Multi-gigabit Broadband

There have been a few ISPs in recent years that have quietly offered residential broadband with speeds up to 10-gigabits. However, this year has seen an explosion of ISPs marketing multi-gigabit broadband.

I recall an announcement from Google Fiber last year offering an upgrade to 2-gigabit service in Nashville and Huntsville for $100 per month. Since then, the company has expanded the offer to other markets, including Atlanta, Charlotte, Kansas City, Raleigh-Durham, Austin, Salt Lake City, Provo, and Irvine.

Not to be outdone, Comcast Xfinity announced a 2-gigabit product, likely available in those markets where Google Fiber is competing. But Comcast doesn’t seem to really want to sell the product yet, having priced it at $299.95 per month. We saw the same high pricing when Comcast first introduced gigabit service – it gave them the bragging rights for having the fastest product, but the company was clearly not ready to widely sell it.

Midco, the cable company, markets speed up to 5-gigabits in places where it has built fiber. In recent months I’ve seen announcements from several rural cooperatives and telcos that are now offering 2-gigabit speed.

This feels like a largely marketing-driven phenomenon, with ISPs trying to distinguish themselves in the market. It was inevitable that we’d see faster speeds after the runaway popularity of 1-gigabit broadband. OpenVault reported that as of June of this year that 10.5% of all broadband subscribers are buying a gigabit product. It makes sense that some of these millions of customers could be lured to spend more for even faster speed.

There are still a lot of broadband critics who believe that nobody needs gigabit broadband. But you can’t scoff at a product that millions are willing to buy. Industry pundits thought Google Fiber was crazy a decade ago when it announced that its basic broadband speed was going to be 1-gigabit. At that time, most of the big cable companies had basic broadband products at 60 Mbps, with the ability to buy speeds as fast as 200 Mbps.

It was clear then and is still true today that a gigabit customer can rarely if ever, download from the web at a gigabit speed – the web isn’t geared to support that much speed the whole way through the network. But customers with gigabit broadband will tell you there is a noticeable difference between gigabit broadband and more normal broadband at 100 Mbps. The human eye can perceive the improvement that comes with gigabit speed.

The most aggravating thing about the debate about multi-gigabit speeds is how far the regulators have fallen behind the real world. According to OpenVault, the percentage of homes that subscribe to broadband with speeds of 100 Mbps or faster has grown to 80% of all broadband subscribers. We know in some markets that delivered speeds are less than advertised speeds – but the huge subscription levels are proof that subscribers want fast broadband.

Farm Fresh Broadband

I was lucky enough to get an advanced copy of Farm Fresh Broadband by University of Virginia professor Christopher Ali. It’s a great read for anybody interested in rural broadband. The book is published by MIT Press and is now available for pre-order on Amazon.

The first half of the book discusses the history and the policies that have shaped rural broadband, and my review of his book will focus on this early discussion, which is near and dear to my heart. Ali hit on the same topics that I have been writing about in this blog for years. Of particular interest was Ali’s section talking about the policy failures that have led to the poor state of rural broadband today. Ali correctly points out that “we have a series of policies and regulations aimed at serving the interests of monopoly capital rather than the public interest and the public good”. Ali highlights the following policy failures that have largely created the rural digital divide:

