some people ask, what is it as a new CEO that you believe? I believe in having a consumer-friendly product, pricing and service strategy that creates value for Charter's consumers and our local communities as well as long-term careers for Charter's employees, which benefits us and our service in the long term. I believe in being fearless and being transparent and doing the right thing all the time, especially when it's hard. Integrity matters, it takes a career to create. It takes a moment to lose, and credibility is key to our ability to execute, and I believe we have that credibility. We're committed to consistent long-term investing, which creates higher generational growth. And we've been having focused investments. We know who we are. We actually know who we're not. And that's equally important. And I think from a capital investing perspective, I think the industry can move faster. We've ultimately always gotten to the right place. But I think some of it is the industry has been worried about short-term capital market reactions. Here at Charter, we have a lot of quotes that we use internally. One of those is from Tom Rutledge, which is there's very few problems in cable that selling more cable won't solve and we wake up every day thinking about that. And one of my own is the best path to lower capital intensity is actually just having higher revenue. So we have confidence in our business plan, and that permits Charter to be opportunistic across market cycles and execute on both organic and inorganic investment opportunities. So in sum, we have a proven levered equity return model for long-term-oriented public shareholders and debt capital market providers who provide -- who share Charter's long-term vision. As part of that, we have a very supportive board. And in fact, we have 2 of the most successful cable investors globally and both Liberty and Advance/Newhouse, and we're really grateful for that. So the outlook here at Charter is very bright. I'm thrilled, and I'm honored to succeed Tom Rutledge, as CEO here. I'm now going to hand it over to Rich DiGeronimo, who's our President, Product and Technology, to walk through our network evolution plans in more detail. Thank you.

Thank you, Chris. It's a real pleasure to be here. So today, I will describe the current and future state of Charter's connectivity evolution. Our connectivity product suite includes 3 products: the multi-gig broadband, Advanced WiFi and the Spectrum Mobile network. I will also describe that when these 3 products are combined together, we create a new class of connectivity. Starting first with multi-gig fixed broadband. Spectrum is currently the nation's fastest Internet. In Ookla's Q3 report, it shows Spectrum as #1 for fixed broadband speeds. And the FCC is measuring Broadband America report states that Spectrum has the most reliable service. We also have the most gig-enabled passings within our 55 million passing footprint. Our current network speed capabilities exceed nearly all product and device requirements and residential customer usage is still heavily weighted to downstream with about a 14:1 downstream to upstream ratio. While we are the nation's fastest Internet today, we intend to continue to provide the fastest speeds. And we are going to do this through a capital efficient and expeditious evolution in the following steps: in the first step of Charter's network evolution, which covers about 15% of our footprint, the total spectrum increases to 1.2 gigahertz. This will enable multi-gig downstream speeds. The Spectrum expansion to 1.2 gigahertz is like an acquisition of approximately 400 megahertz of spectrum. This spectrum increase occurs in the hub, the node and the amplifier, largely via module upgrade to existing equipment. Additionally, more spectrum is utilized for upstream, which is commonly called a high split. The upstream spectrum increases from 42 megahertz to 204, which then enables gigabit per second upstream speed. This is a 30x upstream speed increase from current state. We've initiated this step in 4 midsized markets this year. And again, this step will encompass about 15% of our footprint. We will start step 2 of our network evolution deployment in early 2024. In step 2, we will continue our 1.2 gigahertz spectrum expansion, but we're going to modify our approach and utilize what's called DAA or distributed access architecture. DAA moves radio frequency generation from the hub to the node via what's called a Remote PHY device or an RPD. This is a new module that fits inside most of our existing node equipment. It also introduces a virtual CMTS to the hub, and data is now delivered in IP over our existing fiber between the hub and the node. This step has the capability to deliver up to 5 gigabits per second in the downstream when using a new DOCSIS 4.0 modem, which will also be available in 2024. This step will encompass about 50% of Charter's footprint. Our deployment of DAA with the virtualized CMTS and the Remote PHY device is a nearly identical architecture to Comcast and other cable operators. So we are collectively driving a global standard. In late 2024 and the remaining footprint, our intention is to fully deploy the next generation of DOCSIS, or DOCSIS 4.0 by utilizing a new Remote PHY module in the node and upgrading the remaining apps. With this third step, we will also utilize distributed access architecture, but will increase the spectrum to 1.8 gigahertz, which will increase the downstream speed capability up to 10 gigabits per second. This third step will cover the remaining 35% of Charter's footprint. Our intention is to purchase these 1.8 gigahertz components like the RPD node, modules and amplifiers at a similar price as a 1.2 gigahertz components given our large deployment scale. And our intention is not to go back to step 1 and step 2 markets with the end-to-end 1.8 gigahertz architecture. However, we will incrementally deploy these new components like the D4.0 modems and the 1.8 gigahertz amplifiers as part of our normal replacement cycle, which will reduce the volume and cost of change if or when we go back to the first markets. The advantage of distributed access architecture is that the node has modular capabilities, including Ethernet input speed, DOCSIS 3.1 or DOCSIS 4.0 RPD modules, 1.2 gigahertz or 1.8 gigahertz amplifiers. It also has fiber outputs to the home, which is enabled via a module called the Remote OLT. The Remote OLT is what we're using in our rural fiber build-outs. We're expanding our fiber footprint by over 100,000 miles, and that is just for RDOF. Over time, the output speed will increase and become faster than 10 by 10 gigabits per second, could go to 25 by 25, 50 by 50 and even up to 100 by 100 gigabits per second. This fiber output will be available on the increment for the highest powered users on a success basis. So we can relatively quickly deploy fiber to the premise. It's fiber on demand. This is a highly flexible architecture that enables multiple options over time. To sum up our network evolution, we are currently the nation's fastest Internet, and we will keep getting faster. We have the near-term capability to be gig symmetrical and multi-gig in the downstream. We are targeting that over 85% of our footprint will be capable of an up to 5 gigabits per second service by end of year 2025. And at that time, a 10 gigabit per second service will be available in a large portion of our footprint. We can deploy this network evolution quickly as there are a de minimis amount of legacy video set-top boxes that need to be replaced, and the physical work, such as the node and the amp upgrades, they can be done overnight, and there is no construction required. We intend to be essentially complete with this full footprint deployment by the end of 2025. The upgrade will not be limited to portions of our area as we will light up our entire footprint to have a ubiquitous speed superiority, marketing and service message. We will deploy the network evolution steps 1 through 3 in a capital-efficient way, with a target cumulative cost of $100 per households passed. We will also avoid a portion of the regular access network augmentation costs like node splits. We believe that this evolution will further reduce customer calls and technician visits, which will deliver an even more reliable customer experience. From a spectrum expansion standpoint, we are effectively acquiring 1 gigahertz of spectrum. By way of an admittedly rough comparison, the C-band auction for 300 megahertz of spectrum cost $81 billion, plus relocation costs of $13 billion and the additional cost to deploy that spectrum. So it all cost over $100 billion, whereas Charter is acquiring and deploying over 3x the amount of C-band spectrum for about 5% of the cost. And we are delivering that spectrum over a wire directly to the home. You can have a multi-gig fixed broadband network to the home. But if your WiFi can't keep up, then it's a waste as the Internet experience is largely delivered over WiFi via a short distance. So now I will focus on our advanced WiFi product. Spectrum was recently rated the nation's fastest WiFi by Ookla. Here is a commercial that showcases our WiFi leadership. [Presentation]

