The traditional cable companies lost over 6.25 million cable subscribers in 2022, up from 5.6 million in 2021. That means that almost one in every twenty homes in the country dropped traditional cable TV during the last year.
These numbers come from Leichtman Research Group, which compiles most of these numbers from the statistics provided to stockholders, except for Cox, which is privately held and estimated. Leichtman says this group of companies represents 96% of all traditional U.S. cable customers.
% 4Q
Annual
4Q 2022
4Q Change
Change
Change
Comcast
16,142,000
(440,000)
-2.7%
(2,034,000)
Charter
15,147,000
(144,000)
-0.9%
(686,000)
DirecTV
13,100,000
(400,000)
-3.0%
(1,500,000)
Dish TV
7,416,000
(191,000)
-2.5%
(805,000)
Verizon
3,301,000
(82,000)
-2.4%
(343,000)
Cox
3,050,000
(90,000)
-2.9%
(340,000)
Altice
2,439,000
(52,800)
-2.1%
(293,300)
Mediacom
510,000
(15,000)
-2.9%
(62,000)
Breezeline
309,627
(13,411)
-4.2%
(37,102)
Frontier
306,000
(16,000)
-5.0%
(74,000)
Cable ONE
181,500
(20,500)
-10.1%
(79,500)
Total
61,902,127
(1,464,711)
-2.3%
(6,253,902)
Hulu Live
4,500,000
100,000
2.3%
200,000
Sling TV
2,334,000
(77,000)
-3.2%
(152,000)
FuboTV
1,445,000
214,000
17.4%
323,000
Total Cable
37,779,127
(775,711)
-2.0%
(3,531,902)
Total Other
24,123,000
(689,000)
-2.8%
(2,722,000)
Total vMvPD
8,279,000
237,000
2.9%
371,000
The losses are fairly even across the industry, with most cable providers seeing around a 10% drop in cable customers during the year. The exceptions were Charter, which lost only 4.3%, Frontier that lost almost 20%, and Cable One (Sparklight) that lost over 30% of customers. If these trends continue for another year, Charter will pass Comcast and become the largest traditional cable provider.
The magnitude of the losses are staggering, with Comcast losing over 2 million cable customers during the year and DirecTV losing 1.5 million.
To put the loss of cable customers into context, these same large companies had over 85 million cable customers at the end of 2018 and are now down to under 62 million customers.
In the fourth quarter, the three online cable alternatives that LRG tracks gained 371,000 new customers for the year, A few major online alternatives, like YouTube TV aren’t on the list since they don’t announce customer counts.
I’ve lately been asked by several local politicians why they should pursue getting grant funding for their county since Starlink satellite and FWA cellular broadband seem like good broadband alternatives that are already here today. It’s a reasonable question to ask since they have likely heard from rural households that are happy with both technologies. The question usually includes some degree of wishful thinking because the officials want to be able to tell constituents that good broadband is already available and that the broadband gap has been solved.
I hate to tell them that these technologies are not a good permanent solution. At the same time, I stress that they should be promoting these technologies to make sure that folks know there are some better alternatives available today than other extremely slow broadband options. But I don’t think either of these technologies is a long-term broadband solution.
FWA cellular broadband is home broadband that is delivered by cellular companies from cellular towers. It uses the same technology as the broadband delivered to cellphones, with the only real difference being that there is an in-home receiver that can be used for home broadband.
The primary problem with thinking of FWA cellular as a permanent solution is the reach of the technology. Somebody living right under a tower might be able to get 200 Mbps broadband today, and for somebody who has been suffering with rural DSL or cellular hotspots, this is an amazing upgrade. But the strong cellular service doesn’t carry far from a given tower. Speeds drop rapidly with the distance between a customer and the cell tower. A customer living a mile away from a tower might see maximum speeds of 100 Mbps, but after that, speeds drop precipitously until the product looks like other current slow broadband technologies.
The distance issue wouldn’t be a big problem if rural counties were peppered with cell towers – but most rural counties don’t have nearly enough towers to support this technology. In fact, in most rural counties I’ve worked in, a lot of the county doesn’t have good enough cellular coverage for voice calls. There doesn’t seem to be any mad rush to build new towers to support FWA – and I wouldn’t expect a cellular carrier to want to be on a tower that might only see a few dozen potential customers.
