Outlook for FWA Cellular Wireless

Mike Dano at LightReading published a recent article looking at the future of FWA (cellular fixed wireless). For those not familiar with the technology, this is broadband delivered to homes and businesses by cellular companies using the new spectrum bands that have been labeled as 5G. This is a new product that has only been around for a little over the year and has already taken the broadband market by storm. At the end of the first quarter of this year, T-Mobile had almost 3.2 million customers and Verizon had almost 1.9 million. It’s likely that UScellular will be entering the market in a big way along with DISH. AT&T is still somewhat on the sidelines – it has an FWA product but is still making fiber a priority.

Dano talked to analysts at Wells Fargo who track the broadband industry. They are predicting that FWA will capture 10% of the residential market by 2025. To put that into perspective there are currently around 118 million homes with broadband, and FWA has quickly captured over 4% of households with FWA products. Wells Fargo analysts are predicting an additional 6.8 million FWA customers by 2025.

Interestingly, these same analysts predict that the cable company share of the residential market will drop from 67% today to 62% by 2025, a drop of 5.9 million customers. I’m not sure how the explosion of fiber construction plays into that math.

These analysts and others foresee the FWA wireless hitting a natural plateau as the technology starts hitting a saturation point in neighborhoods. The FWA technology is not able to serve all homes in an area due to several issues. First, while this product is nice for the bottom line of big cellular companies, their bread-and-butter product is serving cell phones. Since FWA shares the same spectrum, there is a natural limit on how many FWA customers they are willing to serve in any neighborhood. Additionally, both T-Mobile and Verizon tell FWA customers in the fine print that they will throttle the bandwidth anytime cellphone usage gets too busy. When that starts happening, I predict a lot of households will lose interest in the FWA product.

We got a deeper glimpse into the plans for FWA when CEO Mike Sievert of T-Mobile talked about the product at the J.P Morgan Global Technology, Media, and Communications Conference. He says that T-Mobile’s overall market penetration in small and rural markets is now at 16%, and the company’s target is to reach 20% by 2025. He says in prime small markets the company is targeting penetration rates in the mid-30s.

I have my own speculations about FWA. FWA is currently seeing big success because it is filling several market niches. In rural areas, the product delivers speeds from 50 Mbps to 200 Mbps depending on how far a customer lives from a tower. In markets where the alternatives are slower technologies like satellite, DSL, or WISP broadband, customers are happy to have relatively fast broadband for the first time. FWA is also the product for the price-conscious consumer, priced between $50 and $65 when most other broadband technologies cost more. In towns and cities, this product delivers a faster alternative to DSL.

But I have a hard time seeing FWA dominating any market in the long run. Many of the rural markets where it will have gained significant market shares will eventually get fiber from the many rural broadband grant programs. Will households stick with FWA when there is a much faster product?

I’ve already been reading online reviews that talk about the unpredictable bandwidth, which is inherent in a network that shares bandwidth with cellphone customers. Cellular bandwidth already varies throughout the day for a wide variety of reasons – something that anybody who watches the bars on their cell phone understands. FWA is not going to deliver the guaranteed speed performance as a wired technology – quality will vary according to local conditions.

Finally, within a decade, a 100 Mbps connection is going to feel as obsolete as 25/3 Mbps broadband feels today. At the end of the first quarter of this year, Openvault said that only 9.5% of all broadband households are still subscribed to a broadband product of 100 Mbps or less. The public has already abandoned 100 Mbps broadband, and the vast majority of households already have something faster. My prediction is that FWA will have a spectacular market share for the next five years, but a decade from now, the only households still using it will be the same ones that stick with DSL today – homes for whom price is far more important than performance.

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