Charter's advanced WiFi product is available and sold across 100% of our footprint. We have over 11 million homes utilizing this advanced WiFi product now. Our advanced WiFi has great features such as parental controls, which enable WiFi pausing and scheduling. Device management, which can alert the user when a new device connects, bandwidth optimization, which dynamically selects the least contended frequency and channel. Spectrum WiFi pods, which provide great reach like to a doorbell camera, to your basement or to your yard, great hardware. This is a red dot design award-winning router. We also have Security Shield, which monitors and block cyber threats to websites and devices. Here is a commercial that demonstrates our commitment to network security. [Presentation]

Of the nearly 500 million devices connected to our network, over 450 million devices connect over WiFi. They connect over the nearly 400 megahertz of total WiFi spectrum in the 2.4 and 5 gigahertz WiFi bands. We are deploying WiFi 6e next year, which opens up an additional 1,200 megahertz of WiFi capacity. WiFi 6e can deliver 2 gigabits per second, and that will grow to 10 gigabits per second with WiFi 7, which we will deploy shortly thereafter. As a result, our WiFi speed road map will match our multi-gig fixed broadband speed road map as the customer Internet experience is largely delivered over WiFi. While the advanced WiFi product features are excellent on a stand-alone basis, the greater value of advanced WiFi is how it connects the multi-gig fixed broadband to the Spectrum Mobile product. This unique combination allows us to create a differentiated and unrivaled converged connectivity experience for our customers. The first example of how we converge our connectivity products is called Mobile Speed Boost. So in this example, the customer's purchased home Internet speed is 300 megabits per second in the downstream. The customer with a non-Spectrum Mobile phone or a phone from another mobile network operator, they do a speed test, and they get 300 megabits per second, which is the purchased speed. The customer with the Spectrum Mobile phone does a speed test and is getting 1 gigabit per second. Both of these customers are on the same home WiFi network. Mobile Speed Boost has recently launched, and we will be fully rolled out early next year. The Mobile Speed Boost will grow over time based upon the network evolution of the multi-gig fixed broadband network that I just discussed. I have gone through our multi-gig fixed broadband network and advanced WiFi product evolution, and now we'll focus on the third connectivity product, Spectrum Mobile. We are in strong relationship with our MVNO partner, Verizon, and in combination with our nation's fastest Internet and WiFi, Spectrum Mobile has the fastest speed. Spectrum Mobile is also the fastest-growing mobile provider in the nation, and our intention is to maintain this leadership position as we expand the Spectrum Mobile network, which I will now describe. The Spectrum Mobile network is enabled to customers that subscribe to both Spectrum Mobile and Spectrum Internet. The Spectrum Mobile customer devices auto connect securely to the Spectrum Mobile network. The Spectrum Mobile network is comprised of the following components: in-home advanced WiFi access points, which I just described, that also broadcast the Spectrum Mobile SSID; out-of-home access points like in a small business or a venue that broadcast the Spectrum Mobile SSID; other networks with which we partner; and our 5G CBRS hybrid mobile network. Currently, 85% of traffic to a Spectrum Mobile phone is over WiFi, and the rest is over the cellular network. Our intention is to enable a greater percentage of traffic to traverse the Spectrum Mobile network via our own assets and as we partner with others to extend network connectivity, Spectrum Mobile customers now have access to 25 million access points on the Spectrum Mobile network. The number of total access points will double to over 50 million over the next few years. For another admittedly rough comparison, these 50 million access points or radios they compare to a total of about 400,000 cell sites for all mobile network operators across the nation. So Charter customers will have access to greater than 100x more radios than all of the MNO cell sites in the country. The Spectrum Mobile network also includes the 5G CBRS hybrid mobile network. We launched a commercial-grade employee trial in one of our largest DMAs this year with 20 megahertz of CBRS PALs and also the use of GAA. We are in the process of evaluating the user experience and amount of traffic that stays on the 5G CBRS hybrid mobile network. Based upon this evaluation, we will then determine the number and locations and pace to deploy in 2024 and beyond. Individually, each connectivity product is currently the fastest and most superior. We have the fastest Internet in the nation. The fastest WiFi in the nation and the fastest mobile service. We are really proud of the individual leadership of each of these 3 products. But when brought together, the combination of the 3 products creates a new class of connectivity, we call it gig powered wireless. This new class of connectivity is unmatched. Fixed wireless providers cannot provide multi-gig Internet. Fiber overbuilders do not have nationwide mobile service. None of our competitors have multi-gig fixed broadband across their whole footprint. This gig-powered wireless combination is the foundation of Spectrum One and a driver of our company's growth. I will now hand it off to our CFO, Jessica Fischer.