A final issue with FWA is that cellular carriers give priority to cell phones over home broadband. If cellphone traffic gets heavy, then the carriers will throttle the FWA speeds. This is probably less of an issue in a rural area than in a city, but it means that the broadband is not fully reliable.
Satellite broadband is also not a great long-term solution for several reasons. Starlink has already said that it will only serve some fixed number of customers in a given geographic area – a number it won’t disclose. That makes sense to any network engineer because the bandwidth from a single satellite overhead is shared by all homes using the service. This means that if too many households try to use a satellite at the same time that broadband speeds will bog down. Starlink is never going to be willing to serve all of the rural customers in a county – when it reaches it’s target customers it won’t sell more connections.
The other issue with Satellite broadband is that customers need a great view of the sky. Homes located amidst trees or near hills or mountains may not be able to get the service at all or get a slowed connection.
The final issue with both technologies is the speed being delivered. FWA is most typically today delivering only 50-100 Mbps to most households that are within range of a tower. The speed tests for Starlink show a similar range between 50-150 Mbps. These are amazing speeds for a home with no broadband alternatives. But these speeds are already at the low end of acceptable broadband today – particularly since these technologies have a much higher latency than fiber.
In twenty years, we’ve grown from DSL and cable modems that delivered 1 Mbps to fiber technology today that can deliver multiple gigabit speeds. There are those that claim that the fast speeds are just marketing gimmicks, but I’m hearing from more households over time that need the faster speeds. The reality of the marketplaces is that technologies will spring up to take advantage of faster broadband. We’re already seeing 8K TVs today, and telepresence should be here in the near future. A rural customer receiving 50-100 Mbps will be locked out of future faster applications.
Any county that decides not to pursue the grants to get faster broadband will regret the decision in a decade when neighboring counties have blazingly fast broadband and are the places where folks will want to live. We’ve learned that fast home broadband now equates to economic development due to the work-at-home phenomenon. I worked with a county recently where 30% of the homes include at least one person working full time from home. That means higher incomes which translates into local prosperity.
I really like both of these technologies, and I recommend them to rural folks all of the time. But these are not the broadband solution that a county needs for long-term prosperity.
I’ve written several blogs that make the argument that we should only award broadband grants based on future-looking broadband demand. I think it is bad policy to provide federal grant funding for any technology that delivers speeds that are already slower than the speeds already available to most broadband customers in the country.
The current BEAD grants currently use a definition of 100/20 Mbps to define who households that aren’t considered to have broadband today. But inexplicably, the BEAD grants then allow grant winners to build technologies that deliver that same 100/20 Mbps speeds. The policymakers who designed the grants would allow federal funding to go to a new network that, by definition, sits at the nexus between served and unserved today. That is a bad policy for so many reasons that I don’t even know where to begin lambasting it.
One way to demonstrate the shortsightedness of that decision is a history lesson. Almost everybody in the industry tosses out a statistic that a fiber network built today should be good for at least thirty years. I think that numbers is incredibly low and that modern fiber ought to easily last for twice that time. But for the sake of argument, let’s accept a thirty-year life of fiber.
Just over twenty years ago, I lived inside the D.C. Beltway, and I was able to buy 1 Mbps DSL from Verizon or from a Comcast cable modem. I remember a lot of discussion at the time that there wouldn’t be a need for upgrades in broadband speeds for a while. The 1 Mbps speed from the telco and cable company was an 18-times increase in speed over dial-up, and that seemed to provide a future-proof cushion against homes needing more broadband. That conclusion was quickly shattered when AOL and other online content providers took advantage of the faster broadband speeds to flood the Internet with picture files that used all of the speed. It took only a few years for 1 Mbps per second to feel slow.
By 2004, I changed to a 6 Mbps download offering from Comcast – they never mentioned the upload speed. This was a great upgrade over the 1 Mbps DSL. Verizon made a huge leap forward in 2004 and introduced Verizon FiOS on fiber. That product didn’t make it to my neighborhood until 2006, at which time I bought a 30 Mbps symmetrical connection on fiber. In 2006 I was buying broadband that was thirty times faster than my DSL from 2000. Over time, the two ISPs got into a speed battle. Comcast had numerous upgrades that increased speeds to 12 Mbps, then 30 Mbps, 60 Mbps, 100 Mbps, 200 Mbps, and most recently 1.2 Gbps. Verizon always stayed a little ahead of cable download speeds and continued to offer much faster upload speeds.
