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A Slowdown in Cellular Expansion?

Mike Dano had a series of articles recently in LightReading talking about how the big cellular carriers plan to significantly cut back on 5G spending in 2023. Dano cited one analyst, Tom Nolle of CIMI that said that the cellular carriers are having a hard time making the business case for expanding 5G. The cellular companies are not seeing an uptick in new incremental revenues as a result of 5G investments. He says the cellular companies are clueless and don’t see a path to increase revenues next year.

This feeling of falling 5G expectations was bolstered by a somber outlook from Crown Castle. The biggest owner of cell sites said that it doesn’t see the big cellular carriers spending heavily in 2023 for cell towers or small cell sites.

As might be expected in complicated economic times, not all analysts agree. Dano cites analysts from Raymond James that say that 2023 will mark the year when the cellular companies start spending at a slow steady pace over multiple years to put in the promised 5G expansions.

As with most topics, I ask what this might mean for rural broadband. T-Mobile and Verizon have made a big recent splash in the industry with the rollout of the FWA fixed cellular broadband product. In the second quarter of 2022, Verizon and T-Mobile added 816,000 FWA customers. For the quarter, the largest seven cable companies collectively lost 60,000 customers. The six largest telephone companies lost 88,000 customers. Before the first quarter of 2022, we heard almost nothing about FWA.

I have to wonder what the news of a cell site expansion means for rural broadband. For customers lucky enough to be able to buy it, the FWA product has been a huge improvement over other kinds of rural broadband. I talked to one farmer who lived adjacent to a cell site and was seeing speeds of 200 Mbps. For this farmer, the faster FWA speeds meant being able to finally utilize his smart farming applications. But his neighbors, only two miles away, weren’t seeing speeds over 50 Mbps.

I’ve always wondered why a cellular company would make the FWA upgrade or even the 5G upgrade at a rural cell site. For a cell site located in a farming area there probably aren’t more than a handful of potential customers within a few miles of a tower. It doesn’t seem like an investment that is ever going to see a return. Voice is a little different because a voice signal can carry many more miles from an upgraded cell site – but most upgrades are leaving voice traffic on 4G.

Both T-Mobile and Verizon said that they were seeing many of the new FWA customers in cities and suburbs and not from rural areas. This makes sense. First, a lot more people are candidates for the product in more densely populated areas. The FWA product is also priced attractively, and I’ve been thinking of it more as a DSL replacement than a direct competitor to cable broadband. The FWA speeds are not as fast as cable broadband, and the signal strength will vary as it does with any wireless product.  Just look at how the cellular bars vary at your house and ask if you want that kind of variance in a home broadband connection. If your only existing choice is lousy rural broadband, you’ll gladly take it as an upgrade. But it seems like a harder sell to folks who have faster alternatives.

I can’t do any more than speculate because even the analysts don’t agree on the trajectory of the cellular industry, although the poor outlook from Crown Castle seems fairly persuasive. We are now sitting at an odd economic time where inflation and interest rates affect everybody, including the big companies. I suspect we’re going to get mixed signals about the near-term future from others, and not just the cellular companies. 2023 is going to be an interesting year to follow the big ISPs.

2 replies on “A Slowdown in Cellular Expansion?”

Much of the anticipated slowdown is due to AT&T and Verizon winding down their C-band deployments, collectively, $10 billion a year for the past two years. We’ve built that decline into our wireless capex forecast. Note that activity on the rest of the network and 5G build out in both macrocells and small cells will continue with what Verizon calls ‘business as usual’ or BAU capex. BAU capex levels for the next several years still will be at elevated levels, certainly above what the industry spent through the 4G years.

I’ve been saying for a while, 5g makes almost no sense. There are no set of high speed mobile applications that need it. Pivot to unreliable, last mile, kinda-high-speed wireless delivery makes no sense. Pivot to cellular-on-factory-floor / IIOT makes no sense.

5g fills a much needed gap in telco marketing plans. Broadly, it is an industry that has saturated the mobile phone subscription plan market; mobile was the last big telco innovation that wasn’t just about speed upgrades and that was… in the 80s? (I don’t count smartphones. At the time the computer industry was inventing smartphones, telcos were still talking about “value added services” like downloadable ringtones.)

This is all New Coke stuff.

Rural 5g makes even less sense. “More expensive and for fewer people when there already was no business case for upgrades in dense areas?”

The only way rural internet happens is if there’s massive government support. The only way better non-rural internet happens is through muni programs or massive antitrust breakups.

We should just nationalize it and get it over with before the telcos realize, for business reasons, they need to take the internet infrastructure the way of pay phones.

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