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.
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.
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.
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.
In the Bernstein Strategic Conference in May, Ronan Dunne, Verizon CEO and EVP for Verizon Consumer talked about his vision for the future of 5G. During that presentation, he made a statement that has been bugging me for weeks, so I finally had to write about it. He said that he can foresee a day when consumers will purchase home broadband in the same way that they buy wireless service today. He said that will happen because the line between the wireless and wireline business are blurring.
Dunne is talking about a future when 5G is ubiquitous and where people won’t perceive a difference between landline broadband and 5G broadband. In a term used by an economist, Dunne foresees a day when wireless broadband is a pure substitute for landline broadband – where a customer won’t perceive a functional difference between the two products.
Verizon offers several wireless products, so let’s talk about them individually. The predominant Verizon product that is in every market is cellular broadband. This uses cell sites to beam voice and data traffic to cellphones or other devices that are connected to a cellular data plan. Those cellular plans are incredibly stingy in terms of the amount of broadband that can be used in a month, with the unlimited plans offering a little more than 20 gigabytes of data before a user has to pay more or become restricted. The specifications for 5G set a goal of 100 Mbps for cellular broadband speeds within a decade. That kind of speed might be a substitute for landline broadband today from a speed perspective. But networks are not likely to achieve these speeds for at least five more years, and by then I think cable companies will be considering increase urban broadband speeds to something like 250 Mbps. I have to question if cellular broadband speeds can keep up with the speeds provided by landline connections.
Of more importance is that cellular speeds drop when entering a building. Anybody who has walked into a large building using their cellphone understands that cellular signals don’t perform as well indoors as outdoors. By the time I walk 100 feet into my neighborhood grocery store, I often have zero bars of data. While speeds don’t drop that drastically in most homes, when outdoor cellular speeds hit 100 Mbps, indoor speeds in most homes might hit half that number. With slower speeds and incredibly stingy data caps it’s hard to see cellular broadband as a pure substitute for a landline broadband connection.
I also don’t think that the gimmick product that Verizon and others are selling in urban city centers that offers gigabit speeds using millimeter wave spectrum is a landline substitute. The product requires closely spaced small cell sites fed by fiber – but the big gotcha is that the millimeter wave spectrum won’t penetrate a building and barely even make it through a pane of glass. This is an outdoor product for which I still struggle to understand a willing market. It’s certainly not a substitute for landline broadband, except perhaps for somebody who is always outdoors.
The newest wireless product is Verizon’s fixed wireless access (FWA) that beams a broadband signal into the home from a pole-mounted transmitter at the curb using millimeter wave spectrum. I have to suspect that this is the product Dunne is talking about. I would agree with him that this is a pure substitute for landline broadband. But that’s because this is just another variation of landline broadband. This technology has historically been referred to as fiber-to-the-curb. Verizon is using a wireless transmission instead of a fiber line for the last hundred feet to reach a home – but this technology requires building the same fiber into neighborhoods as fiber-to-the-home. This is not a wireless technology since 99% of the network is still comprised of fiber. Anybody using this service can walk to their curb to see the fiber that is carrying their broadband. This technology is a clear substitute for a landline fiber drop – but it’s not a wireless network other than for the last 100 feet to a home.
The other way to challenge Dunne’s vision is by comparing the volume of traffic used by landline and wireless networks. The vast majority of data traffic is still carried over wires and the gulf between the data carried by each technology is widening every year. Consider the following chart from Cisco from 2019 that shows the volumes of monthly data traffic in North America by type. This is expressed in exabytes (one billion gigabytes).
Both home and business broadband are carried on wires. In 2020, only a little more than 4% of all of the data traffic in North America is carried wirelessly. For wireless technology to be a pure substitute for wireline data, wireless networks would have to be capable of carrying a much bigger share of data – many times what they carry today. The laws of physics argue against that, particularly since landline data usage is growing at an exponential rate. It’s hard to envision wireless networks in our lifetime that can handle the same volumes of data as fiber-based landline networks.
This is not intended as a major criticism of what Dunne said. The country will be better off if Verizon offers a competitive alternative to the cable companies. However, Verizon is like the other cellular companies and can’t talk about 5G without overstating the potential. I know has to keep hyping 5G for Wall Street and I sympathize with that need. But we are still very far from a day when the average household will view landline and wireless data to be pure substitutes.
After a two-year pause, Verizon has launched a new version of its fixed wireless access (FWA) broadband, launching the service in Detroit. Two years ago, the company launched a trial version of the product in Sacramento and a few other cities and then went quiet about the product. The company is still touting this as a 5G product, but it’s not and using millimeter wave radios to replace the fiber drop in a fiber network. For some reason, Verizon is not touting this as fiber-to-the-curb, meaning the marketing folks at the company are electing to stress 5G rather than the fiber aspect of the technology.
Verizon has obviously been doing research and development work and the new wireless product looks and works differently than the first-generation product. The first product involved mounting an antenna on the outside of the home and then drilling a hole for fiber to enter the home. The new product has a receiver mounted inside a window that faces the street. This receiver connects wirelessly with a home router that looks a lot like an Amazon Echo which comes enabled with Alexa. Verizon is touting that the new product can be self-installed, as is demonstrated on the Verizon web page for the product.
Verizon says the FWA service delivers speeds up to a gigabit. Unlike with fiber, that speed is not guaranteed and is going to vary by home depending upon issues like distance from the transmitter, foliage, and other local issues. Verizon is still pricing this the same as two years ago – $50 per month for customers who buy Verizon wireless products and $70 per month for those who don’t. It doesn’t look like there are any additional or hidden fees, which is part of the new billing philosophy that Verizon announced in late 2019.
The new product eliminates one of the controversial aspects of the first-generation product. Verizon was asking customers to sign an agreement that they could not remove the external antenna even if they dropped the Verizon service. The company was using external antennas to bounce signals to reach additional homes that might have been out of sight of the transmitters on poles. With units mounted inside of homes that kind of secondary transmission path is not going to be possible. This should mean that the network won’t reach out to as many homes.
Verizon is using introductory pricing to push the product. Right now, the web is offering three months of free service. This also comes with a year of Disney+ for free, Stream TV for free, and a month of YouTube TV for free.
The router connects to everything in the home wirelessly. The wireless router comes with WiFi 6, which is not much of a selling point yet since there are practically no devices in homes that can yet use the new standard – but over time this will become the standard WiFi deployment. Customers can buy additional WiFi extenders for $200 if needed. It’s hard to tell from the pictures if the router unit has an Ethernet jack.
From a network perspective, this product still requires Verizon to build fiber in neighborhoods and install pole-mounted transmitters to beam the signal into homes. The wireless path to the home is going to require a good line-of-sight, but a customer only needs to find one window where this will work.
From a cost perspective, it’s hard to see how this network will cost less than a standard fiber-to-the-home network. Fiber is required on the street and then a series of transmitters must be installed on poles. For the long run operations of the network, it seems likely that the pole-mounted and home units will have to be periodically replaced, meaning perhaps a higher long-term operational cost than FTTH.
Interestingly, Verizon is not mentioning upload speeds. The pandemic has taught a lot of homes how important upload speeds are, Upload speed is currently one of the biggest vulnerabilities of cable broadband and I’m surprised to not see Verizon capitalize on this advantage for the product – that’s probably coming later.
Verizon says they still intend to use the technology to pass 30 million homes – the same goal they announced two years ago. Assuming they succeed, they will put a lot of pressure on the cable companies – particularly with pricing. The gigabit-range broadband products from Comcast and Charter cost $100 or more while the Verizon FWA product rivals the prices of the basic broadband products from the cable companies.