The explosion of broadband demand after the introduction of new technology should be a lesson for us. An 18-time speed increase from dial-up to DSL seemed like a huge technology leap, but public demand for faster broadband quickly swamped that technology upgrade, and 1 Mbps DSL felt obsolete almost as soon as it was deployed. It seems that every time there has been a technology upgrade that the public found a way to use the greater capacity.
In 2010, Google rocked the Internet world by announcing gigabit speeds. That was a 33-time increase over the 30 Mbps download speeds offered at the time by the cable companies. The cable companies and telcos said at the time that nobody needed speeds that fast and that it was a marketing gimmick (but they all went furiously to work to match the faster fiber speeds).
I know homes and businesses today that are using most of the gigabit capacity. That is still a relatively small percentage of homes, but the number is growing. Over twenty years, the broadband use by the average home has skyrocketed, and the average U.S. home now uses almost 600 gigabytes of broadband per month – a number that would have been unthinkable in the early 2000s.
I look at this history, and I marvel that anybody would think that it’s wise to use federal funds to build a 100/20 Mbps network today. Already today, something like 80% of homes in the country can buy a gigabit broadband product. The latest OpenVault report says that over a quarter of homes are already subscribing to gigabit speeds. Why would we contemplate using federal grants to build a network with a tenth of the download capacity that is already available to most American homes today?
The answer is obvious. Choosing the technologies that are eligible for grant funding is a political decision, not a technical or economic one. There are vocal constituencies that want some of the federal grant money, and they have obviously convinced the folks who wrote the grant rules that they should have that chance. The biggest constituency lobbying for 100/20 Mbps was the cable companies, which feared that grants could be used to compete against their slow upload speeds. But just as cable companies responded to Verizon FiOS and Google Fiber, the cable companies are now planning for a huge leap upward in upload speeds. WISPs and Starlink also lobbied for the 100/20 Mbps grant threshold, although most WISPs seeking grant funding are now also claiming much faster speed capabilities.
If we learn anything from looking back twenty years, it’s that broadband demand will continue to grow, and that homes in twenty years will use an immensely greater amount of broadband than today. I can only groan and moan that the federal rules allow grants to be awarded to technologies that can deliver only 100/20 Mbps. But I hope that state Broadband Grant offices will ignore that measly, obsolete, politically-absurd option and only award grant funding to networks that might still be serving folks in twenty years.
I’ve been working with a lot of counties and cities that are providing funding to ISPs to expand last-mile broadband. Some of them think of the arrangement as a public-private partnership, while others think of it as making local broadband grants. Almost universally, the hardest question I get asked is how to know if they can trust an ISP to fulfill its promises. They want to know who is going to be a good steward of their money. No local politician wants to provide money to an ISP, and a year later hear the public complaining about that choice.
I rarely have a specific response to the question, but I provide a way for them to think about it. I’ve been suggesting a series of question that makes them dig deeper into the real nature of a given ISP and why they want the local funding.
Does the ISP do a good job today in other markets? Understanding this requires real due diligence, but it’s a question that can be answered. I have yet to see any ISP claim anything other than that they have stellar customer service – and we know that is not true for a lot of ISPs. One way to check on an ISP is to contact local officials in some of the communities where the ISP serves today.
Will the ISP you partner with today still be around in a decade? I never asked this question in the past, but it feels relevant today. A lot of experts foresee a huge roll-up of fiber networks, and an ISP you partner with today might not be the same ISP that will be serving your community a decade from now. There is a lot of venture capital money in the market today, and at least some VCs likely have the philosophy of building a network and dumping it in ten years. Unfortunately, this question doesn’t only apply to VC-backed firms, and there will kikely also be a roll-up of family-owned and sole proprietor ISPs.
Is the ISP trying to grow too quickly? I’ve lately seen ISPs seeking local grant funding that brag about how they already have deals in queue to build hundreds of thousands of other passings. The hardest thing for any ISP to do is to grow quickly – failure to master the complexities of rapid growth has been the fatal flaw for a lot of ISP start-ups over the years. It’s a fair question to ask if the ISP you are talking to is overreaching.
