Delays in Satellite Broadband

One of the big unknowns for rural broadband is if there will ever be a better satellite broadband option. The industry was surprised last year when Elon Musk announced that he planned to blanket the earth with over 4,000 satellites and operate as a worldwide ISP under the newly formed Starlink. These satellites would be launched by SpaceX, another Elon Musk company that that provides commercial rocket launches.

I’ve been following the financial news about the Elon Musk family of businesses, and about SpaceX and Starlink more specifically, since a successful launch of the business could provide another rural option for broadband.

There are several financial analysts predicting that Starlink is now largely on hold, due mostly to funding issues. They report that Starlink has stopped hiring the new employees needed to implement the business plan. Further, it appears that SpaceX needs up to $10 billion to fulfill its own business plan and that any money raised by the company is likely to go there first before Starlink is funded. At a minimum this probably means a major delay in satellite launches for Starlink.

These analysts warn that the SpaceX business plan is not yet solid. The commercial launch business is now seeing other major competitors. ULA, the existing major competitor to SpaceX has been stepping up their game. Boeing is behind Space Launch Systems, another newcomer to the field. Jeff Bezos of Amazon has started Blue Origin and has started construction on a spaceflight center in Florida. There is also a new competitor announced in Japan. The competition is going to drive down the cost of space launches and will also spread the launches among numerous parties, diluting any early advantage enjoyed by SpaceX.

SpaceX was counting on riding the coattails of other commercial launches to get the broadband satellites into space. The company is scheduled to complete 28 launches by the end of this year but is only scheduled so far for 18 launches in 2019. The company is also banking on making money from selling commercial space travel to rich tourists, but the analysts doubt that will be enough revenue to keep the company afloat.

Starlink had originally announced plans to have 40 million broadband subscribers generating $30 billion in annual revenues by 2025. That’s an average revenue per customer of $63 dollars per month. It now looks like the date for getting the company started will be significantly delayed. Starlink launched two test satellites earlier this year, but has not reported how they performed.

I’ve also wondered if Starlink would strongly pursue the residential broadband business in North America. While they will be a great alternative for rural America, they will be just another player in cities. Being an ISP makes a lot more sense in those parts of the world where the company could enjoy a near-monopoly.

In the US and Canada there is probably a lot more money to be made instead by serving the many proposed small cell sites if 5G turns out to be a relevant business plan. Starlink says they can deliver speeds of a gigabit or more to a given customer, but the math behind the bandwidth available at any given satellite means that would only be available to a relatively small number of customers rather than to the whole residential market. Speeds for residential broadband are likely to be at much lower speeds. However, gigabit satellite broadband could be the backhaul solution that 5G needs and might let it escape the bottleneck of needing fiber everywhere. I’ve never seen any discussion of such a partnership, but that’s probably because the satellite business is still somewhat theoretical and at a minimum, delayed from the original projected time line.

Deploying 5G – It’s no Panacea

This was published last week as an article on WRAL Techwire, a Raleigh TV station. 

If you read many articles about 5G, you’d think that we’re on the cusp having wireless broadband brought to most homes in America, providing homes with another option for broadband. This idea was recently bolstered by news that Verizon plans to offer 5G wireless broadband to as many as 11 million homes over the next few years.

However, Verizon has one huge advantage over the rest of the market in that they already own an extensive fiber network that reaches to cellular towers, large businesses, schools, large apartment complexes and high-rise buildings. Verizon plans on leveraging this existing network to bring wireless broadband to neighborhoods lucky enough to be near to their fiber. It’s unlikely that anybody else will copy the Verizon business plan – the other big telcos with large fiber networks, AT&T and CenturyLink, have made it clear that they are not pursuing 5G broadband to homes.

Verizon has a second benefit that few others share. As a huge cellular carrier, Verizon will benefit by relieving the pressure on their cellular networks in neighborhoods where they offer 5G. The bandwidth being demanded on cellular networks is the fastest growing sector of the industry with total bandwidth requirements doubling every 18 months. Verizon will save a lot of money by not having to bolster their cellular backbones in 5G neighborhoods.

So, what would it take for anybody else to provide the same 5G wireless technology as Verizon? The 5G technology relies on the placement of small transmitters on utility poles or street lights and the FCC just passed rules making it easier for a provider to get the needed connections. Each transmitter will be able to wirelessly transmit broadband to homes or businesses in the immediate area. Verizon press releases say the effective distance for delivering a signal is up to 2,000 feet, but most of the industry thinks the realistic distance is closer to 1,000 feet. That means that any given pole-transmitter will be able to ‘see’ anywhere from a handful up to a few dozen homes, depending upon what’s called line-of-sight. The 5G spectrum requires a relatively clear path between the transmitter and a dish placed on the home – and that means that 5G is best deployed on straight streets without curves, hills, dense tree cover or anything that decreases the number of homes within range of a transmitter.

The first-generation Verizon technology claims broadband speeds of around 300 Mbps, with the goal to eventually reach gigabit speeds. That level of bandwidth can only be delivered to the pole-mounted unit in two ways – with fiber or with a high-bandwidth wireless link. If wireless backhaul is used to bring broadband to the poles there can be no obstructions between the pole units and the wireless basestation – unlike many kinds of wireless transmission, high-bandwidth wireless backhaul can’t tolerate any obstructions in the transmission path. That requirement for pure line-of-sight will make wireless backhaul impractical in many neighborhoods.

Where wireless backhaul won’t work a 5G network will require fiber to each pole transmitter. The cost of building fiber to neighborhoods is the biggest barrier to widespread 5G deployment. It’s expensive to string fiber in residential neighborhoods. The cost of putting fiber on poles can be expensive if there are already a lot of other wires on the poles (from the electric, cable and telephone companies). In neighborhoods where other utilities are underground the cost of constructing fiber can be exorbitantly high.