After that deep dive into our network evolution, I'm going to talk about our strategy and how that translates to financial results. As Chris discussed, we have valuable assets including our network that passes 55 million homes today and enables our delivery of a differentiated converged connectivity experience. We have a successful operating model that drives customer penetration by pricing our products at a value. And we prioritize investments in high-quality customer service transactions, which saves money by driving down our customer interactions, lowering churn and as a result, enhancing the ROI of our relationships. We have a large and continuing growth opportunity to further penetrate our customers spend on connectivity services and use our scaled construction force and presence across markets to accretively build and penetrate new passings, and it's all backed up by our proven capital allocation. We utilize excess free cash flow and prudent leverage to amplify the results of the business. And in the current case, we're also able to take advantage of dislocations in the value of our equity relative to our cash flow generation. I'm going to take a look at each of these items in turn to walk through some of the financial impacts beginning with our network assets and the network evolution that we have planned. As Rich and Chris indicated, we're targeting $100 per passing for an upgrade of essentially all of our network in the next 3 years. We expect the resulting around $5.5 billion in network evolution spend to ramp through next year with the bulk of the spend hitting in 2024 and 2025. While that sounds like a substantial investment, it's a mere fraction of what others are spending to upgrade copper passings to fiber in our footprint, and it represents only 3% of current year revenue over a 3-year period. As a result of the upgrade, we expect to be able to sell 5 by 1 service in the vast majority of passings. We'll also have a flexible approach to offer fiber-to-the-home across our entire footprint, which will enable us to market an even faster product for success-based deployment to high bandwidth users. Our existing modems will continue to function in our upgraded systems. And when DOCSIS 4.0 modems are available and priced at scale, we plan to deploy them. We're targeting 2024 for that availability. Offsetting the capital spend, we expect to see some relief across network-related capital and operating expenditures. What you see in the chart is our network augmentation spend from capital and our plant maintenance operating expense. We expect both of those items to decrease over time. Network augmentation capital should decline as a result of less need for contention management as our spectrum split will relieve contention in the upstream. Plant maintenance operating expenses should also decrease because the older components of the network will be replaced as part of the upgrade process. We also expect to see reduced transaction volume in the network. The move to distributed access architecture brings the IP signals further down the line, which increases signal quality at the node. In addition, through the process of the upgrade, we will complete some full network standardization that will reduce variance-driven trouble calls. As a result, we believe that over the long run, the operational and capital efficiencies resulting from our network evolution will largely offset the cash investment associated with the upgrade. We'll also drive expenses down using our operating model. Customer experience is a top focus for everything that we do. And we've changed the focus of our customer care model from one that was largely reactive to customer calls to one that utilizes data and machine learning and artificial intelligence to solve problems before they start and better address customer concerns as they arise. Our plant and in-home device data now self-identifies 95% of our outages giving us the ability to proactively notify customers of the outage and an estimated time to fix. That reduces calls to our call centers. The identification is specific too, which allows us to dispatch the right technician to deal with the issue, reducing truck rolls in the field. In addition, our customers are increasingly using intuitive digital self-service platforms to manage their account and bill. They can also see real-time status of in-home equipment to address service failures. And the activity reductions we've seen are just the beginning. This year, we're upgrading our IVR to create a more user-friendly plane language approach to addressing customer concerns. And we're improving our agent tools to provide greater context when customers call, which should reduce call times and increase customer satisfaction. We continue to see self-installation at very high rates, which is a benefit both to us and to customers and is enabled by our fully deployed network with drops in place in the vast majority of the homes that we service. And we're identifying the source of service impairments that haven't yet resulted in an outage call. We do that through a combination of node health, which addresses plant-level maintenance issues and proactive maintenance where we're reaching out to customers with equipment drop or in-home wiring issues to proactively schedule appointments to address impairments that haven't yet resulted in a call. We believe that proactive maintenance is pulling forward service calls that otherwise would have occurred and preventing disconnects related to non-outage service issues. Finally, we're investing in our workforce. Two years of inflation and disruption in the labor market has reduced the efficiency and productivity of our frontline functions. In response, we've made targeted adjustments to job structure, pay and benefits and career paths in order to build an even higher skilled and more tenured workforce. Based on what we know about improved performance of longer-tenured employees, we believe that these near-term investments in the labor force will generate returns quickly. We made some of those adjustments in marketing earlier this year and have similar, though lower impact adjustments, coming through in cost to service. And although we had a slight uptick this year in cost to service per customer, largely driven by some normalization of bad debt expense, and there may be some pressure on cost to service in the short term, we continue to expect additional efficiencies in cost to service customers over time as a result of the efforts I've discussed. Moving from the operating model to our growth opportunity. The market is pricing in a no-growth scenario for our shares today, and it just isn't reasonable. We have the opportunity to continue to grow our share of the connectivity market through increasing our Internet customer penetration in the current footprint through network expansion and through growing our share of wireless connectivity. And with the key being that each of the converged products facilitates growth with the other. We continue to be underpenetrated in overall connectivity services and nowhere is that underpenetration more evident than in mobile. There are 126 million mobile lines in our footprint. And while we've been growing quickly, we still only serve less than 4% of those lines. But because of the technological innovation Rich discussed, we're delivering the fastest mobile speeds in the industry to our customers. And we're doing it in a way that makes financial sense by offloading a significant amount of our mobile data usage to the Spectrum Mobile network. We plan to continue to grow that offload, which will expand our margins in the mobile business. Though I should be clear. We have a great MNO partner with a strong mobile network to the extent that increasing offload onto our network requires capital, it will be subject to appropriate return hurdles. We're seeing some of the results of improvements to mobile costs already. Our mobile service margin, excluding subscriber acquisition costs, is currently around 18%. And with the negative EBITDA margins that we've reported in prior quarters, driven primarily by the speed of our growth and associated subscriber acquisition costs. And we'll continue to drive the cost down. We haven't yet reached the full benefits of scale across our mobile services. We're focused on customer service and just like in cable as our service improves, will drive down the cost to service customers. And as we roll out the Spectrum Mobile network, we'll continue to drive down our cost to serve each customer. I say all of that, but our strategic goal continues to be to drive the most revenue we can from the network by connecting the most customers and delivering high caliber services to those customers at a value. As the fixed and mobile connectivity products converge and as we offer bundled products across our fixed and mobile connectivity services, the mobile EBITDA computation just becomes less relevant. The takeaway here is that by growing our penetration of the mobile product, we can drive additional EBITDA with our assets. In addition to the opportunity in mobile, we're taking advantage of the experienced machine we now have to build at scale and to expand the reach of our network. As you likely know, through RDOF, we committed to build approximately 1 million passings over 5 years in rural America, a project that we expect to cost around $5 billion and for which we're receiving $1.2 billion in government subsidies. And we've continued our commitment to rural expansion through participation in other subsidized grant programs, including ARPA and BEAD. That isn't the only way we're expanding. Across every type of build that we execute. As laid out in the slide, we've renewed our focus and resolve to build more. You'll see the impact both inside and at the edge of our network and we're driving it -- creating additional opportunities that will generate appropriate returns for the business regardless of where we find them. And the results of the expansion have been really strong. We've won funding for an additional 160,000 subsidized passings outside of RDOF, and we have pending bids for 300,000 more. And focusing on rural year-to-date through November, we've constructed around 187,000 rural passings, about half of which were related to RDOF. Our current build pace is around 15,000 passings a month, and we have plans to more than double that pace in the next 12 months. And penetrations have been consistently ahead of our expectations with our 6-month penetration of passings currently about 40%. Given where we are, we continue to expect to deliver mid- to high teens IRRs on our rural build, which brings us to the question, why organic investment. Our view on the appropriate capital waterfall hasn't changed. We invest first in growth opportunities for the business, whether those are organic growth opportunities like the rural construction initiative or accretive M&A opportunities, and then we take whatever actions are necessary to adjust our leverage to its targeted range, which has typically resulted in significant returns of capital to our shareholders. Our methodology for evaluating organic and inorganic investments is distinguished by disciplined cost of capital benchmarking and project risk assessment, but we continue to identify a large number of high-quality opportunities for the expansion of the business, as I've discussed. Because of our continued expected growth, the sustainability of the business' cash flows and the flexibility afforded by our split rated debt structure, we intend to stay at or just below the high end of our 4 to 4.5x target leverage range. We believe that maintaining our leverage at this level both promotes levered equity returns and delivers the financial flexibility for scaled M&A. And for that reason, delevering would only make sense if the market valuation of our shares fully reflected the intrinsic value of the cash flow opportunity, if debt capacity in the market were limited or if our expectations of cash flow growth, excluding the impact of our expansion were significantly impaired. Those just aren't the case. We also see significant benefits from the current debt structure. Charter is insulated from the impact of the interest rate environment due to our significant positive free cash flow and our long-dated 85% fixed rate debt structure. We have, on average $2.4 billion due to our bondholders per year over the next 5 years and refinancing that $12 billion of bonds at current rates would only increase interest expense by about $140 million a year. Our term loan and revolving credit facilities, a portion of which also come due during that term, are much lower risk given their already floating rate structure. And our structured buyback program reflects our priority which is to return capital to shareholders in a consistent, transparent manner rather than attempting to time the markets. Our methodology smooth the interest rate on borrowings over time and allows us to dollar cost average into the shares all while creating a levered equity return for shareholders. I'm going to wrap up with a couple of reporting items and our capital outlook. First, on the reporting front, I want to make you aware that we're planning to change our reporting beginning in the first quarter to remove separate mobile reporting and instead reflected as part of the converged business. It's consistent with the way we operate it. And on the slide, which will be available electronically after the presentation, we lay out the major metrics that we expect to change and what you should expect in the revised P&L once we make those changes. We'll report the revised P&L retroactively to give you a chance to update your models. On the capital side, we'll also begin providing some additional detail in line extensions, particularly for rural and commercial. We think it's important to view all of our additional line extension activity like we view the rural build, which is essentially slow motion cable M&A. Accordingly, when we talk about capital intensity going forward, we expect to talk about capital expenditures, excluding all line extensions as a percentage of total revenue. Excluding line extensions, increases focus on costs related to the existing network, which is the right way to judge capital intensity. And as I discussed earlier, we expect increases in our line extension expense, both in rural and in other areas where we build based on our increased expansion efforts in those areas. For 2023, excluding line extensions, we expect a small uptick in capital related to the acceleration of network evolution we've discussed, partly offset by declines in other areas. We've always said if we decide to go fast, capital intensity, excluding line extensions, could briefly escalate, and that will be the case mostly in 2024 and 2025. We anticipate that our network evolution spend will peak in 2024 or 2025, and the capital intensity will decline again thereafter. On the line extension side, we plan to meaningfully increase our spending, targeting around $4 billion next year versus around $3 billion this year, inclusive of the rural build and our other expanded opportunities. As you all know, all of the expenses related to line extensions go into place before the passings are placed in service, meaning that they come well ahead of the revenue on those accounts. The extra money we spend on line extensions today and over the next few years, is going to power continuing growth for years to come. which is why our strategy to evolve our network, expand its reach and execute on our service goals provides the growth platform we need to drive value to shareholders for years to come. And with that, I'll hand it over to Chris for closing remarks.

