Who’s On First?

I saw a short article in Business Wire that said that Comcast Business had landed a project to provide a private wireless network for the guests of The Sound Hotel Seattle Belltown. This is an example of the continuing convergence in the industry where the big cable companies, ISPs, and wireless carriers are freely competing on each other’s turf. For decades we’ve neatly categorized companies as telcos, cable companies, or wireless carriers, but this convenient categorization is starting to fray around the edges, and its getting a lot harder to distinguish between the big industry players.

If we look back ten or fifteen years, the distinctions between these companies were clearly defined. The big telcos served residences and small businesses using DSL. The big telcos were clearly structured in silos. There was practically no interface between the wireless companies at Verizon and AT&T and the broadband business. Verizon went so far as to set up Verizon FiOS, its fiber business, separately in every aspect from the copper and DSL business.

The cable companies had faster broadband than DSL after the upgrades were made to DOCSIS 3.0. Speeds up to 300-400 Mbps blew away the capabilities of DSL. Once those upgrades were completed, the cable companies took market share in cities from the telcos year after year until the cable companies had a near-monopoly in many markets.

The market with more balanced competition has been the large business market. This is the market where fiber quickly became king. At one point the telcos controlled most of this market, with their fiercest competition coming from a handful of big CLECs. Verizon responded to this competition by buying MCI, XO, and others in the northeast. CenturyLink become one of the nationwide market leaders through the acquisition of Qwest and then Level 3. The big cable companies cautiously launched fiber ventures for this market twenty years ago and have picked up a decent market share.

But those simple explanations of the business plans of the big ISPs is now history. As the Business Wire announcement showed, the big companies are crossing technology barriers in new ways. Comcast

Providing a private wireless network for a large hotel is emblematic of a new trend in competition. In doing this, Comcast is crossing technical lines that it would never have considered years ago. From a business perspective, Comcast is going after the full suite of services for businesses like this hotel, not just the wireless network. The newest word in the competitive market is stickiness, and Comcast is likely tying down this hotel as a customer for a long time, assuming it does a great job.

These crossovers are even more evident in the residential and small business markets. Comcast, Charter, and other cable companies are bundling cellular service with broadband and the triple play, something that the telcos have never managed to pull off. Telcos have decided to reclaim urban market share by building huge amounts of fiber. And the cable companies are reacting to that threat by rushing some early versions of DOCSIS 4.0 to the market in order to fix the upload bandwidth issues. The big wireless companies have joined the fray with the FWA cellular wireless broadband products. While these products can’t compete with the bandwidth on fiber or cable networks, the product is still adequate for many homes and hits the market at a much lower price.

This has to be confusing to the average residential consumer. Consumers who abandoned DSL years ago are being lured back by to the telcos by fiber. Folks who have been paying far too much for cellular service are moving to the more affordable cable company wireless service. And people who can’t afford the high price of cable broadband are seemingly flocking to the more affordable FWA wireless. I have to imagine that the customer service desks at the various ISPs are being flooded by customers canceling service to try something different.

Markets always eventually reach an equilibrium. But for now, both the residential and business markets in many cities are seeing a fresh new marketing efforts. A decade from now, it’s likely that we’ll reach a predicable mix of the various technologies. We know this from having watched the markets where Verizon FiOS battled with the cable companies for several decades. But much of the country is just now entering the era of refreshed competition.

Unfortunately, this new competition isn’t everywhere. There is already evidence that new investments are not being made at the same pace in lower-income neighborhoods. Some cities are seeing widespread fiber construction while others are seeing almost none. There will still be a lot of work to do to make sure that everybody gets a shot at the best broadband – but the obvious convergence in the industry shows that we’re headed in the right direction.

Competing Against Big Cable Companies

I’m asked at least twenty times a year how a small ISP can compete against the big cable companies. The question comes from several sources – a newly-formed ISP that is nervous about competing against a giant company, a rural ISP that is entering a larger market to compete, or investors thinking of funding a new ISP. These folks are rightfully nervous about competing against the big cable companies. Comcast and Charter together have roughly 55% of all broadband customers in the country, so the assumption is that they are formidable competitors.