Where does the money come from? I’m seeing ISPs that have been in the business for many years suddenly talking about being able to fund huge expansion. When you partner with somebody like this, are you really partnering with the ISP with the known name or with a venture capitalist hidden in the background?
Are you being offered a too-good deal? I’ve seen several ISPs offering partnerships to cities where there will be a guaranteed profit share paid to the City. Is the ISP dangling money to a community to cover for other weaknesses? This takes me back to the advice I’ve heard for my whole life – if something sounds too good to be true, it probably has an underlying flaw.
Can I trust an ISP who has done a lousy job for many years but now swears they are different? I’m obviously talking about the big telcos. These companies abandoned rural DSL networks and customers. Suddenly, they want localities to believe that they will be a different company with a fiber network – because of the new technology. But new technology doesn’t change an ISPs underlying philosophy. Will these big telcos keep enough staff to make timely repairs, and will they do the maintenance to keep the fiber network operating in the future?
One of the hardest questions I’ve been asked is how to evaluate a new ISP taking over a terrible network. In recent years the three most prominent ISPs in this category are Consolidated, Ziply, and now Brightspeed. I don’t have a clue how to judge the intentions of a new company. My best advice is to be at least a little wary – companies that have purchased telephone copper networks in the past struggled badly for many years when the copper networks act like an anchor holding them down.
Sometimes the offers of partnerships have an easy and obvious choice. For example, I know counties that have partnered with electric or telephone cooperatives. They trust that these businesses will still be local and operating for many decades to come. After that, picking a partner is a lot harder.
Craig Moffett, of MoffettNathanson, was recently quoted in FierceTelecom asking if the broadband industry is reaching maturity. Other than in rural areas, where a lot of homes are still hungry for better broadband, the broadband penetration rate in cities is approaching 90%. It’s a fair question to ask if there is room for much more growth in the industry.
This is a question that has bounced around for the last five years. But there was still significant growth in broadband over the last few years. In 2019, national broadband subscribers grew by 2.6%. That leaped to 4.5% in the 2020 pandemic year. In 2021, broadband growth slowed to 2.8% but rebounded to 3.3% in 2022.
The 2022 growth rate is likely inflated by rural broadband growth, as practically all the overall industry growth for the year came from cellular FWA broadband provided by T-Mobile and Verizon. We can’t know for sure since those companies haven’t reported on the mix of rural and urban FWA customers.
What would a mature broadband market look like? It would first mean that annual subscriber growth would likely not be greater than the growth of total households. In recent years that has been in the 1% annual range and would mean perhaps 1.2 million new broadband subscribers each year nationally. This is a drastic change for the broadband industry. Consider Comcast and Charter, the two largest ISPs. These two companies represent almost 55% of all broadband subscribers. In 2019 the two companies grew by over 5%. In 2020 that leaped to over 7%. Growth for the two fell to 4% in 2021, but in 2022 was only around 1%. The stock price for these companies for the last decade has been based upon an ever-growing customer base – and annual rate increases.
We already have an idea of what a mature telecom market looks like by looking at the big cellular companies. Practically everybody has a cellphone, and the industry now expends huge marketing dollars in trying to pry market share from competitors.
There is one way that broadband differs from cellular in that cell service in much of the country is a commodity, meaning there is not much real difference between products or performance of the cellular carriers. This isn’t true everywhere, and in some places, one of the cellular companies has a superior network. But in most urban markets where most folks live, there isn’t a lot of difference between cell companies.
The broadband market is different because, in many markets, there is only one fast ISP – usually the cable company. Such markets are effectively broadband monopolies, and the monopoly provider doesn’t have to worry about a competitor taking market penetration. That means that if overall growth permanently slows that all of the wrestling for market share is going to happen in the markets that have both a cable company and a fiber competitor.
But there is another possibility. In markets where Verizon FiOS has competed against a cable company for many years, the two sides have reached a duopoly equilibrium – meaning that neither Verizon nor the cable company won the competition battle. We saw Verizon and the cable companies dukeing it out heavily in the early years of FiOS, but the marketing in these markets today has none of the desperation or vehemence of cellular competition. In a duopoly market, the two big players are happy to maintain a relatively steady market share – and the equilibrium is fine with both competitors as long as it doesn’t get too badly skewed.