Thanks, Jessica. Let me bring this home, and then we'll move to Q&A after a short break as we set up. First and foremost, we have valuable network assets. We pass 55 million passings today with a fully deployed gigabit network combined with wireless convergence makes it really powerful. And we have a cost-effective path to upgrade to faster speeds, lower cost and at a faster pace than any of our competitors. We have a successful operating model. It's the same that we've deployed before, which is the notion that having great products, pricing and packaging that's very difficult for competitors to replicate, putting that all together so that we get more product into the household, the more penetration across the network passings that we have and marrying that with high-quality service and being willing to go invest for higher quality service along the way, bring significant value. And then on top of that, we have a large growth opportunity. At the end of the day, whether it's the 55% Internet with a 5% converged seamless connectivity, we are underpenetrated relative to our potential, both in terms of penetration in the household and penetration on the passings that we have inside of our footprint. And you take that sustainable cash flow, good cash flow model married with growth and put that together with the balance sheet strategy and a levered equity return, together with an innovative capital structure and disciplined approach to ROI-driven capital allocation and you get what is Charter, which is, I think, a really fantastic growth opportunity. We're looking forward to delivering that for our shareholders and look forward to doing that for many years to come. So in total, we have a large opportunity. We have a proven strategy I think we've got the right team to go do it. So we're going to take a 2-minute break here to get everything set up, bring Stefan back on so we can do some Q&A together with the analysts, and we look forward to doing that. And I thank you for your attention so far. We'll be right back. Thank you very much. [Presentation]

Hello, and welcome back to our investor meeting. We're now ready for Q&A with our 3 speakers -- excuse me, Jessica. Alice, we are now ready for our first question, please.

Yes, I believe our first question is from Walter Piecyk from Lightshed.

I guess since I'm first, I'll just ask what specifically is the CapEx guidance for '23? I think I'm getting to over $10 billion in aggregate.

Jessica, do you want to take that one?

Yes. That's correct. So you've got $4 billion on line extensions. And then I don't have the slide right in.

$6.5 billion to $6.8 billion on the core, less line extensions.

And then the second point there is that the core cable capital intensity is declining, both in percent as well as in dollar terms.

Got it. And then just a follow-up on the wireless business. I was listening to the words carefully, and I think when you were talking about offload, you mentioned when you were saying like, hey, you're trying out CBRS, but you're evaluating new partners. Can you give us a better sense of what that means? Are you talking about other MVNOs to add to your existing partner? Are you talking about different ways or maybe other new companies that you could use to offload some of that usage?

Sure. I can speak to that. So our CBRS trial is certainly a component of our overall offload strategy. But in addition, I think the third component I spoke to, the first one was our Spectrum Mobile network, home access points, which will broadcast the Spectrum Mobile network. The second are out-of-home access points, which will broadcast the Spectrum Mobile network. And the third are the other partners, which I think is really the root of the question. through our wireless JV with Comcast, they would be an example of another partner whereby our customers, particularly our Spectrum Mobile customers can securely auto connect to, in that instance, the Comcast network. And there are other operators that we're contemplating as well.

And vice versa.

Our next question is from Jonathan Chaplin from New Street.

Thanks, guys. This has been a great presentation. Really appreciate it. I've got dozens of questions, but I'll leave it to one modeling question just to be polite. Just following up on the last question. It sounds like it's $6.8 billion in core and then $4 billion in line extension CapEx for next year. Can you give us a sense -- Chris, you said that CapEx -- the core CapEx is coming down in dollar terms every year. So what would that go to in '24? And how much line extension -- sorry, how much of the $5.5 billion upgrade CapEx is in '23? I'm trying to get a sense for sort of what the capital how the capital plan evolves as we go from '23 to '24, '25?

I put my foot in it, and I'll let Jessica take it out and say when I was talking about core cable-like capital intensity. I really was talking about absent the high split upgrade or really the network evolution, which is the high split DAA and the positioning for DOCSIS 4.0 everywhere through the 1.8 gigahertz insert. It was excluding network evolution, and it was excluding the line extension. So when I talked about core cable capital intensity or business as usual, that's the dollar amount that's declining as well as the percentage and an increasing revenue environment. I'll let Jessica answer add. Does that answer your question already?

No. That's what I assume. So I don't think you totally put your foot in it. But yes, Jessica, would love to get some clarity on that.

Yes. So if I take it from there, so you have sort of core cable capital intensity that's declining over time, both because revenue is increasing and because the capital spending against that revenue is coming down a bit. The $5.5 billion, Jonathan, I think you got to think about it kind of ramping through next year and then being in full force across both '24 and '25. So you have a lighter year assuming kind of a ramp over 2023 and then full force in '24 and '25. And that's why I think we think that the then you kind of have a peak that either '24 or '25, depending on how things roll out. And after that, once you're after the network evolution sort of window. I think then you're back to the kind of BAU cable capital intensity that declines over time.

It wasn't a question you asked, but I'll just jump in as well. So for construction as well as for the network evolution CapEx, you end up with different pieces, the timing is different from the actual activation, both of line extensions as well as the network evolution. So for example, in the RDOF spend that we have today, our walk out for the entire 1 million passings is effectively completed. It's almost 100% done. And the design is maybe close to 1/3 done today. But the permitting is just beginning on a lot of it as well as the actual physical construction. So the timing of the spend and the activation of the plant, both for line extensions as well as for network evolution, where you also have walk out and design is not going to be one for one. And we'll talk about that as we go through the cycle in terms of what's the level of activity and what's being completed or activated in both cases.

Got it. And so Jessica, just to follow up on that, should we think of maybe like $1.5 billion next year, going to $2 billion a year in '24-'25 as the upgrade CapEx.

I'm not going to give exact guidance on it, Jonathan. If we spend $1.5 billion next year, that would be a brilliant execution on our side. But I but we're not going to give an exact number.

And maybe a little bit of an unfair question, but the -- my sense is always that going with FDX over 1 gigahertz was going to be a cheaper path -- a cheaper, riskier path than going with ESD over 1.8 gigahertz. But Comcast has sort of guided to a total cost of $200 per home. How do I marry that up with your $100 per home? Are you guys measuring sort of the bit that you attribute to network upgrade in a different way?