  • Definition-Based Policy. The FCC has been hiding since behind its 25/3 Mbps definition of broadband since 2015. We still see this today when current federal grants all begin with this massively outdated definition of broadband when defining what is eligible for grant funding. We recently passed a milestone where over 10% of all households in the country are subscribed to gigabit broadband, and yet we are still trying to define rural broadband using the 25/3 Mbps standard. Unfortunately, sticking with this policy crutch has led to disastrously poor allocation of subsidies.
  • Technology Neutrality. Ali points to regulators who refuse to acknowledge that there are technologies and carriers that should not be worthy of federal subsidies. This policy is largely driven by lobbying by the big ISPs in the industry. This led to the completely wasted $10 billion CAF II subsidy that was given to shore up DSL at a time when it was already clear that DSL was a failure as a rural technology. This same lack of regulator backbone has continued as we’ve seen federal subsidies given to Viasat in the CAF II reverse auction and Starlink in the RDOF. The money wasted on these technologies could have instead been invested in bringing permanent broadband solutions to rural areas. It looks like Congress is going to continue this bow the big ISPs by allowing grants to be awarded for any technology that can claim to deliver 100/20 Mbps.
  • Mapping. Ali highlights the problems with FCC mapping that disguises the real nature of rural broadband. He points to the example of Louisa County, Virginia, where the FCC maps consider the county to have 100% broadband coverage at 25/3 Mbps. It turns out that 40% of this coverage comes from satellite broadband. Much of the rest comes from overstatements by the telcos in the county of the actual speeds. M-Lab speed tests show the average speeds in the county as 3.91 Mbps download and 1.69 Mbps upload – something that was not considered as broadband a decade ago by the FCC. Unfortunately, Louisa County is not unique, and there are similar examples all over the country where poor mapping policies have deflected funding away from the places that need it the most.
  • Localism. There are hundreds of examples where small regional telephone companies and cooperatives have brought great broadband to pockets of rural America. We have made zero attempt to duplicate and spread these success stories. In the recent CAF II awards we saw just the opposite, with huge amounts of money given to companies that are not small and not local. We already know how to fix rural broadband – by duplicating the way we electrified America by loaning money to local cooperatives. But regulators would rather hand out huge grants to giant ISPs. When we look back in a few decades at the results of the current cycle of grant funding, does anybody really believe that a big ISP like Charter will bring the same quality of service to communities as rural cooperatives?

The second half of the book is the really interesting stuff, and all I supply for that are some teasers. Ali describes why farmers badly need broadband. He describes the giant bandwidth needed for precision agriculture, field mapping, crop and livestock monitoring, and overall management of farms to maximize yields. One of the statistics he cites is eye-opening. Fully-deployed smart agriculture could generate 15 gigabytes of data annually for every 1,000 acres of fields. With current land under cultivation, that equates to more than 1,300 terabytes of data per year. We have a long way to go to bring farms the broadband they need to move into the future.

I do have one criticism of the book, and it’s purely personal. Ali has a huge number of footnotes from studies, articles, and reports – and it’s going to kill many of my evenings as I slog through the fascinating references that I’ve not read before.

An Update on Telemedicine

I’ve been keeping tabs on the news about telemedicine since it is touted throughout the industry as one of the big benefits of having good broadband. One piece of news comes from a survey conducted by Nemours Children’s Health. This is a large pediatric health system with 95 locations in Delaware, Florida, New Jersey, and Pennsylvania. The company treats almost half a million children annually.

Nemours released a report on Telehealth in July. The report was based on a survey of 2,056 parents/guardians of children. The survey had some interesting results:

There is a Need for Telehealth. 48% of the survey respondents said that they had at least one recent experience where there was a hardship in getting a sick child to a live doctor visit. This included reasons such as living in an unsafe community or not having easy access to transportation. 28% of respondents reported two such occasions, and 15% reported three or more. These are the situations for which telehealth is an ideal solution to get a doctor to look at a sick child when care is needed rather than when the child can be transported to a doctor’s office.

Telehealth Good for Parents. Almost 90% of the respondents to the survey said that telehealth makes it easier for parents to take an active role in a child’s health care. A lot of parents said that somebody other than them takes sick children to see a doctor during the workday, and they love being able to participate first-hand in the discussion with a doctor.

Provider’s Play a Big Role in Enabling Telehealth. 28% of respondents to the survey said they have never been offered a telehealth visit. 12% said they had never heard of telehealth. Respondents who use telehealth said they were more likely to use the service when it is offered as an option by the health provider.

Reimbursement is Still a Barrier. Two-thirds of parents say that having telehealth visits covered by insurance is essential for them to consider using the service. There was a big push during the pandemic for insurance companies to cover telehealth visits. There is a concern at Nemours for this to continue when things return to normal.

As further evidence that reimbursement is a major issue, a recent article in KHN (Kaiser Health News) shows that there are surprising issues that are impacting telehealth. The article discusses insurance companies that don’t want to cover telehealth visits where the patent and doctor are in different states. This is based on laws in most states and also in Medicare and Medicaid rules that require a licensed clinician to hold a valid medical license in the state where a patient is located.

These laws don’t stop people from voluntarily visiting a doctor in another state, but the law is being raised for telemedicine. This is surfacing as an issue as states start rolling back special rules put in place during the early days of the pandemic.