To summarize, a 5G network need transmitters on poles that are close to homes and also needs fiber at or nearby to each pole transmitter to backhaul these signals. The technology is only going to make financial sense in a few circumstances. In the case of Verizon, the technology is reasonably affordable since the company will rely on already-existing fiber. An ISP without existing fiber is only going to deploy 5G where the cost of building fiber or wireless backhaul is reasonably affordable. This means neighborhoods without a lot of impediments like hills, curvy roads, heavy foliage or other impediments that would restrict the performance of the wireless network. This means not building in neighborhoods where the poles are short or don’t have enough room to add a new fiber. It means avoiding neighborhoods where the utilities are already buried. An ideal 5G neighborhood is also going to need significant housing density, with houses relatively close together without a lot of empty lots.

This technology is also not suited to downtown areas with high-rises; there are better wireless technologies for delivering a large data connection to a single building, such as the high bandwidth millimeter wave radios used by Webpass. 5G technology also is not going to make a lot of sense where the housing density is too low, such as suburbs with large lots. 5G broadband is definitely not a solution for rural areas where homes and farms are too far apart.

5G technology is not going to be a panacea that will bring broadband to most of America. Most neighborhoods are going to fail one of the needed parameters – by having poles without room for fiber, by having curvy roads where a transmitter can only reach a few homes, etc. It’s going to be as much of a challenge for an ISP to justify building 5G as it is to build fiber to each customer. Verizon claims their costs are a fraction of building fiber to homes, but that’s only because they are building from existing fiber. There are few other ISPs with large, underutilized fiber networks that will be able to copy the Verizon roadmap. With the current technology the cost of deploying 5G looks to be nearly identical to the cost of deploying fiber-to-the-home.

Big Telcos and Broadband

A recent article in Telecompetitor reports that analysts at Moffett Nathanson expect the big telcos to start making inroads into the near-monopoly for broadband currently enjoyed by the cable companies. The article focused specifically on AT&T, but some other big telcos like CenturyLink are also aggressively expanding fiber networks.

I would have to assume that the analysts got the following goals directly from AT&T because I can’t find any other references to these specific goals. But each of these is in line with statements made by AT&T executives over the last year. According to the article, AT&T broadband goals over the next few years are as follows:

  • Offer broadband speeds below 50 Mbps to 30 million passings using DSL;
  • Offer broadband speeds between 50 – 100 Mbps to 20 million passings using paired copper VDSL;
  • Offer ‘near gigabit’ speeds to 10 million passings using via 5G wireless;
  • Offer gigabit speeds using FTTH technology to 14 million residential passings and 8 million business passings.

The real news here is in the last two bullet points. AT&T accepted the goal from the FCC for passing 12.5 million customers with FTTH from the merger with DirecTV. It’s big news if they intend to extend that to 22 million passings. And the goal of using millimeter wave radios to reach another 10 million potential customers is something new.

If AT&T meets these goals they will be bringing serious competition to the cable companies. AT&T and the other telcos have been bleeding DSL customers for over a decade and handed the cable companies a near-monopoly on fast broadband in most urban and suburban markets. According to Moffett Nathanson the telco expansion will bring near-gigabit speeds on telco networks to 32% of the country.

It’s important to understand where the new AT&T broadband is being built. The majority of the new coverage is in three market niches – apartment buildings, new greenfield housing developments and business districts. AT&T’s expansion has largely focused on these specific market niches and is likely to continue to do so. AT&T is not proposing to duplicate what Verizon did with its FiOS network and bring broadband to older single family home neighborhoods. They are instead focusing on buildouts where the the cost of construction per customer is the lowest – the ultimate cherry-picking network.

This means that the AT&T coverage will bring the opportunity for gigabit broadband to a much larger footprint, but that’s not always going to bring customer choice. In the MDU market many landlords are still allowing only one ISP into their apartment complexes. As telcos like AT&T compete with the cable companies for this market the broadband speeds in apartments and condos will get much faster, but many customers will still only have the option to buy from whatever ISP that landlord has allowed.

I have to admit that this market shift to bring broadband to MDUs caught me a bit by surprise. Many years ago Verizon showed that there is a successful business plan for building fiber to older residential neighborhoods. In the northeast Verizon still carries significant market share in its FiOS neighborhoods, and customers consistently rate them as having better customer service than the cable companies. Other telcos like CenturyLink are copying the Verizon model and are building swaths of fiber in residential neighborhoods.

The traditional wisdom was that it is too costly to bring fast broadband to apartments. A decade ago bringing fiber to an apartment meant rewiring the whole building with fiber – and for many apartments that is prohibitively expensive. But there have been technology advances that have made this more feasible. For example, much of the ‘near-gigabit’ speeds can be achieved by using G.Fast technology over existing coaxial or telco cable in older apartments. There have also been big improvements for indoor fiber deployments that include small flexible fibers and techniques for installing fiber inconspicuously in hallways. Many buildings that seemed too costly to serve years ago now make economic sense. Finally, the potential to deliver backhaul to an MDU using millimeter wave radios is going to eliminate the need to build as much fiber.

The real big unknown is how successful any of these big companies will be with 5G. As I’ve been writing lately there are still a lot of barriers that might make it difficult for AT&T to use the wireless technology to cover 10 million passings. We’re going to have to wait to see some real deployments over the next few years to see if the technology works as promised and if the cost of deployment is as cheap as anticipated. But the one thing that these analysts have gotten right is that the big telcos are finally fighting back against the cable monopolies they helped to create by sticking with DSL too long. It’s going to be interesting to see how well they do in winning back customers that they lost over the last two decades.