Yes. Jonathan, this is Rich. I don't think we can certainly -- have any ability to speak to Comcast’s cost structure. But what we can talk about is the assumptions associated with our target of $100 per homes passed. And we break it into a few components. The first component, which I think is the most important is our upgrade is mostly focused on module changes. And as a result of that, as you look at our nodes, as you look at our amplifiers, our technicians just have to replace a component within our existing equipment. So within the existing node or within the existing amp. You don't have to cut out the entire housing which makes it pretty cost effective. The second piece is we plan to utilize exclusively employees to do the work, and they do this work in the overnight window and they really just have to do it once to a particular customer's home. And so there's great value in being able to use our employees to do this work. The third piece is there's really just a de minimis amount of legacy equipment that has to be replaced in terms of legacy set-top boxes. There's not many components associated with that need to be swapped out. The last piece which I think is really important is our intention here is to ensure that we purchase all of even the 1.8 pieces of equipment. That could be amplifiers. It could be an RPD module that's D4.0 capable. It could be a D4.0 modem. Our intention is to purchase those components at the same pricing that we plan to purchase the 1.2 gigahertz components. Now we recognize that's an aggressive target. We've done that before in other cycles. We did it with DOCSIS 3.1, where we're able to purchase equipment at the same price as DOCSIS 3.0. This is a large scale deployment that's going to be done over 3 years. And so this is going to be very lucrative for those vendors that choose to partner with us on this. And as part of that, our assumption is that given our scale, we'll be able to deploy at those rates. I think in addition, and certainly, Jessica mentioned this in her presentation, we also think there could be some offsets to the $100 per household passed. And so the regular access augmentation costs like node splits over time, those will certainly go away because there really won't be any network contention after this network evolution upgrade. And so that's how we came up with our $100 target.

It's a bottoms-up build. It's aggressive, and it requires, as Rich said, a lot of participation and buy-in from our vendors, which we think will get -- but I think it will be successful, and I think it's really attractive. If you step back, say, for $100, yes, I know it's $5.5 billion over 55 million passings, as I said before. But it's incredible value for what we get. It's not really disruptive to our customer base in terms of as a percentage of revenue and the value you get is very, very attractive. I'm looking forward to it.

So our next question is from Benjamin Swinburne from Morgan Stanley.

Let me just pick up on the theme of the conversation. Chris, could you talk a little bit about the benefits to the top line or your customer metrics as you guys invest this capital over the next few years? I mean, I want to make sure we're thinking about the credit you should get in terms of customer growth from expanding the footprint so much, particularly in the line extension side. And you guys are doing rural and non-rural. So I don't know, Jessica, is there a way for us to think about either an average cost per pass some way to translate the $4 billion of line extensions into passings growth. So we can make sure we're balancing the cost with the benefit you guys are going to get. Hopefully, that makes sense.

Sure. So let me to cover off, I think you were asking the network evolution, where credit we should get for that spend. Right now, honestly, there's not a lot of product and there's not a lot of devices that are capable of handling the type of speeds that we already deliver today. And certainly, when we go to 2 by 1 and then 5 by 1 and then a 10-gigabit product, I don't know of many -- as Rich talked about WiFi devices, that's how people get their service today that can handle that type of speed, much less devices, much less product. But every time in the 25 years that I've been in cable that you say, what would somebody ever use it for, when you develop that type of competitive speed, superior products in the marketplace, products get developed around that, and that's how you can continue to drive share and drive bigger participation in the market. That's always been our experience. You also avoid -- even though there's not a product out there today or a service that's really capable of handling those types of speeds or demanding that type of product, you get marketing claims inside the footprint. And I think that all else equal, it matters, and it's well known in the capital markets. It's been one of the concerns of the capital markets as well. I don't think it has a big impact on us today, but I think by having that and having it quickly at a lower cost than our competitors can provide at a faster pace than our competitors can go and doing it ubiquitously everywhere we operate, we don't red line, which is what I said in my prepared remarks, I think that has a big impact all around. And so I think we'll get significant credit in the marketplace once we get going. Line extensions, Jessica covered, we're already after 6 months on our rural line extensions. We're getting 40% penetration. She's not going to like that I'm telling you this, but in our state grants, it's more like 50% after the first 6 months. And so that's just the beginning. These are areas that have essentially no true broadband Internet service. And so you almost have to ask the question, who wouldn't want it. So I think our penetration potential there is very high. The bulk of what Jessica was talking about really is tied to the rural build, and that's the RDOF as well as the state grants as well as over time, not just next year or beyond our expectations of being a big winner in the BEAD because of our size and scale and our service infrastructure. But the bulk of the spend that Jessica is talking about really is driven more by rural -- you may see passing growth in the marketplace slowed down a little bit in a recession, and that is going to be more than offset by some of the opportunities to go fill in the existing footprint.

Yes. And I guess if you think about how you layer Total passings growth onto that. So we today are building around 1 million -- where we've been building around 1 million passings a year. We've committed on top of that through rural between RDOF and the state grants to about another 1.2 million passings. If you assume that those get done along with some BEAD and some additional state grants that we bid, so will give us the benefit of a slightly tighter time frame, say, it gets done over maybe 4 years instead of the longer time line we have for RDOF, probably gets you pretty close to what -- a way to think about pacing and how we might be able to place passings and service over time. And certainly, we're out there bidding on additional subsidized state grants. We are fully ready to be part of the BEAD allocation process when it comes. So we think that the passings are accretive to the overall financial growth of the company and our returns in the future. And as they come up, I think that you'll see us continue to bid on and to try to attract more of them because we think it's good for the business in the long term.

It's a unique moment -- it's a unique moment in time.

Can I just ask one follow-up. Is there a way for us to think about the time line between spending the dollar of CapEx on line extensions and starting to drive penetration that you just talked about? Is that 6 months, 12 months? A quarter? I know it varies by geo, but any thoughts you...

It varies, then we gave you on the slide that you'll have in the presentation. It doesn't have numbers on it, but at least it sort of gives you kind of the way that we think about the time line for proportionately how the RDOF spend hits and then how the revenue comes in behind it. And we give a window of years because that's what we have, but I think the growth in that revenue kind of continues as you get outside of the window as well. But to Chris' point, you got to build the whole passing before you get started. But the penetrations that we've seen, particularly in rural where people have not had real broadband products and are excited about having access to the connectivity services that we're able to offer. The penetration has come pretty quickly in that space.

So our next question is from Doug Mitchelson from Credit Suisse.

Chris, you talked about core capital intensity declining -- It's currently declining, will continue to decline. I'm trying to understand how much of that improvement in capital intensity is to become because of the network evolution or because of things that you're already working on? I guess the importance of that is, you talked about potential offsets for the network evolution. But you might do as many as you tell me $1 billion in node splits a year or something like that, that in a few years, you're not going to have to spend any money on those splits. So I guess I'm trying to understand the quantity of core capital intensity improvement I guess, you may either separate or including the benefits of the network evolution. Obviously, we're all trying to circle up 2024, '25, '26 capital intensity. Maybe it doesn't step up as much in '24, '25 due to those improvements. So any help would be great.