If overall broadband growth slows, we’ll see different responses depending on the market. Markets without a major fiber provider will continue to be cable monopolies. This is where prices will go up every year. Markets that settle into a steady duopoly will compete with low-key advertised specials to lure folks back and forth between the two ISPs. The biggest marketing battles and the real competition will come from markets where a cable company is competing against an independent fiber provider other than the big telcos. When broadband growth inevitably slows, the industry will naturally change. But I don’t expect to see a clear-cut national response. A mature broadband market will differ according to the local mix of competitors.
One of the biggest uses of bandwidth continues to be streaming video from the many online vendors like Netflix, Disney, Hulu, and many others. Final 2022 earnings reports show that this is an industry segment in crisis.
Warner Brothers, which owns HBO and Discovery reported losses for online video of as much as $2.3 billion in 2022.
Paramount reported losses of $1.8 billion for its online platform.
Comcast and its NBC Universal subsidiary that operates Peacock reported losses in 2022 of $2.5 billion.
Disney reported a loss of $4.1 billion for its Disney Plus platform, which is hard to fathom with a platform that has 162 million subscribers.
Altogether, the losses for just these four video platforms were almost $11 billion in 2022. There are other big platforms like Apple, Google (YouTube), and Amazon that don’t specifically report on the performance of the video streaming segment. There is one exception to the trend towards losses as Netflix, with 230 million global customers, reported profits of over $6.5 billion in 2022.
The companies with the losses have already reported taking measures to trim the losses. That involves some staff cuts, but mostly it’s going to mean cutting back on the budget for developing new content.
This raises some interesting questions about how the performance of the video streaming industry segment will affect broadband. There has been a significant proliferation of video platforms. Ten years ago, you could count the video platforms on one hand. The earliest platforms like Netflix and Amazon spent almost all of their content budget buying existing TV shows and movies.
But in 2013, Netflix broke the mold with the introduction of House of Cards, followed by a ton of original content. Amazon followed suit in 2015 with the introduction of The Man in the High Castle and Mr. Robot, and now with a wide array of original programming. It now seems that every platform has original content, which seems to be the primary strategy for attracting new subscribers.
It’s hard to think that the industry can sustain these kinds of losses for a long time. Netflix purposefully lost money as it was building its platform, and the company knew it wouldn’t be profitable until it eventually got a lot of subscribers. But with the proliferation of platforms, the idea of any platform suffering losses to get to the top seems like a difficult model to repeat.
One of the ways for the industry to become profitable is to raise rates, but with so much competition, that doesn’t look like an easy solution. Anyone who has tracked subscribers at platforms like Hulu or SlingTV can see how customer counts shrink and grow quarter to quarter. Very few of these platforms have developed a stable, loyal customer base, and the online platforms have made it easy for subscribers to come and go at will – their big differentiator from traditional cable.
The chances are that poor performance, or even the disappearance of a few platforms won’t make much of a difference in the industry overall. If a few of these platforms fail, the subscribers will watch video elsewhere. Probably the only thing that would cause cord-cutting to slow might be if the online platforms raise rates to the point where people decide to keep traditional cable.
Probably the best news for online platforms is that traditional cable companies keep raising rates, largely in response to the ever-climbing cost of traditional TV programming. The programmers seem determined to raise rates significantly every year, even in the face of losing customers. For many traditional programmers, the loss of American subscribers is being offset by a growing audience around the world.
The Virginia House of Delegates recently took up the issue of regulating the fees and the time it takes to get a permit to cross railroad tracks with fiber or other wire infrastructure. This seems to have originated from complaints from some of the winners of the $722 million in state broadband grants that have recently been awarded. I also saw that a similar bill is being debated in Arizona.
There are a lot of complaints made about the regulatory hoops that must be navigated to get onto poles. But we rarely hear about the problems encountered when trying to cross railroad tracks, bridges, interstate highway underpasses, or parklands. Each of these situations can add both time and cost to a fiber construction project.
There are lot more miles of railroads than a lot of people assume. In a rural area, the first challenge is often finding out who owns a given set of tracks. The large railroads own the major rail paths, but there are a ton of different owners of the rights-of-ways for spurs off the mainline. Those spurs were sometimes built by a factory to provide a path to ship products. Some spurs are owned by local governments. A lot of spurs are owned by small railroad companies – a few of which have gobbled up the rights-of ways from defunct railroads.