It’s more realistic to say that they are decent competitors. They have slick marketing materials to try to lure customers. They have persuasive online marketing campaigns to snag the attention of new customers. They have good win-back programs to try to keep customers from leaving them.

But the two big cable companies have one obvious weakness – their prices are significantly higher than everybody else in their markets. Every marketing push by these companies involves giving temporary low special prices to lure customers – but those prices eventually revert to much higher list prices.

There is a great example of this in the market today. Both Verizon and T-Mobile have been adding large numbers of broadband customers to their fixed wireless FWA products that deliver home broadband using cellular spectrum. The two cellular companies have been highly successful in the marketplace, adding over 2.6 million new broadband customers through the first three quarters of 2022, while Comcast and Charter added about half a million customers during that same time period – mostly at the start of the year.

The FWA wireless product is clearly competing on price. The FWA broadband is not as fast or robust as cable company broadband, but the prices are attractive to a lot of consumers. For example, T-Mobile offers 100 Mbps broadband for a $50 monthly fee for customers willing to use autopay – a price T-Mobile says will never increase. This is far below the prices of the cable companies, which are in the range of $90 per month for standalone broadband.

I thought I’d take a look at how Comcast is competing against the lower-price FWA products. Comcast has two special offers in January 2023 for standalone broadband.

  • In a special offer that ends February 1, Comcast will provide 400 Mbps broadband for $30 per month, which requires autopay. The special price is under a contract for one year, but the special price extends for two years (meaning that if a customer terminates during the first year they have to pay for the remaining months of the contract). The special price for this product was higher in the past and likely has been lowered to compete against FWA.
  • The other offer is ongoing and doesn’t end on February 1. Comcast will provide 800 Mbps download speeds for $60 per month, which requires autopay. This is also a two-year term, with the first year under a contract.

Comcast then adds hidden fees to the special price. Unless a customer brings their own modem, Comcast charges $15 per month for a WiFi modem, a price that was increase by $1 this month. In many markets, Comcast also has data caps, and customers that exceed 1.2 terabytes of usage per month are charged $10 for each additional 50 gigabytes of data used in a month.

For the 400 Mbps product, a customer who brings a modem and who doesn’t exceed the data caps will pay $30 per month if using a bank debit and $35 per month with a credit card debit. Using the Comcast WiFi modem (which most customers do), raises the monthly price to $45 or $50 – right in line with the T-Mobile FWA product. But the kicker comes at the end of the term when the price, before a cable modem, jumps to $92 per month, and $107 with the modem. The result at the end of the 800 Mbps special is similar, with the price rising to $97 per month before a WiFi modem. Anybody buying the special today must also worry about whatever rate increases Comcast adds to the base broadband price by 2025.

The special prices offered by the big cable companies are alluring – customers can get a significant discount for a year or two. But inevitably, the prices will skyrocket – and in the case of the 400 Mbps special will more than double at the end of the discounted special.

ISPs that compete against the big cable companies have learned that all they have to do to compete is to offer fair prices and wait out the specials. Over time, customers who get tired of the pricing yoyo will come around. ISPs with fiber tell me that customers that come to them from a cable company almost never go back to cable. Customers appreciate fair pricing with no games and a reliable broadband product that delivers the promised speeds – that’s how you compete against the big ISPs.

What Happened to Verizon Fiber-to-the-Curb?

Back in 2018, Verizon got a lot of press for the release of a fiber-to-the-curb (FTTC) technology it called Verizon Home. The first big test market was Sacramento. The company built fiber along residential streets and used wireless loops to reach homes. At the time, Verizon touted speeds of 300 Mbps but said that it was shooting for gigabit speeds using millimeter-wave spectrum. Verizon tried to make this a self-installed product, and customers got instructions on how to place the receiver in different windows facing the street to find the best reception and speeds.