If you think about what Jessica said and what I said, the benefits of the network evolution on both CapEx and OpEx aren't going to come until you're more than complete with a particular area. So the comments I made around core cable capital intensity declining now and in the future is already a result of the things that we're doing. And then as you get towards the back end of the network evolution, you would start to see additional benefits in the categories that you described.

I think if you want to think about the offsets, I group them into sort of buckets. So you have what you're going to do in reduced network augmentation efforts over time. If you put that kind of in a 5-year time line, I think of it as somewhere between I don't know, $600 million and a little over $1 billion. And I would tell you that's a really wide range, and that probably isn't as helpful as it could be. But some of it is that until we actually go and do the work and see what happens on the backside. We're not going to have a full picture of the expense reductions. And so you should take all of my ranges to be estimates, which they are.

It's also driven by network usage something that you'd have to forecast over the next 5 years.

That's right.

Right. We do expect, so in addition to the reduced network augmentation efforts, we expect a similar sized benefit in maintenance expenses. There are a number of the oldest components of the network that are replaced as part of the network evolution plan. And so because of that, we expect that maintenance on the network will also decline and maybe by a similar size benefit to what we've seen or to what we're expecting in network augmentation. Then in addition to that, I think, because you replaced those older elements and because you have the more efficient technology sort of delivering IP all the way to the node, we expect transaction reduction. There's not a great way for me to tell you how much of that there is, and it's hard as well because we do have a lot of other reasons that transactions will go down with our network monitoring and AI and digitization. So we think there will be a meaningful benefit, but it will be hard for us to kind of break it out. And then the last one is on plant replacement. There are components of the plant that are -- that will end up being replaced as part of the network evolution. It's really just an acceleration of plant replacement that we would have done over a longer period of time. So there's some acceleration into the network into the network evolution that $5.5 billion that I think would have hit over a longer period of time. So you'll see it come out of the CapEx after that.

So our next question is from Craig Moffett from MoffettNathanson.

My question is with respect to the rural fiber builds. I won't -- Jessica, I won't try to pin you down for longer-term CapEx guidance, but you talked about $4 billion for this year. And that's before the BEAD program has even started. How large could that get as you look forward? I would imagine it eventually becomes constrained by capacity and just sort of workforce size. But how large could that number become? And how large do you like it to become if you have the capacity to do it?

The -- so I just want to clarify first, the $4 billion is total line extensions versus the $3 billion this year. So if you think about incrementally sort of how much additional build we're doing next year. It's another $1 billion on top of what we're doing now. I think that we think the line extension capital could become meaningfully larger than what we're projecting for next year. You're right that at some point, while we've built a lot of scale into the machine. And because of that, we're able to execute really efficiently on getting the builds completed. There are probably limits on that on the other side. But to the extent that we can find accretive passings to build and we can go out there and secure the labor and the materials to go build them, which we've been successful in doing. I think that we are ready to go out and do a lot of build because it makes sense, particularly where it's next to our network and where we think that we can get good returns on it in the future.

I think we're going to have to just the way that we did with RDOF, when we announced RDOF, I think you're going to have to really put this to the side and think about it as Jessica -- I call it M&A, Jessica calls it the creation of a brand-new cable company. We all know what that looked like. It turned out to be really successful. And so I think we need to bifurcate how we're taking a look at the business, and we're starting to do that. Now what will happen is because BEAD probably isn't going to be granted by the states. They're not going to go into a process until early 2024, the earliest and it's probably going to be later than that. And then they have to run a process. It has to be allocated, it has to start and then it has to get built over 4 years, you'll buy -- for sure at that point, you'll be on the back end of RDOF spend. So as RDOF is tailing down, you'll start to see BEAD and some of those programs really ramp up. So I don't know that you should think about it as doubling up and one will be stepping down and the other will be stepping up, if that's helpful.

And one technical follow-up, if I could. Should we assume that the subsidy dollars that you start to receive from RDOF and some of the ARPA and eventually BEAD programs will be treated as tax deductible? Or are you assuming that they are going to be treated as taxable until we otherwise?

I try not to bet on what is going to happen with the tax law going forward. So I think we would bet on the current tax treatment until somebody changes it for us.

Yes. So our next question is from Vijay Jayant from Evercore ISI.

So I hope you can hear me. One question was like, why is it sort of really targeted over 3 years on doing the strategy elevated CapEx and why not over a more protracted period? Was there any sort of urgency you saw on that? And I think the question has been sort of answered in some way, I just want to clarify based on what you have on your current RDOF build is sort of 2024, the peak year on that spend and that moderates on the other side of that?

I'll take the first question. The 3 years really came out of us taking a look and saying, we should be aggressive. If you know you're going to spend the capital, you might as well spend it as fast as you can and get the benefit as quickly as you can. And so that's always been our philosophy is to not be afraid of short-term capital market reactions. In this case, I actually think the reaction should be very positive. It's a dramatically lower cost than what I think a lot of people had planned at $100. The fact that we can do it fast and we can do it everywhere. We can do it across our entire footprint over 3 years. I think it's a huge positive. If some of it ends up bleeding out a couple of quarters because of either labor or supply challenges, so be it, but that's not our goal and that's not what we're shooting for. And so I think it's the right goal to have. I think if we had been saying that we were going to take it over 5 years, for example, you'd have exactly the opposite question coming back to us, why are you taking so long? Are you not taking it seriously, why can't you move faster? So our point of view has always been if you're going to spend -- if you know you're going to spend the capital and it's really efficient capital spend, and it can help you in the marketplace, then go as fast as you can and get the benefit. And really focus what is our long-term goal here? It isn't about short-term CapEx. I know the focus today will be what's our 2024 and our 2025 CapEx. And I don't want to minimize that, but what we're after is free cash flow per share, long-term free cash flow per share generation and doing everything that we can today to maximize that in the future and we take a long-term point of view. And I think that's healthy, and I think that's what long-term shareholders would want out of us. And I think that's what they're asking for.

Yes. We also wanted to make sure that we could line up the amount of available resources to accommodate this program over 3 years, and that was one of our big stress tests. We want to make sure that it was achievable. And our belief is that it is.

On the other question on RDOF spend as to what year exactly it ends up peaking. I think that there will be heavy years for RDOF often 2023, 2024, 2025 and probably continuing capital going into 2026. There's a long time horizon for a lot of that build, and we're completing it as quickly as we can, but also adding in the state subsidy builds as well. So I wouldn't necessarily say it peaks in a particular year. I think that there's a good spend cycle ahead of us. But to Chris' point, then probably comes down a bit as the BEAD money event starts flowing in.

In the list of unpopular things to say, I actually think it's a good thing. To the extent we have a chance to accelerate that, that's also why Jessica has to be careful how to answer that. If we have opportunities because the machine is up and running, and we're getting better, we're getting faster and supply is opening up. We have labor secured. To the extent we can go faster, we're going to, which means some of that spend that might have been in 2025 or even 2026. If we can pull that forward, we will. Right now, it doesn't look like that's going to be the case. But for the same reasons I talked about the network evolution, if you know you're going to spend it and you're going to drive customer acquisition, you're going to have higher revenue and better long-term free cash flow, and you do more of it sooner, then that's just a better NPV and why wouldn't you do that?

Great. So that's from Peter Supino from Wolfe Research.