One of the issues with railroad crossings are the fees. It’s not hard to be hit with fees of $3,000 to $5,000 for a permit for a single rail crossing. A rural fiber route might cross several sets of tracks, and roads will often cross back over the same rail line multiple times. There are also horror stories of railroads that want much higher fees. It’s routine that the owners of defunct tracks, some that haven’t been used for decades, still expect payments for a permit to cross the tracks. I’ve saw permitting cost of $10,000 for a railroad line where locals can’t remember seeing a train for at least twenty years.
The issue isn’t only the fees. Because the process of getting a permit can drag on for a long time. It’s not unusual to see a permit take six months, and I’ve heard stories of permits taking well over a year. I suspect it was the time required in getting permission to cross the tracks that got the attention of the Virginia legislature. States like Virginia have been striving to get fiber deployed quickly after awarding grants, and a slow railroad permit can stop a project dead in its tracks, so to speak.
The Virginia legislation would cap crossing permit fees at between $750 and $1,500 (Senate versus House versions). More importantly, the legislation would require railroads to respond to a permitting request in thirty days.
While this legislation doesn’t address other rights-of-way problems, there can be similar delays getting permits to cross bridges. The problem with crossing a bridge is that there usually is a delay until and engineer certifies that the bridge will not be harmed by adding a conduit along the side. I have to admit that it’s scary to think that relatively light conduit could endanger a bridge, but in almost all cases this a step that is perfunctory, but necessary to get the permit. However, I have worked with clients who have been denied a bridge crossing. The reasons given for the refusal have usually been aesthetic and not structural. But I know of a few cases where permits were denied for bridges that were scheduled to be upgraded – in one case, with the upgrade was scheduled five years in the future.
As hard as those situations are, the slowest permitting can occur when needing to cross parkland or other public lands. This issue with these permits is not the cost, but the long waits to get approval. And approval often comes with requirements that make it impossible to build. I recall one park permit that said that fiber couldn’t be buried – and this was to cross a park where there are no existing poles.
In recent Telecompetitor article, AT&T Chief Financial Officer Pascal Desroches was quoted as saying that fixed wireless is “not a great product and the customer ultimately is going to reject it.” By fixed wireless, Desroches was referring to the FWA product being offered by competitors Verizon and T-Mobile. The product takes advantage of excess capacity on cell towers to sell home broadband using the same spectrum used to serve cell phones. For now, the market is embracing the FWA product. In 2022, T-Mobile sold around 2 million connections on the product, while Verizon sold almost 1.2 million.
The new product has some clear advantages in two different markets. In rural areas that don’t have any good broadband connection, the FWA product is likely to be faster than what is available from competitors. I’ve talked to rural customers using the product who say speeds are between 50 and 100 Mbps, although I talked to one customer living near a tower who is getting 200 Mbps. In many of the counties I’ve worked in, these speeds are heads and tails above the existing DSL, cellular hot spots, or more traditional fixed wireless.
In more urban and suburban areas, the attraction is price. These markets have much faster broadband available from cable companies and sometimes by fiber providers. But the faster ISPs charge a lot more than the $60 price of FWA. I think this product makes a great replacement for DSL – it costs about the same but is significantly faster. But T-Mobile and Verizon are not providing any details on who is buying the FWA product. How much of the sales are rural versus urban?
There are noted downsides to the FWA product. The primary one I’ve heard from customers is that it’s not consistent and that speeds vary a lot. This is pretty understandable considering the complex nature of cellular networks, and anybody who watches the bars on their cellphones knows that speeds bounce up and down during the day.
FWA coverage is also limited by the location of cell sites since the FWA broadband doesn’t go far. In most rural counties, only a small portion of the geography is within two miles or so of a cell tower. Hopefully, the cellular carriers will be smart enough not to sell service to folks who are at the outer fringe of a coverage area.
I’m sure that Desroches is talking about the long-term legs of the FWA product. I think he is referencing the ever-increasing demand for broadband. OpenVault recently reported that the average U.S. household is now using 587 gigabytes of data each month, up from 270 gigabytes just four years ago. You don’t have to trend that growth very far into the future when it becomes reasonable to ask if cellular networks can meet that kind of demand. Cellular carriers are using excess capacity today to sell FWA. At what point in the future does the FWA demand exceed the cell phone demand at cell sites?