There were quotes from the time that Verizon intended to build fiber to pass 25 million homes by 2025 with the technology. But then the product went quiet. In 2020, the Verizon Home product reappeared, but it is a totally different product that uses cellular spectrum from cell towers to bring broadband. This is the product that the industry is categorizing as FWA (fixed wireless access). The company no longer quotes a target broadband speed and instead sayshttps://www.verizon.com/5g/home/Verizon 5G Home is reliable and fast to power your whole home with lots of devices connected. So all of your TVs, tablets, phones, gaming consoles and more run on the ultra-fast and reliable Verizon network.” In looking through some Ookla speed tests for the FWA product, it looks like download speeds are in the 100 – 150 Mbps range – but like any cellular product, the speed varies by household according to the distance between a customer and the transmitter and other local conditions.

The new cellular-based product has gone gangbusters, and Verizon had over one million customers on the product by the end of the third quarter of 2022, having sold 342,000 new customers in that quarter. The relaunch of the product was confusing because the company took the unusual step of using the same product name and website when it switched to the wireless product. It even kept the same prices.

But the two products are day and night different. Verizon’s original plan was to pass millions of homes with a broadband product that was fast enough to be a serious competitor to cable broadband. Even if the product never quite achieved gigabit speeds, it was going to be fast enough to be a lower-priced competitor to cable companies.

While the new Verizon Home product is selling quickly, the product is not close in capabilities to the FTTC product. Cellular bandwidth is never going to be as reliable as a landline technology or one where fiber is as close as the curb. Verizon (and T-Mobile) have both made it clear that the FWA customers will take second priority for bandwidth availability behind cell phone customers. I don’t know that these companies could do it any other way – they can’t jeopardize unhappiness from a hundred million cellular customers to serve a much smaller number of FWA customers.

I think everybody understands the way that cellular broadband capabilities change during the day. We all see it as the bars of 4G or 5G at our homes bounce up and down based on a variety of factors such as weather, temperature, and the general network usage in the immediate neighborhood. The most interesting thing about being a broadband customer on a cellular network is that the experience is unique to every customer. The reception will vary according to the distance from the cell tower or small cell and the amount of clutter and interference in a given neighborhood from foliage and other buildings.

I expect that large bandwidth users will get frustrated with the variability of the signal and eventually go back to a landline technology. The FWA product is mostly aimed at bringing broadband to rural customers who have no better broadband alternative or to folks in towns for whom saving money is more important than performance. There are a lot of such people who have stuck with DSL for years rather than upgrading to the more expensive cable broadband, and these are the likely target for FWA. In fact, FWA might finally let the telcos turn off DSL networks.

Verizon says it’s still on track with what it calls the One Fiber initiative which is aimed at building Verizon-owned fiber to cell towers and small cell sites. This backbone was likely the planned starting point for neighborhood fiber, but now this is mostly a cost-cutting step to stop paying fiber leases.

Fearing the Competition

Over the last six months, practically every big carrier in the industry has made a formal announcement that they are not worried about specific competitors. The latest one I read was in LightReading where Nick Jeffery of Frontier said he’s not worried about competition from the cable companies upgrading to DOCSIS 4.0 or from cellular carriers offering FWA home broadband. Frontier is building a lot of fiber, and Jeffery was commenting that he thinks fiber is a superior technology compared to the alternatives. To be honest, this might be the only claim I read where the ISP was being truthful. Frontier has been at the bottom of the heap in the industry for many years and led in the percentage lost broadband and cable TV customers quarter after quarter. It’s got to be refreshing for the company to be deploying a technology that gives it a fighting chance to succeed.

I’m not citing all of the other CEOs that said the same thing – but these announcements were pretty much across the board – basically, no carrier is afraid of other competitors.

I’ve seen all of the big cable companies quoted as saying they aren’t afraid of FWA cellular broadband. And yet, in the second quarter of this year, T-Mobile and Verizon added over 800,000 new customers, while the large cable companies collectively lost 150,000 customers during the quarter. The cable companies rightfully say they have superior technology when competing against 100 Mbps download speeds, but the FWA cellular carriers have much lower rates and are attracting customers who think that cable broadband costs too much.