Johns Hopkins Medicine in Baltimore recently had to cancel over 1,000 telehealth visits with patients in Virginia because such visits would not be covered by insurance. This left patients to find a way to make the physical trip to Johns Hopkins or find another health provider. As someone who has used John Hopkins, this is the place where people from the DC region look to when they need to see the best specialists.

When I first heard about telemedicine a decade ago, the ability to see specialists was one of the biggest cited benefits of telemedicine. These kinds of issues are always more complicated than they seem. For example, state medical boards don’t want to give up the authority to license and discipline doctors that treat patients in the state. Of course, money comes into play since medical licensing fees help to pay for the medical boards. When insurance companies find it too complicated to deal with a gray legal issue, they invariably take the safe path, which in this case is not covering cross-state telemedicine visits.

Probably the only way to guarantee that telemedicine will work would be with legislative action to clear up the gray areas. Add this to the list of broadband topics that need a solution from Congress.

The Migration to Faster Speeds

The OpenVault Broadband Insights Report for the 2nd quarter of 2021 highlights the strength of customer demand for broadband.

The most interesting statistic is the migration of customers to faster broadband tiers. The following table shows the percentage of households subscribed to various broadband speed plans in 2020 and 2021.

June 2020 June 2021
Under 50 Mbps 18.4% 10.5%
50 – 99 Mbps 20.4% 9.6%
100 – 199 Mbps 37.8% 47.5%
200 – 499 Mbps 13.5% 17.2%
500 – 999 Mbps 5.0% 4.7%
1 Gbps 4.9% 10.5%

In just the last year, the number of households subscribed to gigabit broadband has doubled, while the number subscribed to slower speeds nearly cut in half. Many millions of homes upgraded to faster broadband plans over the past year.

OpenVault provides some clues as to why homes are upgrading to faster broadband. Consider the following table that shows the percentage of households using different amounts of total monthly broadband.

June 2018 June 2019 June 2020 June 2021
Less than 100 GB 51.6% 42.7% 34.2% 29.5%
100 – 499 GB 37.7% 39.5% 37.6% 38.6%
500 – 999 GB 8.9% 13.7% 19.4% 21.1%
1 -2 TB 1.7% 3.7% 7.8% 9.3%
Greater than 2 TB 0.1% 0.4% 1.0% 1.5%

The percentage of homes using less than 100 gigabytes of broadband per month has dropped by 43% over three years. At the same time, the number of homes using more than a terabyte of data per month has grown by 500% over three years. While there may be no direct correlation between having a faster broadband plan and using more broadband, total broadband usage is likely one of the factors leading residential customers to upgrade. Another big factor pushing upgrades is customers looking for faster upload speeds to support working and schooling from home.

The average household broadband usage in June 2021 was 433 gigabytes – which is the combined upload and download usage for the average American home. (405 GB download and 28 GB upload). To put that number into perspective, look at how it fits into the past trend of average broadband usage.

1st quarter 2018           215 Gigabytes

1st quarter 2019           274 Gigabytes

1st quarter 2020           403 Gigabytes

2nd quarter 2020         380 Gigabytes

1st quarter 2021          462 Gigabytes

2nd quarter 2021         433 Gigabytes

The second quarter 2021 usage is up 14% over 2020, but down compared to the first quarter of this year. OpenVault observed that broadband usage seems to be returning to seasonal patterns, and in past years it’s been normal for broadband usage to decrease during the summer.

The continued increased household usage has to be good news for ISPs like Comcast that are enforcing monthly data caps. OpenVault shows 10.8% of homes are using more than a terabyte of data per month. However, OpenVault also shows that having data caps influences broadband customers to curtail usage. In June, the average usage for homes with no data caps was 451.6 GB and 421.1 GB for homes with data caps.

The Cable Market Continues to Erode 2Q 2021

The largest traditional cable providers collectively lost almost 1.3 million customers in the first quarter of 2021 – an overall loss of 1.8% of customers. To put the quarter’s loss into perspective, the big cable providers lost over 14 thousand cable customers per day throughout the quarter. The losses for the quarter were lower than the first quarter that had a net loss of 1.6 million customers. The industry is still on pace to lose roughly 6 million customers for the year.

The numbers below come from Leichtman Research Group which compiles these numbers from reports made to investors, except for Cox which is estimated. The numbers reported are for the largest cable providers, and Leichtman estimates that these companies represent 95% of all cable customers in the country.