FWA is never going to more than an interesting footnote for cellular companies. Even if they sell to ten million FWA customers, that’s barely noticeable compared to the hundreds of millions of cell phone customers. I can’t picture any scenario where a cellular company will endanger its cellular business by trying to meet the demands of FWA. They’ll selectively cancel FWA service at overloaded cell sites before doing that.
Interestingly, AT&T will be offering some FWA service. Desroches characterizes AT&T view of FWA as a temporary product and will treat it accordingly.
I doubt that Desroches set out to be negative about his competitors. I have to imagine that AT&T is constantly being asked why it isn’t emulating the rapid deployment of FWA, and I would guess he was responding to one of these queries. But it is interesting to see his response because it sounds like an honest assessment of the FWA business case. It’s a new broadband product that fills some interesting market niches today. But it’s reasonable to ask if it be relevant a decade from now. I would tend to agree with Desroches that FWA will have a relatively short shelf life compared with faster broadband technologies.
OpenVault published its end of year 2022 Broadband Insights Report that shows that average broadband usage continues to grow.
The average household broadband usage has grown to an astounding 586.7 gigabytes per month. Comparing this to earlier years shows an ever-upward trend of broadband usage.
Usage
Growth
% Growth
2018
270.2 GB
2019
344.0 GB
74 GB
27%
2020
482.6 GB
139 GB
40%
2021
536.3 GB
54 GB
11%
2022
586.7 GB
50 GB
9%
The average usage numbers are probably the most interesting statistic published by OpenVault. It would have been hard at the end of 2018 to find anybody who would have confidently predicted that in only four years that households would routinely be using 217% more broadband every month. These statistics also show the extraordinary impact of how the pandemic impacted broadband usage. It’s easily understandable how usage skyrocketed in 2020 when everybody was at home. But perhaps more extraordinary is that usage didn’t drop off as life returned to normal – broadband usage has continued to climb.
What OpenVault calls power users continues to climb. 18.7% of homes used more than 1 terabyte per month at the end of 2022, including 3.4% of households that used more than 2 terabytes. That’s a lot of homes that are surpassing the gigabyte data caps imposed by some ISPs.
The trend of homes subscribing to faster speeds is also continuing. Much of this increase comes from ISPs that have upped the speed on existing broadband products – but it’s obvious in looking at the numbers that people are also electing to upgrade to faster broadband packages. An extraordinary 26% of homes are now subscribing to gigabit or faster broadband speeds.
Subscribers
4Q 2020
4Q 2021
4Q 2022
Under 50 Mbps
12.4%
9.4%
6.8%
50 – 99 Mbps
9.1%
7.6%
12.7%
100 – 199 Mbps
50.6%
36.9%
11.3%
200 – 499 Mbps
15.8%
28.5%
32.8%
500 – 999 Mbps
3.7%
5.5%
10.4%
1 Gbps+
8.5%
12.2%
26.0%
OpenVault also compared upload and download usage. The average home now uploads 35.3 gigabytes per month and downloads 551.4 gigabytes.
OpenVault says the average download speed achieved across the U.S. is 415 Mbps, and the average upload speed is 25 Mbps. While the FCC doesn’t seem to be in any hurry to change the definition of broadband, the reality of the marketplace would suggest that setting the definition of broadband at 100/20 Mbps would be significantly lower than what households are already achieving. Any definition of broadband ought to be at least a little forward looking, so I’m not sure why we aren’t considering that the definition of broadband ought to be something like 500/50 Mbps.
Incredibly, the upcoming $42.5 billion in BEAD grants would allow for the construction of technologies as slow as 100/20 Mbps. Hopefully, State Broadband Offices are noticing these market statistics and will give little consideration to technologies that far below the national average.
I will readily admit that I have a fiber bias when it comes using infrastructure grant funding. This is a policy issue for me and is not limited only to broadband. The federal government is handing out huge once-in-a-lifetime infrastructure grants. I think federal infrastructure grants should be used to build infrastructure that will last as long as possible to create the longest-term public good. I am perplexed when I see cities using ARPA funding to buy firetrucks and computers if that city has big infrastructure deficits for things like water systems or public housing. I obviously have no bias against firetrucks or computers – but they aren’t infrastructure.