The big telcos that are building fiber have all made the same claim about not fearing FWA wireless. The big telcos collectively lost less than 100,000 customers in the second quarter of this year, the best they’ve done in ages. The small loss disguises the fact that the telcos continue to lose DSL customers but are largely replacing them with fiber customers – except Lumen, which had a net customer loss for the quarter of 93,000.

I’ve seen most of the big fiber overbuilders scorning cable company broadband and saying they aren’t worried about DOCSIS 4.0 – like Frontier said. That’s a fairly easy thing not to fear for now since we’re a number of years away from any conversions to DOCSIS 4.0. But Comcast and others are talking about soon introducing some of the higher split technologies on DOCSIS 3.1 to boost upload speeds sooner. Will fiber overbuilders fear the cable companies more after some upgrades?

The WISPs that will be installing new versions of fixed wireless, including some technologies that claim to be able to deliver speeds up to a gigabit, say they are not afraid of competing against rural fiber networks built with grant funding. That’s an interesting claim since the general public seems to have grasped that fiber is better. It will be interesting to see what happens in places where rural fiber competes against fast rural broadband.

The big three cellular carriers all claim they are not afraid of Dish Network becoming the fourth major cellular carrier. It’s an odd claim to make since Dish says the only way for it to gain market share is to be extremely aggressive with prices. The cellular industry is already highly competitive, and it can’t be good for any of the bigger carriers to have to lower rates.

I get a chuckle every time I read one of these statements because when a carrier goes out of its way to mention a competitor, it is worried. The reality is that every carrier in a competitive situation has to be concerned about competitors. In the end, this is a battle that is going to be fought at the local level, market by market. I can picture that the various technologies will get a different reception depending on local factors. But for now, apparently, nobody fears the competition.

What’s The Trend for Broadband Prices?

For years, cable companies have been raising broadband prices every year. These annual rate increases meant a huge boost the earnings of the largest cable companies like Comcast and Charter. Most of the annual price increases of $3 to $5 went straight to the bottom line. While price increases don’t hit every customer immediately because of customers on term contracts, every price increase reaches every customer eventually.

It’s going to be really interesting to see if Comcast, Charter, and the other big cable companies raise prices later this year. The industry has changed, and it doesn’t seem as obvious as in the past that cable companies can raise rates and that customers will just begrudgingly go along with it.

First, the cable companies have stopped growing, and in the second quarter of this year, both Comcast and Charter experienced a tiny loss of customers. This seems to be for a variety of reasons. First, the FWA fixed cellular carriers are thriving. In the second quarter of this year, T-Mobile and Verizon added 816,000 new FWA broadband customers using 5G frequencies. The product is not as robust as cable broadband, with download speeds of roughly 100 Mbps, but FWA has faster upload speeds than cable. What’s making FWA attractive is the price of $50 – $60 for unlimited broadband – far below the prices charged by cable companies.

The cable companies have to be feeling some sting also from the large telcos and others who are building and selling fiber in cable company markets. There must be a few million customers moving to fiber annually at this point – a number that is going to grow.

The big question is if cable companies will keep raising rates in the face of customer stagnation. This can’t be an easy decision for cable companies. New revenues from raising rates go straight to the bottom line, and it is the annual rate increases that have sustained the earning growth and stock prices for cable companies. Comcast has over 32 million customers, and Charter has over 30 million, so forgoing a rate increase would mean forgoing a lot of new cash and earnings.

The strategic question is if the cable companies are willing to accelerate customer losses for the extra earnings from higher rates. Households getting a rate increase notice are going to be prompted to look around for alternatives, and many of them will find one. The time when cable companies are a monopoly in many cities is starting to come to an end.

The rest of the industry is going to watch this issue closely because it’s going to be easier to compete against the cable companies if they continue to raise rates. Higher cable broadband prices let other ISPs creep up rates and still stay competitive.

It’s interesting that almost no ISP has raised rates during this year when inflation is a major topic of conversation. One thing this shows is that there are big margins on broadband, and there is real cash pressure to raise rates to stay whole. But this also means that the big ISPs are absorbing higher labor, materials, and operating costs without charging more – and without increasing revenues through customer growth.