Following are first quarter subscriber numbers compared to the end of the first quarter of 2021:

2Q 2021 Change % Change
Comcast 18,956,000 (399,000) -2.1%
Charter 16,012,000 (50,000) -0.3%
AT&T 15,412,000 (473,000) -3.0%
Dish TV 8,554,000 (132,000) -1.5%
Verizon 3,782,000 (63,000) -1.6%
Cox 3,530,000 (60,000) -1.7%
Altice 2,870,500 (48,300) -1.7%
Mediacom 611,000 (15,000) -2.4%
Frontier 423,000 (30,000) -6.6%
Atlantic Broadband 309,242 (4,349) -1.4%
Cable One 287,000 (11,000) -3.7%
Total 70,746,742 (1,285,649) -1.8%
Total Cable 42,575,742 (587,649) -1.4%
Total Other 28,171,000 (698,000) -2.4%

Some observations about the numbers:

  • The big loser continued to be AT&T, which lost a net of 473,000 traditional video customers between DirecTV and AT&T TV. During this quarter the company spun its cable business off to a new company, but are still reported here as AT&T.
  • The big percentage loser continues to be Frontier which lost 6.6% of its cable customers for the second quarter in a row.
  • After staving off big losses in 2020, Comcast has lost almost 900,000 cable customers this year.
  • Charter continues to lose cable customers at a slower pace than the rest of the industry. I’ve searched by can’t find any explanation for this.
  • This is the tenth consecutive quarter that the industry has lost over one million cable subscribers.

To put these losses into perspective, these same companies had over 85.4 million cable customers at the end of 2018, and 79.5 million at the end of 2019. That equates to a net loss if 14.7 million customers (17% of customers) since the end of 2018.

The big losses in cable subscribers is happening at the same time that the biggest ISPs are adding a lot of broadband customers. The biggest ISPs added almost 900,000 new broadband subscribers in the second quarter of 2021.

In 2020, we saw that a lot of customers dropping traditional video were switching to online versions of the full cable line-up. That didn’t carry into the second quarter of 2021 where the combination of Hulu plus Live TV, Sling TV, and FuboTV collectively gained only 56,000 customers.

It’s Time for Collaboration

There has never been a better time for communities to collaborate to fund better broadband solutions. It almost seems like it’s raining grant money this year, and there is likely a lot more in grants coming over the next few years.

Communities are going to get the biggest bang for the buck with a collaborative effort. If each stakeholder in a community seeks its own solution, the community will see a wasteful overlap of broadband construction instead of seeing money spent wisely to make sure that everybody gets the broadband solution they want.

What do I mean by collaboration? I mean coordinating funding efforts to take the best advantage of grant monies that available to different community stakeholders right now. Consider the following sources of funding available today:

  • In the most unexpected grants of all, local counties, cities, towns, and townships got a share of the $350 billion Coronavirus State and Local Fiscal Recovery Fund that can be used for broadband.
  • Schools can fund some fiber infrastructure through the E-Rate capital program.
  • Libraries have more grants headed their way than ever before.
  • Rural health care grants through the Universal Service Fund are higher than ever.
  • A $1 billion grant program for tribes is just now closing, but more will be on the way.
  • States have announced huge amounts of state grants, with funding from the ARPA being added to existing state broadband grants.

There are also huge amounts of more traditional broadband grant funds to consider:

  • Many rural communities have areas that will hopefully get broadband through the RDOF awards. But these awards rarely cover everything in an area and are often a strange checkerboard of RDOF and non-RDOF Census Blocks. The FCC is still wading through the long forms for the RDOF winners, and once funds are released, the winners will have four years to build infrastructure.
  • A $288 million grant program with the NTIA just closed.
  • There is a $3 billion grant program that will be coming from the EDA later this year.
  • There is a second round of ReConnect grants that will likely commence before the end of the year.
  • Some areas saw awards made in last year’s CAF II reverse auction. If these areas are not already under construction, they will be within the next year or two.