Congrats on the occasion, everybody. Two questions, if I might. One on infill and rural -- nonrural extensions. Historically, this has been about 1 million new homes passed per year. And I wonder what the central tendency of that number might be over the next few years? And then a second question on mobile. I just wonder how you're finding mobile as a customer acquisition tool, that advertising that you showed today for Charter One seem to target new customers. I wonder if it's starting to help new account growth in a meaningful way.

Yes. So the -- today, you pointed out, we do about 1 million of new passings per year. The vast majority or the bulk of that is through new construction. Some of that new construction because of the economy, you can already start to see that new build is going to start to come down a little bit. It's going to be more than offset, as I mentioned, by historical opportunities already inside of our existing footprint, where maybe we took a look at -- just as an example, maybe we took a look at a strip mall and said, we're going to target the one customer who's asking for service, and we're going to base the ROI based on that particular customer or potential customer and maybe passed on something instead of taking a look at the 9 others that later on, kept on calling and we kept on having the same answer instead of just saying, "Geez, I think I can get all of this strip mall. And therefore, the return even under a reasonable penetration would have been a slam dunk from the get-go. So that type of opportunity exists in residential and exists in SMB. It exists in enterprise, and it's ramping up as we speak, but I think a lot of that is really going to be offset by what looks to be a slowing down of regular way construction in the marketplace. So the bigger piece here, as I mentioned before, it's really going to be all about the rural spend. But we have growth opportunities inside of the footprint that we're going to take advantage of as well. On mobile, Spectrum One, I'm glad you like the commercial. I think it's really attractive even at the promotional pricing of $49.99. It has our flagship Internet, it has Advanced WiFi, and it has a free mobile line for the first year. But even after the promotional period, it is a product set that you cannot replicate in the market in terms of speed, the way that it works together and even the price point after a promotional period. You save money even at a retail price. So I think it's hugely attractive not just to upgrade existing customers to new lines, but to also have new customer acquisition along the way. Now as compelling as that is technically and from a value savings perspective, from a product perspective, it hasn't been done before. And so that's why I said we're out in the marketplace. We're advertising Spectrum One. We're trying to really educate the new customer base that this is a completely different category of products. And so yes, Spectrum One is working. But I think it's going to be a long runway to if we're really going to establish converged connectivity or seamless connectivity, or as Rich says, gigabit wireless and...

Gig-powered wireless.

Gig-powered Wireless. And then it's going to take a little while to educate the market about that. So I wouldn't expect any dramatic results right out the gate. But it's working, as I mentioned before, and I think it's really attractive. Whether that ends up being the final offer or the way that we position it, I don't know, but we're trying to educate the marketplace. And I think we have all the assets, and I think it's going to be very successful.

So it's from Brett Feldman from Goldman Sachs.

And thanks for giving us the color in terms of the expectation you have in terms of the investment you're making now and how that's going to translate into lower capital intensity over time. I know the question we're going to get tomorrow, which is, well, at what point in this investment cycle, does Charter expect that it's going to start being more evident in faster subscriber growth. And I'm not so much looking for a date, but as you think about the expanding breadth of the footprint, the expanding capabilities of your network, where do you think you would need to be to be able to say we are seeing this not just in better overall cost and capital intensity but genuinely better subscriber trends.

This year has been a lighter year because of all the reasons that we've talked about on our earnings call, so I'm not going to rehash that. And so you have a little bit of a challenge going into next year as it relates to the amount of growth coming from net adds that are underneath your belt. Our goal is certainly to have higher, significantly higher Internet net adds coming as a result of the product offering, coming as a result of the line extensions that we've already made the investment this year as well as all the competitive factors that you can think about that we've talked about as well. So our goal and our expectation is to increase Internet net adds already starting next year. So I think you'll start to see the strategy play out relatively quickly. That doesn't mean that we're not going to have challenges along the way. We had a political advertising in the year this year. We had Internet momentum from last year, pulling into this year. We'll have less of that going into next year. We have really targeted wage investments designed to drive tenure and progression inside of our workforce that's playing in, that will ultimately have a pretty significant return. We'll have good EBITDA and we'll have hopefully better Internet net additions. And I think you'll be able to see the fruits of what we're doing both through subscriber acquisitions and the pros and cons on the financials, as we've talked about already starting in next year.

So that's from Kutgun Maral from RBC Capital Markets.

I was hoping to dig into your network evolution a bit more, including the cost profile that you outlined. So first, are there any costs to upgrade your network that are not included in that $100 cost per home target that we should contemplate? I only ask because it is so much lower than many expected. So the natural question is, is it apples-to-apples with some of the figures provided by your peers? And second, you provided a lot of fantastic detail for the next few years. So I don't want to come across as ingrateful for that. But how do -- as we think about Charter's longer-term free cash flow per share potential, can you help us think about the puts and takes for core broadband network costs or CapEx beyond 2025? You moved beyond the $5.5 billion you talked about. There are sustainable benefits around declining network augmentation and maintenance CapEx, lower transaction costs, lower replacement costs. So I know you'll always invest in the business, but how do we think about the drop off after 2025 or any puts and takes you could share would be helpful.

Rich, do you want to first one.

Network evolution -- I'll repeat myself just a little bit, just so you understand what's in and Chris mentioned this as well. I mean our network evolution includes the full design and walk out of our entire network, 800,000 miles across 55 million passing. So that's all in, in our cost structure here. All of the replacements of the modules for our nodes. So within a node, the replacement cost that's associated with the Remote PHY Device, the RPD, the amplifier, the amplifiers that need to be upgraded, whether it's to 1.2 gigahertz or to 1.8 gigahertz, that's all in. All of the work that's done in the hub, like the virtual CMTS, which I mentioned in my slides, all of that work has included, the labor to do all of that work is included in our number. The one thing that I think you should know is CPE. So to the extent that a customer were to have a new D4.0 modem, that would be part of our normal CPE schedule. I don't -- my expectation is it wouldn't be greater year-over-year than it is today, but that's not in the $100 of the cost process. Now as I mentioned, our intention is to have the cost of that D4.0 CPE, be the exact same cost as a D3.1 CPE, which would be part of our traditional CPE schedules. So that would be the one component that comes to mind that's not the $100. But otherwise, you should really view it as soup to nuts.

If you really -- if we need or wanted to utilize that 1.8 gigahertz and move to the 10x1, we replace millions of taps. That question will come up as well. We replace millions of taps every year. And so you could go node by node and convert the taps to the vast majority of which will be with a face plate. So that's kind of business as usual for us as well. But other than that, I think you're right, I can't -- CPE and taps that we'll do as part of a regular program later down the road.

And just to be clear, the success-based fiber as well to the extent that -- there's no expectation that we would deploy sort of actual fiber drops out of this. That's really just optionality. So it's only the upgrade of the existing network that's included in the cost structure.

Yes. I try to make that very clear in the prepared remarks that the target cost of $100 for households passed was really for steps 1 through 3 and to Jessica's point that did not include the fiber on demand, that would be certainly incremental.

The fiber on demand, I'm not sure how useful ultimately, that will be, you're talking 25, 50, 100 gig speeds symmetrical, so you can kind of think of that as the equivalent of an enterprise customer where you get paid a very -- they have a different usage profile, you get paid a different amount. But it does give you marketing claims in the marketplace to the extent you need it. You'd be able to do it fairly ubiquitously.

And it is success based.

That's from Sebastiano Petti from JPMorgan.