The biggest cable companies have other sources of revenue. Comcast and Charter both have a growing cellular business, but many analysts are speculating that it’s not generating a big profit. However, as the cable companies start utilizing licensed spectrum it might become quite profitable.

This is a really interesting time for the industry. The biggest cable companies have been the king of the hill for a decade and could do almost anything they wanted. They’ve been converting DSL customers by the millions annually while also raising rates – meaning getting doubly more profitable. Comcast and Charter are so large that they are not going to stop being the largest ISPs for a long time to come – but they are starting to show some market vulnerability, and there are plenty of ISPs willing to pounce on their markets.

Comcast and Charter Losing Broadband Customers

It’s big news that both Comcast and Charter lost broadband customers in the second quarter of this year. Both companies have steadily gained customers every quarter over the last decade. It was not a surprise to me to see this happen, but it happened sooner than I would have guessed.

Comcast lost 10,000 broadband customers for the quarter, a minuscule loss for a company with over 32.1 million broadband customers. To show how surprising this loss is, the company gained 262,000 customers in the first quarter of 2022, more than 1.3 million in 2021, and almost 2 million in 2020.

Charter lost 21,000 customers in the second quarter, again a small fraction of its 30.1 million broadband customers. But the loss is a big turnaround compared to the 185,000 broadband customers the company gained in the first quarter of this year, the 1.2 million customers gained in 2021, and the 2.2 million customers gained in 2020.

Comcast blames the customer loss on two factors. One is the end of the pandemic, which implies that households are now dropping broadband since the pandemic has cooled. This is the first time I’ve heard anybody make that claim. I’d love to hear if any ISPs that read this blog are seeing that same thing. Comcast also blamed the drop on the fact that fewer people than normal moved into new homes and apartments during the second quarter. That’s another claim that we’ll be able to check when the folks who track housing release statistics.

Charter blames the loss of customers on the change in the federal subsidy for low-income homes. Charter said it lost 59,000 customers when the subsidy changed from $50 under the Emergency Broadband Benefit (EBB) program to the $30 discount on the Affordable Connectivity Plan (ACP). That’s interesting, if true, and it provides evidence that many low-income households need a substantial discount in order to afford broadband. I’d also love to hear from any ISPs that are seeing this same customer trend. But I think Charter is being disingenuous to blame the drop on the low-income programs. The math doesn’t add up, and losing 59,000 in a quarter would not drive the company into having a net loss of customers.

There was something that both companies conspicuously didn’t claim – that the customer losses are due to competition. They are apparently not ready to make that claim yet because it makes them seem vulnerable. But it has been clear for some time that competition is nipping at the heels of the big cable companies. Telcos and other ISPs are furiously building fiber in urban areas in direct competition with cable companies. It’s hard to know fact from fiction, but fiber-based ISPs have high expectations – for example, AT&T says it plans to get a 50% penetration rate on fiber in a new neighborhood after three years.

Both companies are not acknowledging competition from the cellular carriers, which are selling unlimited 100 Mbps FWA broadband at an affordable price. Both cable companies have recently said they don’t fear competition from the FWA product. It’s too early to know how much of a threat wireless broadband will be – and it will take some time before we can see if the cellular networks can handle a lot of simultaneous broadband users and still maintain speeds. But for now, Verizon and T-Mobile are picking up a lot of new customers  – together, the two companies gained half of all new broadband customers nationwide in the first quarter of this year.

The stock prices of both cable companies have benefitted for years from continuous growth since analysts could count on each company growing both customers and revenues year after year. It’s going to be interesting to see what a loss of customers means to the long-term stock prices.

This new trend might change a lot of dynamics in the industry. I’ve said for years that the cable companies were on a steady march to have $100 broadband – and they still might be. It might be that raising rates is now the only path for them to increase the bottom line. But will these companies be able to raise rates in an increasingly competitive market? It seems unlikely that they will be able to keep increasing the price for the basic products, but the companies might be hoping for a continuation of the trend of customers upgrading to faster products. Both cable companies are aggressively selling cellular services, and each gained over 300,000 new cellular customers in the second quarter. But we don’t know how much margin the cellular business adds to their bottom lines.