My position raises the obvious question of what qualifies as infrastructure. In my mind, infrastructure is an asset with a long useful life. I think everybody would agree that roads, bridges, and water pipes are infrastructure. These are assets that will be useful to the public for a long time.
It’s a little less clear with broadband infrastructure. Conduit is clearly infrastructure, and there is no reason to think that conduit won’t still be functional in a century.
Fiber is a little less clear-cut. I remember when fiber was being constructed in the 1980s, we thought of it as a 40-year asset. There are some fiber routes built in the 80s that are showing wear, but a lot of fiber built in the 1980s is still going strong.
But fiber manufacturing technology has improved significantly since the 80s. Fiber is now much clearer and less likely to grow opaque with age. Fiber today has much tougher outer sheathing. We’ve also learned a lot about fiber installation techniques, and many of the problems that have arisen from older fiber are due to stress placed on the fiber during construction. While the manufacturers won’t go on the record on the useful life of fiber, I’ve been told privately by fiber manufacturing engineers that fiber ought to last 70 or 80 years if installed properly. That sounds like infrastructure.
The biggest weakness of all broadband technologies in terms of longevity is the electronics. This applies equally to fiber and wireless technologies. The conventional wisdom is that most broadband electronics are good for about 10 or 12 years. Part of this is due to true obsolescence, where circuit cards wear out after being used non-stop for a decade. But part of the obsolescence is due to vendors that stop supporting older technology. It becomes harder each year to support a network if vendors aren’t making replacement cards. Everybody that’s owned a broadband network for twenty years can still point to a few pieces of gear that are still chugging along – but for the most part, electronics have to be replaced over time.
If my philosophy is that infrastructure is an asset that lasts for a long time, how do I reconcile any broadband grant with relatively short-lived electronics (at least short-lived on an infrastructure time scale)? I define infrastructure in the same way as lenders. Federal bond rules say that a borrower can’t have a bond term (the years to pay back the loan) that is longer than the average economic life of the assets being funded. A lot of commercial banks have a similar test as part of evaluating infrastructure loans.
What’s the average useful life of a fiber network? Consider the following real-life example of a recent rural fiber project I worked on.
Average Life
% of Project
Conduit
100
25%
Fiber
40 – 60
60%
Drops
30
8%
Buildings/Huts
40
3%
Electronics
12
4%
Folks can disagree about the average life of fiber. I’ve been conservative since I think fiber will last longer than shown in the table. If you assume that fiber is good for 40 years, the weighted average useful life of the above network is 53 years. If you assume the average life of fiber is 60 years, the useful life climbs to 65 years. Aerial fiber networks have a lower economic life without conduit, but the range of expected life is still between 37 years and 53 years.
Other broadband technologies have a much shorter economic life. My guess is that the economic life for Starlink is under ten years since the satellites are designed to fall out of orbit by then. There are probably components in satellite base stations that will last longer – but most of the investment is in the satellites.
It’s hard to do the same math and get a useful economic life for the typical fixed wireless network that is higher than 15 years. It is possible to construct a fixed wireless network with a higher average useful life. Well-built towers can easily last 75 years. Fiber backhaul to towers has the same useful life as last-mile fiber. However, my reading of the BEAD grant rules is that it will be difficult to win funding to build towers or middle-mile fiber. A fixed wireless grant that funded towers and fiber would probably pass my infrastructure sniff test.
I can’t begin to estimate the average useful life of an FWA cellular network, but it’s not very long. These are networks that are built to use the excess capacity of cell phone networks and are not constructed just for broadband. When I consider the rapid evolution of cellular technologies, it seems likely that any system built today will be technically obsolete when real 5G standards are finally implemented.
Hybrid-fiber coaxial systems have an average economic life that is about the same as the lower range of fiber network lives. The coaxial wire won’t last as long as fiber, but forty years is a reasonably assumed life for the coax.
The NTIA tried to express the same sentiment as me without defining why. The NTIA said early on, after it was given responsibility for the BEAD grants, that the agency favors fiber. It would have been a lot clearer if the NTIA said instead that it doesn’t support infrastructure grants for projects that don’t have infrastructure useful lives – I think that is what they meant. If the agency had set a definition of infrastructure as projects with a useful life of at least thirty or forty years, we wouldn’t be having the discussion of funding networks with short useful lives.