Smart communities are going to organize the many stakeholders to take the best advantage of this funding. There are a number of ways that collaboration can make for the best broadband result:

  • Communities need to make sure that somebody is going to somehow fill in the checkerboard of grant areas awarded in the RDOF and the CAF II reverse auction. Those two grants relied on faulty FCC mapping data, and there are huge swaths of equally needy areas nearby to most of these grant areas. Areas that don’t get covered by good broadband in the next few years could be left behind for a long time.
  • There is a huge opportunity for anchor institutions to get a long-term facility-based fiber solution. If all of the anchor institutions in an area join together, they can collectively negotiate for long-term IRUs for a private fiber network that can connect schools, libraries, health care facilities, city and town anchor institutions, non-profits, rural electric substations, and tribal facilities together. A collaborative network is the ultimate way to cut long-term costs through the collective purchase of transport and broadband. Such collaboratives will be even stronger if they stretch across multiple counties. These collaboratives will be great for the companies building RDOF or other grant-funded networks – they get a large long-term revenue stream.

This is the time for communities to have these discussions. The big grant monies are going to be awarded over the next few years – so it’s not too late to figure this out. I think communities will be surprised to find out how much buying power all of the anchor institutions and other stakeholder have when they combine forces.

A Chance to Tackle the Urban Digital Divide

For the first time in my career, we face the possibility of some big changes for broadband in low-income neighborhoods in cities. The recent American Rescue Plan Act (ARPA) gave cities significant funding that can be used for various kinds of infrastructure, including broadband.

Cities have been handed a once-in-a-lifetime chance to fix some of the broadband deserts that have grown in poor neighborhoods. I’m already working with several cities that are taking this opportunity seriously. I think everybody in the industry understands the issues. The big ISPs have redlined poor neighborhoods for many decades. These are the places where you can still find ancient DSL technology that has a maximum speed of 6 Mbps if it performs perfectly (which it never does). Cable companies have not been as blatant as the telcos, but they still largely ignore neighborhoods that they don’t think contribute to the bottom line.

The household broadband penetration rate in some urban neighborhoods is dreadful, often with less than half of the homes having broadband. Numerous studies have shown that students without home broadband and computers underperform other students. A study by the Quello Center of Michigan State last year showed that an eleventh-grader without home broadband has the same digital literacy skills as an eighth-grader with home broadband. This is a deficit that rarely gets closed.

The ARPA funding can let cities construct fiber to bring broadband to the poorest neighborhoods. This might mean fiber to public housing or fiber to neighborhoods that have been neglected for decades. The funding also can be used to provide computers. There is a lot of other grant funding available for digital literacy training.

If a city builds and owns fiber, it can sell broadband in these neighborhoods at marginal cost. Homes that find it impossible to pay for Comcast broadband at $90 might instead get gigabit broadband at $35.

Many critics will say that cities shouldn’t do this because the federal government has solved the problem with the EBB low-income program that gives a $50 discount for qualifying low-income households. This program is temporary and won’t last more than another year. There is the hope of a follow-on program funded by the recent Senate broadband bill that would extend the life of EBB while lowering the discount to $30 per month.

The EBB program is not a great long-term solution for poor neighborhoods. Comcast and Charter are headed for $100 basic broadband rates, so a $30 discount a few years from now is still going to mean $70 monthly fees for low-income households. It’s also likely that a controversial program like EBB could be killed by a future Senate as easily as it was created. The worst scenario imaginable is that the EBB program functions well for many years but then disappears overnight due to a change in Administration.

Very few cities are willing to be an ISP – it’s one more challenging task to lay onto staff that likely is already overworked. But there are other options. There are already a few examples around the country of non-profit ISPs bringing better broadband to public housing. I’ve always thought that a broadband cooperative could do well in a city, with the customers owning the business. I think that if cities get creative, that workable solutions can be found. It’s not an easy task, but we already know the consequences of letting neighborhoods continue without adequate broadband.

Supply Chain Issues are Here

2021 is already shaping up as the biggest year we’ve ever had for building fiber. As busy as it is now, we are just warming up when looking out at the huge amounts of fiber that might be built as the result of the ARPA grants, aggressive state grant programs, and the possibility of a massive federal infrastructure program. On top of all of this, all of the big telcos have announced aggressive plans to finally build fiber.

AT&T reported recently at an investor conference that supply chain issues will likely mean that the company will only achieve 2.5 million of the 3 million planned new passings for the year. AT&T didn’t name the vendor that was the primary reason for the slowdown, but it’s likely that it’s either Corning or CommScope.