Charter might have an easier path than Comcast to curtail losses and possibly grow again. Charter is aggressively seeking grant funding to expand into the rural areas around existing markets. These are areas that have had poor rural broadband, and Charter is building fiber in these markets – much to the annoyance of its urban customers who are not getting upgraded to Charter fiber. But this expansion should add a lot of new customers over the next four or five years. I think Charter realizes that in these markets, they will benefit by being the only provider of fast broadband – the first time the company will be operating in areas where it will largely be a monopoly.

The fact that the two biggest ISPs lost customers is a bellwether event that shows that the broadband market is now up for grabs. Who will be the big winners that fill the void if Comcast and Charter are not grabbing most of the new customers each quarter?

Licensed Spectrum and Broadband Mapping

As I work with clients who are thinking about applying for the BEAD grants, I keep stumbling across new issues that I see as problems. Today’s blog talks about how the BEAD grants in a given location could go sideways because of the NTIA’s decision to declare facility-based wireless technologies that use licensed spectrum to be considered as a reliable technology that is eligible for BEAD grants. I can foresee two different problems that might result from this decision.

There are two kinds of wireless carriers that could qualify under this new definition. First, cellular carriers like T-Mobile and Verizon are aggressively marketing FWA fixed wireless for homes using licensed spectrum. In the not-too-distant future, we can expect AT&T, Dish Network, and probably many of the smaller cellular carriers like U.S. Cellular to deploy the technology using licensed spectrum. The carriers are largely advertising this as 5G, but the actual technology being used for now is still 4G LTE.

The other set of facility-based wireless providers are the fixed wireless WISPs that use a mix of licensed and unlicensed spectrum to deliver broadband from towers. Most of these WISPs are using the licensed portion of Citizen Band Radio Spectrum (CBRS), but they can use other licensed spectrum like 700 MHz or other cellular spectrum purchased at auction in the past.

The first problem I foresee is that these wireless carriers can use the upcoming FCC broadband mapping update to lock down huge areas of real estate from eligibility for BEAD grants. Anywhere that these carriers claim speeds of 100/20 Mbps in the next set of FCC maps will be initially declared by the BEAD rules to be served and ineligible for grants.

Unfortunately, the new mapping rules allow for this since ISPs can claim marketing speeds in the FCC mapping. I’m positive that many WISPs will declare the speeds that will classify their areas as served, because many of them already have been reporting these speeds in the past. In just the past year, I’ve worked with at least thirty counties where at least one wireless ISP claimed countywide coverage with broadband  – in some cases at speeds of 100 Mbps or faster. These WISPs might have the 100/20 Mbps capability for some customers close to a tower, but it’s impossible to be able to deliver those speeds to everybody across an entire county.

To use an example, I talked to a farmer recently who is thrilled to get the new T-Mobile FWA product at the farm. The tower is on his property, and he is getting 200 Mbps downloads. But the stories from his neighbors are quite different. One neighbor less than a mile away is seeing 75 Mbps download speeds. A few other neighbors two miles or more away claim the broadband is unusable. If T-Mobile was to claim a fairly wide coverage for this technology in the FCC maps, it would be blocking BEAD grant money inside whatever areas it claims.

But let’s say that T-Mobile reports honestly. Under the new FCC mapping rules. a wireless ISP is supposed to input a wireless propagation map like the one below. This map is typical of wireless coverage in that the wireless signal travels further in directions where it is unimpeded. But this example propagation map doesn’t tell the whole story because you might imply that the speeds are the same over the whole propagation area. My farmer example shows that wireless speeds can drop off rapidly with distance from a tower. A map of a 200 Mbps coverage area or even a 100 Mbps coverage area will be tiny for a wireless ISP. The map that should be input to the new FCC maps is just the areas that can get good broadband speeds. In the propagation map below, probably 80% of the green areas probably don’t even see one bar of broadband. It’s also worth noting that the propagation map is not fixed – the coverage area changes with temperature, precipitation, and more mundane factors like the amount of backhaul provided to a given tower.This raises the second issue. If the wireless carriers with fast licensed spectrum report properly in the new maps, there are going to be splotches of areas around every rural cell tower that will be off-limits for grants. In the same way that the swiss cheese RDOF awards goofed up anybody else from bringing a fiber broadband solution, these fixed wireless or cellular blotches will make it hard to build a coherent network in areas that have to avoid the wireless areas. In a real deployment, An ISP will likely build to everybody in an area – but because of the mapping rules, they won’t get grant funding everywhere. I can’t even begin to imagine how somebody building a fiber network is going to properly account for assets that are inside and outside of areas that are supposedly already served.

