The Industry

Comcast Busts on FWA

One of the best ways to know when a new technology is a threat is when one of the big telcos or cable companies begins talking badly about it. The most recent case in point comes from a recent conference covered by LightReading where Comcast CEO Brian Roberts said that Comcast is not worried about competition from FWA (cellular wireless) technology. He was quoted as saying that FWA is an “inferior technology” that will not remain viable for the long term.

Realistically, Comcast and the other big ISPs have to be concerned about FWA technology. T-Mobile added 546,000 customers to the product in 2021, and Verizon added 173,000 – with most of the additions coming near the end of the year. MoffettNathanson says that FWA broadband accounted for 38% of all broadband customer gains in the fourth quarter. Bloomberg says that FWA accounted for 22% of all new broadband customers for the whole year of 2021. T-Mobile said that much of its growth came from urban and suburban customers formerly served by cable companies.

The FWA market is just getting started. T-Mobile says it has a target of serving seven to eight million homes by the end of 2026. Verizon says it is already passing 15 million homes with the technology and plans to be passing 30 million homes by the end of 2023. We don’t know the specific goals for Dish, but the newest big cellular carrier will start hitting the market this summer, and the company says it plans to have aggressive pricing.

Roberts is right in that FWA bandwidth cannot compete with the speeds of cable broadband. Comcast has increased its download speeds to a minimum of 200 Mbps for a new broadband connection and has a top speed of 1.2 Gbps. But that misses the point. FWA is targeting those households that have modest broadband needs or who want to save money. If a Comcast customer isn’t getting any discounts, the cost of basic broadband is over $90 when adding in the $14 charge to get a broadband modem. FWA products are priced between $50 and $60, and Dish is likely to be even lower. The FWA companies are competing for the households that care about price more than speed.

However, many houses will find the FWA product to be fast enough. Ookla speed test results for February 2022 show the nationwide average download speed for FWA at 146 Mbps, with the average upload at almost 21 Mbps. It’s worth noting that the FWA upload speeds are faster than the average speeds I’ve seen in any market for cable companies – which typically is closer to 15 Mbps.

It’s somewhat ironic for a cable company to say that the FWA technology is inferior because the cable companies have spent the last year lobbying hard not to set the definition of broadband to be any faster than 100/20 Mbps. That means Comcast believes that what FWA service is broadband.

Roberts’s major objection is that FWA is not a future-looking technology. That sounds like a valid point since the growth in broadband demand will probably mean that a decade from now we’ll think that 150/20 Mbps will feel like a slow broadband product. I’m not sure that carriers a lot of legs for customers who want to save money today.

But what Roberts is failing to acknowledge is the pending upgrade in six or seven years to real 5G. That technology will be able to right-size broadband connections for each customer according to the demand, and it’s likely that 5G speeds might eventually climb to as much as a gigabit – although that’s going to require the cellular companies to dump a lot of broadband into each neighborhood small cell site. But speeds on FWA will certainly be much faster a decade from now. In my mind, that’s the real threat of FWA to cable companies.

Of more immediate concern for cellular companies will be maintaining the 150/20 Mbps speeds recently measured by Ookla. These FWA products are being delivered by the same cell sites that deliver voice and data to cellphones, and the cellular carriers have all said that their cellular customers will get first priority at cell sites. If the cellular carriers sell too many FWA customers from a given cell site, there is a good chance that those customers will collectively drag down the overall speeds at a cell site. As long as this service is using 4G LTE technology, there are absolute caps on the amount of broadband a given cell site can deliver at a given time. Cellular carriers can make sure this is not a problem by not selling too many FWA customers in a given neighborhood. But that would require restraint, and I can’t think of a time when any big ISP ever restricted sales.

The Industry

Comcast and Competition

There was a short interview in Fortune recently with Comcast CEO Brian Roberts about Comcast’s views on competition. Roberts’ responses are a very good summary of the state of cable competition in the country in general.

First, when asked about competition today Roberts said that Comcast feels competitive pressure every minute and that he thinks the market is getting increasingly competitive. That’s an interesting comment. There are certainly markets where people are building fiber to compete against Comcast. We see CenturyLink building fiber in a number of large cities. Verizon has announced that it’s going to expand FiOS in Boston. Google is slowly building fiber, although not yet in many Comcast markets. And there are a tiny number of municipal fiber builds, mostly in more rural markets.

But to offset those new fiber competitors it’s obvious that Comcast is crushing DSL in its many markets. The older DSL equipment is just becoming too slow and DSL customers are finally upgrading to faster cable modem service. Overall Comcast added a net of almost 1.4 million new broadband customers in 2015. So for every customer they might have lost to fiber they have picked up many more from competing with DSL. Because Comcast’s cable modems are so superior to DSL, in the vast majority of its markets Comcast now has a virtual monopoly on real broadband.

Roberts was also asked about the company’s interest in competing outside of Comcast’s cable service territories. Unsurprisingly Roberts said that the company has no plans to expand its footprint. The FCC has been bringing the pressure on cable companies to become more competitive. But I am not aware of an example where one of the major cable companies has ever competed against one of their neighboring cable providers. In other places like Europe and Canada there are markets where cable companies compete against each other – but in this country there is an obvious tacit agreement among the cable companies to not step on each other’s monopoly turf.

Finally, Roberts was asked about current news that Comcast might be thinking about offering a competitive cellular product. The company tried this a few years ago together with some other cable companies but then ditched the attempt. Roberts says that the company is exploring the concept (something they probably have been doing for a decade) but that – unless the company can find some unique value proposition – they probably won’t enter the cellular market. Interestingly, one of the values of the merger between Charter and Time Warner is that it gives Charter the contracts that allow the company to offer an MVNO cellular product. We’ll have to watch to see if anything comes of that possibility.

In summary, Comcast says they see competition everywhere. It’s an interesting perspective because the company is overall as close to a monopoly as any company can be in the telecom space in this country. There is a lot of public relations and regulatory benefit for Comcast by acting besieged by competition. If Comcast was instead touting their monopoly advantage they would probably come more under the crosshairs at the FCC and at state regulatory bodies.

But I have a hard time seeing where competition is hurting the company. They are still adding customers like crazy. Revenues and profits are up. The company has made big headway in rolling out new security and home automation products. And in a large percentage of its markets the company is becoming a virtual monopoly.

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