This news has to be sounding loud alarms in boardrooms everywhere in the industry because if AT&T has supply chain issues, then everybody else is likely to have worse ones. It’s hard to imagine that every manufacturer in the industry isn’t giving AT&T the highest priority in its queue. If AT&T can’t buy everything they want, then how will smaller telcos meet fiber expansion goals? How will new fiber overbuilders like cities using ARPA funds be able to break into an overloaded supply chain?

Supply chain issues are arising for a variety of reasons, all of which might come together to create a perfect storm for the industry. One reason for shortages is manufacturing capacity. For example, Corning saw revenues jump by 21% in the recently ended second quarter compared to a year earlier. Factories that are already working at or near capacity and can’t flip a switch to produce 20% more product. Demand is going to grow a lot more. The consulting firm RVA LLC recently predicted that the industry has plans to build fiber past 61 million homes between this year and 2025 – that’s far more fiber than has ever been built.

Supply chain issues are also still suffering from the lack of the raw ingredients needed to manufacture key components. This is one of the key issues behind the chip shortage and the shortage of electronics cases that are made from resin. Much of the global supply chain has not recovered from the impacts of the pandemic – and as the delta variant sweeps the world, this issue is far from behind us.

There are also more mundane supply chain issues. There is still a shortage of truck drivers and port capacity to deliver the glut of materials and products hitting the market as the economy is rapidly improving. Apparently, during the break from the pandemic, many truckers decided they were tired of life on the road and are pursuing something else. The industry is having a hard time training new truckers at the needed pace, and truck driving schools are working overtime.

There are also more subtle changes behind the scenes. For example, many manufacturers have quietly looked for sources other than China during the pandemic. Many companies have come to realize that their own success was tied too closely to supply chains that were wholly within specific regions of China. Switching supply sources to other countries is not something that happens overnight, and many of these new relationships are still growing and maturing.

Some of these issues will get solved over time. But the bigger issue of unprecedented demand is likely going to plague us for much of the next decade. AT&T is not going to give up on the half-million homes it won’t reach this year and will just shove that into next year.

Broadband Growth Continues 2Q 2021

Leichtman Research Group recently released the broadband customer statistics for the end of the second quarter of 2021 for the largest cable and telephone companies. LRG compiles most of these numbers from the statistics provided to stockholders other than for Cox, which is estimated. Leichtman says this group of companies represents 96% of all US landline broadband customers.

The 891,525 net broadband customer additions is a drop from the first quarter additions of 1,020,097 new customers.

 1Q 2021 1Q Change % Change  
Comcast 31,388,000 354,000 1.1%  
Charter 29,634,000 400,000 1.4%  
AT&T 15,481,000 46,000 0.3%  
Verizon 7,263,000 70,000 1.0%  
Cox 5,485,000 50,000 0.9%  
CenturyLink 4,666,000 (62,000) -1.3%  
Altice 4,401,300 200 0.0%  
Frontier 2,798,000 (22,000) -0.8%  
Mediacom 1,468,000 14,000 1.0%  
Windstream 1,131,800 9,500 0.8%  
Cable ONE 1,017,000 14,000 1.4%  
WOW! 826,300 3,400 0.4%  
Atlantic Broadband 517,004 6,847 1.3%  
TDS 513,600 11,900 2.4%  
Cincinnati Bell 437,800 200 0.0%  
Consolidated 393,480 (4,522) -1.1%  
107,422,131 891,525 0.8%  
Total Cable 74,737,451 842,447 1.1%  
Total Telco 32,684,680 58,122 0.2%  

As we’ve seen for several years, Comcast and Charter are taking most of the new customers in the industry and together captured 754,000 new customers, or 85% of the net customers added for the quarter. The cable companies collectively added 842,447 customers in the fourth quarter compared to 58,122 for the telcos. If the growth rate so far this year is sustained, the industry will add around 3.8 million customers this year, a drop from the 4.8 million new broadband customers added in 2020.

There are some interesting numbers inside this report. AT&T’s new emphasis on building fiber seems to be paying off as the company added 97,000 net new customers this year. That’s extraordinary considering that the company stopped installed new DSL customers – the company lost 1 million DSL customers last year, and this year the loss is likely to be higher. The third highest customer growth for ISPs comes from Verizon, which has added 134,000 new customers for the year.