I wonder if the NTIA understands what it has done. The agency seems to have worked very hard to avoid the problems the FCC caused in the RDOF reverse auction. But this ruling brings in one of the most damaging aspects of RDOF – incoherent grant serving areas. I know there is a challenge process for the maps used for BEAD, but it’s going to be extremely difficult to dispute an ever-changing propagation map around every cell tower or fixed wireless radio. I fear this is going to be one of the newest nightmares to pop out of the revised FCC maps.

Here Comes FWA

Broadband industry statistics have been compiled by the Leichtman Research Group which provides an interesting new narrative for the industry. The biggest ISPs added just over one million new broadband customers in the first quarter of 2022, but half of the new customers went to the FWA products from Verizon and T-Mobile.

FWA stands for Fixed Wireless Access and is home broadband delivered using cellular frequencies. T-Mobile and Verizon are aggressively marketing the product, which is touted to have download speeds over 100 Mbps. The market is going to get hotter when Dish gets its launch underway soon. AT&T has also been promising a major new marketing effort to sell the product.

 1Q 2022 1Q Change % Change
Comcast 32,163,000 262,000 0.8%
Charter 30,274,000 185,000 0.6%
AT&T 15,533,000 29,000 0.2%
Verizon 7,400,000 35,000 0.5%
Cox 5,560,000 30,000 0.5%
Lumen 4,470,000 (49,000) -1.1%
Altice 4,373,200 (13,000) -0.3%
Frontier 2,819,000 20,000 0.7%
Mediacom 1,468,000 5,000 0.3%
Windstream 1,176,000 11,300 1.0%
Cable ONE 1,057,000 11,000 1.1%
T-Mobile FWA 984,000 338,000 52.3%
Breezeline 719,608 2,830 0.4%
TDS 495,200 4,900 1.0%
Verizon FWA 433,000 194,000 81.2%
Consolidated 380,150 (850) -0.2%
   Total 109,305,158 1,065,180 1.0%
Total Cable 75,614,808 482,830 0.6%
Total Telco 32,273,350 50,350 0.2%
FWA 1,417,000 532,000 60.1%

FWA was originally touted as the replacement for rural DSL. However, both T-Mobile and Verizon report having success selling the product in urban areas and competing with cable companies. This means that FWA success is going to bring down customer counts for other ISPs.

Over the past several years, Comcast and Charter have been accounting for most of the growth in broadband customers. In the first quarter, the two FWA providers and Comcast and Charter together account for 92% of net increases in broadband customers.

There are some interesting numbers inside this report.

  • Frontier has clearly turned it around after steady losses for several years and saw growth of 0.7% for the quarter.
  • The big loser is now Lumen, which lost over 1% of its broadband customers in the quarter.
  • We know that AT&T has been selling fiber connections at a hot pace but is still seeing significant losses of DSL customers to net out at a small positive growth.
  • The biggest percentage gainer among landline companies for the quarter is CABLE ONE, with quarterly growth of 1.1%.
  • Altice continues to struggle and lost broadband customers for the quarter.

Another BEAD Grant Complication

I’ve been thinking more about the NTIA’s definition of Reliable Broadband Service that was part of the recently issued Notice of Funding Opportunity (NOFO) for the $42.5 billion BEAD grants. That definition says that any grant cannot be used to overbuild a reliable broadband technology that meets or exceeds the 100/20 Mbps speed threshold of the grants. The NOFO said that the grants can’t be used where speeds are adequate for the following technologies: (i) fiber-optic technology; (ii) Cable Modem/ Hybrid fiber-coaxial technology; (iii) digital subscriber line (DSL) technology; or (iv) terrestrial fixed wireless technology utilizing entirely licensed spectrum or using a hybrid of licensed and unlicensed spectrum.