I thought it was interesting, you talked about growing share within the existing footprint. Just trying to understand the puts and takes there. How does that happen against the backdrop of an expanding fiber competition? And to that point, what are you seeing in terms of price competition from the fiber guys of late, any more or less aggressive over the course of '23?

So the growing share comes about of everything that we've talked about in this presentation. So it's network evolution, and it's convergence. So think about the ability to go 2 by 1, then 5 by 1 and then have 10 gigabit speeds, marketing claims even further inside of the footprint, and in addition to that, the convergence that I talked about were really none of our competitors can replicate in an easy way, the type of product or the type of savings that we can generate for those customers. All of that's fairly unique, and you marry that up with a very different service commitment that we provide inside of our footprint relative to our competitors. I think all that's fairly compelling. In terms of price competition, I haven't seen any major shifts in the marketplace from what we talked about on the last quarter. Market volume continues to be low. In fact, our churn is -- I try to avoid getting into an earnings call here because we're going to do that in plenty of due time. But market activity continues to be low, but Spectrum One is in the marketplace and it's doing well. So there are some puts and takes. But from a price competition standpoint, no dramatic changes.

And if I could just -- just in terms of wireless spend, it doesn't really seem as though just any kind of color on 2023 it seems as though there will be no substantial deployment of CBRS really. Anything we should be thinking about in terms of the incremental spend related to the deployment of small cells, '23 and beyond.

I can spend a little bit of time just to reiterate a few points. We're in a real production grade commercial trial right now in one of our largest DMAs. And I think it's important to note that we've fully outfitted that market ready for production. What I mean by that is we have our 5G stand-alone core that's in place, our mobile back office, our CBRS RAN is in place. And we're really trying to ensure that we have a seamless handoff between our network and the MVNO partner network as well, leveraging DSDS or dual SIM, dual subscription. So we're working through that -- those use cases right now. And right now, the trial is going really, really well. We also want to make sure that we get enough offload to offset the capital cost that's associated with building out more markets, which we do intend to do, but we want to be really disciplined and be NPV positive with the markets that we roll out. We also want to match that offload with device capabilities. So device capabilities that, in short, they have, the DSDS capability as well as the ability to have CBRS spectrum on them. And that will continue to grow over time. So with that, we're really going to do our full evaluation in '23. And based upon that, we'll be very disciplined on an NPV positive way in '24 and beyond.

That will be from Kannan Venkateshwar from Barclays.

Just a couple from me. The first is on the network side of it. I just wanted to make sure I understood the steps laid out probably. So in terms of step 1 and 2, it sounds like about 50% of the plant will be 1.2 gigahertz capable and the balance, 50% will be 1.8. I wanted to understand if the 1.2 is a steady state or maybe I just misheard, would you be upgrading the entire plant to 1.8 and DOCSIS 4 capable? Or will there be some differences in footprints?

I can walk through -- why don't I answer that one first, and then we can go to the next one. That's okay. I'm sorry, this is -- I'm not used to the earnings call or investor situation. So let me -- before when Craig said, it's a technical question, I thought it was a question for me, but certainly, it wasn't, which is okay. So as it relates to the steps, step one, does increase the spectrum to 1.2 gigahertz, and that's 15% approximately of the footprint. And step 2 is 50%. So the combination of those 2 is 65% at 1.2 gigahertz and the remaining 35% is at 1.8. I think it's important as you think about going back to step 1 and step 2. We don't think that that's going to be necessary in any time horizon that's within our particular model. And the reason being is we're starting from a place today, which we shouldn't forget, which is we are the nation's fastest Internet right now. We're going to do these upgrades and we're going to increase our upstream speed by 30x the maximum speed that we have available today. As Chris mentioned, we'll have gigabit symmetrical and multi-gig in the step 1 markets and the step 2 markets will have 5 gigabits per second. So we think that's very relevant to compete. However, through the normal course of the replacement cycle. So if we're replacing an amplifier or a node, we will replace that in step 1 and step 2 markets with 1.8 capable gear. We'll also, as I mentioned in the prepared remarks, we will deploy DOCSIS 4.0 modems as part of this process as well throughout our footprint at a similar price to what we purchased them at today. And so what that would mean is if we had to go back to these other markets, we think it would be done relatively quickly. It would also be done at a fraction of the cost because you also have to recognize in step 1 and step 2. We're also doing all of the walk out and design and survey work, which Chris mentioned, that's part of the $100 per homes passed costs. You would not have to do that if you went back. So again, just to sum it up, we don't intend to go back to step 1 or 2 markets, but if we did, it would be at a fraction of $100 per household pass cost.

Got it. So just to make sure I understand this correctly. It's -- I guess, 35% of the market is going to be DOCSIS 4 capable and the rest will have essentially high splits to manage capacity. And that's the way we should think about this.

Yes. I think it's an interesting comment. The -- we'll be able to leverage DOCSIS 4.0 modems throughout our footprint. So I think that's important. The DOCSIS 4.0 RPD or the Remote PHY Device would be deployed in the 35% in step 3 markets at 1.8 gigahertz spectrum.

Got it. Sounds good. And then just as a follow-up, when we think about capital returns, Jessica, the capital intensity for the next couple of years, obviously, will be high, not capital intensity, but the dollar amount is going to be high and looks like it's going to ramp into '24 and '25 as well. So when we think about free cash flow growth and in that context, the buyback volumes over the next couple of years, is it fair to assume that given the 4.5x leverage cap there should be some moderation in capital returns that you ramp up investments?

Yes. When we think about capital allocation strategy, it's the same way that we've always kind of thought about it, that we would go out and get organic investments first and then accretive M&A and then that the residual cash flow that we have would go to share buybacks. The good news is that we do have a lot of cash flow, which means that even with ramping up the organic investments that we have, I think that there's still substantial sort of left over cash flow as well as EBITDA growth that will drive additional share buybacks, assuming that we don't find other deploy -- other uses of capital that would come higher in our hierarchy. But you're right. I mean the reality is the capital spending dollar for dollar offsets free cash flow. And so we will have some impacts of the investments that we're making, but we think that it's the right thing to do in terms of investing in the business, investing in the long-term value of the shares, which then makes those share buybacks that we do today more valuable. And so we're excited to go out and spend the money, which we think will bring value to shareholders in the long term, along with our buyback plan, which we'll continue to do.

You just said it, but it's really a virtuous cycle in terms of how our operating plan works, how our go-to-market plan works, how our service infrastructure and commitment there, our investment plans into the network and into our service and then tying that to our balance sheet and then our capital returns. And it's all a virtuous circle. If you do all those things well, you end up having each one of those components continues to get better and better. And that includes the accretion of the buybacks along the way. If you just if you're just addicted to capital returns, you fail to take advantage of some of these unique opportunities to invest in the business. The buyback may be okay, but it won't be great. And here, we have the opportunity to have the output be very, very good. So with that, I think I'll close those out and say thank you very much for doing this on a Tuesday evening. We appreciate it. I'm pretty confident that we're going to look back several years down the road and take a look at this as a seminal moment in the industry an opportunity to refocus the investment, drive growth and really do good in our local communities and generate that next leg of growth, where if you remember where I started the presentation in terms of how the industry has evolved over time and time again, really since the 1950s, and I'm looking forward to doing that together. So thank you very much.

And that concludes today's event. As a reminder, a replay of the event will be available shortly at ir.charter.com. Thanks all of you for joining us, and thanks to our speakers and happy holidays to everyone.

Thank you very much.

Take care.