We are perhaps seeing why CenturyLink is selling a big pile of copper assets – the company lost a net of 101,000 broadband customers so far this year and continues to get clobbered on DSL. CenturyLink surpassed Frontier as the biggest percentage loser of customers for the year, although Frontier continues to lose DSL customers rapidly as well.

The biggest percentage gainer for the quarter is TDS, with quarterly growth of 2.4%. For those not familiar with the company, about half of its customers are on copper and fiber, with the rest served with cable technology.

It’s getting harder to understand the dynamics behind broadband growth. For instance, the second quarter included the first wave of low-income customers added with the EBB subsidy program that was funded by the American Recovery Plan Act. Only the ISPs know how much of the growth this year came from that plan.

Are We Ready for Big Bandwidth Applications?

There is a recent industry phenomenon that could have major impacts on ISP networks in the relatively near future. There has been an explosion of households that subscribe to gigabit data plans. At the end of 2018, only 1.8% of US homes subscribed to a gigabit plan. This grew to 2.8% by the end of 2019. With the pandemic, millions of homes upgraded to gigabit plans in an attempt to find a service that would support working from home. By the end of the third quarter of 2020, gigabit households grew to 5.6% of all households, a doubling in nine months. But by the end of last year, this mushroomed to 8.5% of all households. OpenVault reports that as of the end of the first quarter of 2021 that 9.8% of all households have subscribed to gigabit plans.

I have to think that a lot of these upgrades came from homes that wanted faster upload speeds. Cable company broadband is stingy with upload speeds for basic 100 Mbps and 200 Mbps basic plans. Surveys my company has done show a lot of dissatisfaction with urban ISPs, and my guess is that most of that unhappiness is due to sluggish upload performance.

Regardless of how we found ourselves at this place, one out of ten households in the US now buys gigabit broadband. As an aside, that fact alone should completely eradicate any further discussions about 25/3 Mbps even being part of the discussion of broadband.

My ISP clients tell me that the average gigabit household doesn’t use a lot more bandwidth than customers buying 100 Mbps broadband – they just get things faster. If you’ve never worked on a gigabit connection, you might not understand the difference – but with gigabit broadband, websites appear on your screen almost instantaneously. The word I’ve always used to describe gigabit broadband is ‘snappy’. It’s like snapping your fingers and what you want appears instantly.

I think the fact that 10% of households have gigabit speeds opens up new possibilities for content providers. In the early days after Google Fiber got the country talking about gigabit fiber, the talking heads in the industry were all asking when we’d see gigabit applications. There was a lot of speculation about what those applications might do – but we never found out because nobody ever developed them. There was no real market for gigabit applications when only a handful of households were buying gigabit speeds. Even at the end of 2019, it was hard to think about monetizing fast web products when less than 3% of all homes could use them.

My instincts tell me that hitting a 10% market share for gigabit subscribers has created the critical mass of gigabit households that might make it financially worthwhile to offer fast web applications. The most likely first applications are probably telepresence and 3D gaming in your living room space. It’s hard to think that there is no market for this.

I know that ISPs are not ready for households to actually use the speeds they have been peddling to them. There is no ISP network anywhere, including fiber networks, that wouldn’t quickly bog down and die if a bunch of subscribers started streaming at fast speeds between 100 Mbps and a gigabit. ISP networks are designed around the concept of oversubscription – meaning that customers don’t use broadband at the same time. The normal parameters for oversubscription are already changing due to the proliferation of VPN connections made for working and schooling from home – ISPs must accommodate large chunks of bandwidth that are in constant use, and that can’t be shared with other customers. Home VPN connections have paralyzed DSL networks, but it’s something that even fiber network engineers are watching carefully.

I’ve been imagining what will happen to a network if households start streaming at a dedicated symmetrical 100 Mbps instead of connecting to Zoom at 2 Mbps. It wouldn’t take many such customers in any neighborhood to completely tie up network resources.

I will be shocked if there aren’t entrepreneurs already dreaming up gaming and telepresence applications that take advantage of the 10% market share for gigabit broadband. In looking back at the past, new technology phenomenon seems to hit almost overnight. It’s not hard to imagine a craze where a million gigabit homes are playing live 3D games in the living room air. When that finally happens,  ISPs are going to be taken by surprise, and not in a good way. We’ll see the instant introduction of data caps to stop customers from using broadband. But we’ll also see ISPs beefing up networks – they’ll have no choice.