The policy behind this makes sense – the NTIA doesn’t think that valuable federal grant dollars should be used where adequate broadband technology is already in use. That would make them a good shepherd of the federal dollars.

But this particular definition is going to cause some complications the NTIA might not have considered. I’ve been running into rural FWA cellular wireless broadband in rural markets. So far, I’ve only encountered the new technology from T-Mobile and Verizon. But this will also be introduced by Dish Network. AT&T says it also has plans to roll out the faster cellular home product.

The FWA technology is enabled when a cellular company beefs up cell sites to provide home broadband in addition to cell phone service. This is being enabled by the introduction of new spectrum bands. For marketing purposes, the carriers are labeling these new bands as 5G, although the technology is still 4G LTE.

The cell carriers have been offering a weak version of home broadband for years, marketed as a hotspot or jetpack. But that technology shared the same frequencies used for cell phone service, and the broadband has been slow, weak, erratic, and expensive. However, putting home broadband onto new cellular spectrum changes the product drastically.

Recently I heard from a farmer who is getting 200 Mbps download broadband from a rural T-Mobile FWA connection – this farmer sits right next to a large cell tower. According to the NTIA, this farm should not receive any grant subsidy to bring fiber broadband with a grant. But as is usual, real life is a lot more complicated than that. This same farmer says that his nearest neighbors, only a little over a mile away, are seeing speeds significantly below 50 Mbps.

This makes sense because that’s how cellular technology works. Most people don’t realize how quickly broadband signal strength weakens with distance from a cell site. In cities, practically everybody is within half a mile or a mile from a cell site, so we never notice. But in rural areas, most people live too far from a cell site to get decent bandwidth from this technology. Consider the following heatmap of a real cell site.

The fastest broadband speeds would be within a few thousand feet, like with the farmer. The area that might get 100 Mbps broadband is in the orange and yellow areas on the map. The speeds in the green areas are where speeds fall below 100 Mbps, and by the time the broadband signal reaches the light blue areas the speeds are almost non-existent. The purple areas show where a voice signal might carry, but only unreliably.

What does this mean for the BEAD grants? As T-Mobile and the other cell carriers start updating rural cell sites they are going to be putting heatmaps like the one above into the FCC mapping system. It’s worth noting that most cell sites don’t create a roughly symmetrical coverage pattern because the wireless signal gets disrupted by any obstacles in the environment, even small rolling hills. It’s also worth noting that cellular coverage is dynamic and changes with temperature, precipitation, and even wind.

Recognizing cellular broadband coverage (licensed) as reliable broadband will have several consequences. First, this disrupts grant coverage areas since there will be cellular areas in every county that won’t be eligible for grants. This will create a swiss cheese phenomenon where there are areas where grants are allowed next to rural areas that are not allowed. That will complicate the engineering of a broadband solution for the areas that are left. This is the same thing the FCC did with the RDOF awards – chopped up potential grant areas into incoherent, illogical, and costly swiss cheese.

This also might mean this farmer won’t get fiber. His neighbors who can’t get good speeds on T-Mobile might be covered by a BEAD grant, but an ISP might be unwilling to fund the cost to reach this farmer if the cost is not covered by a grant.

I doubt that the NTIA thought of the practical consequences of the new definition, just like I can’t imagine the FCC had the slightest idea of the absolute mess they made with RDOF coverage areas. The only way to justify building a new network in a rural area, even with grants, is to cover large areas with one coherent network – not by building a network that has to somehow avoid RDOF areas and cell towers.

ISPs interested in BEAD awards are now going to have to wait until the new broadband maps come out to know what this might do to their grant plans. I’m thinking that, at least in some cases, this will be the final straw that breaks the camel’s back and convinces an ISPs to walk away and not even try.

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.