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The Industry Uncategorized

Lumen’s Fiber Path Forward

Lumen is taking a different path forward than the other big telcos. AT&T continues to build fiber in selected clusters, mostly in cities, rather than concentrate on building entire markets. Frontier, Windstream, and Consolidated are all concentrating on upgrading existing telco DSL networks to fiber.

Lumen has a different path forward. In a recent press release, the company announced a major upgrade to its long-haul fiber routes that cross the country. The company’s main fiber strategy is to beef up the intercity network with plans to add six million miles of fiber to existing fiber routes by 2026. In case you are wondering how there can possibly be six million route miles of fiber in the country – that count is miles of individual fibers. This is a marketing trick that long-haul fiber providers have been using for years to make networks seem gigantic.

The existing Lumen long-haul fiber network came to the company in two acquisitions. The original network came when CenturyLink bought US West, which had earlier merged with Qwest, a major builder of long-haul networks. The network was strengthened when CenturyLink purchased Level 3 Communications.

The original Quest fiber is getting dated in terms of capacity and performance. Much of this fiber was built thirty and forty years ago. While most of the fiber is still functional, fiber glass technology has improved drastically since then. Lumen will be using two low-loss types of fiber from Corning. This newer fiber is far clearer than older fiber and will increase the distance between repeater points while also allowing for using the fastest 400-gigabit electronics today and faster electronics later.

Earlier this year, Lumen announced it is improving its Ethernet architecture in forty cities this year. This means upgrading local networks to major customers to be able to provide speeds up to 30 gigabits. While this upgrade will mostly benefit business customers, this also will improve the local fiber backbone in these cities to 100 gigabits, which should improve performance for all broadband customers.

Lumen is also pursuing a last-mile fiber expansion. In August, the company announced fiber expansion plans in Denver, Minneapolis, and Seattle. The company had a target for this year to pass one million locations with fiber but has fallen a little behind due to supply chain and logistics.

Unlike the other telcos, Lumen hasn’t been talking much about the upcoming rural grant funding. This doesn’t mean the company might not pursue those opportunities since rural fiber expansion creates monopolies. But major residential expansion does not seem to be a key part of the Lumen plan, at least compared to plans for companies like Frontier, which says it plans to pass 12 million homes with fiber.

Another big unknown is if the company is still trying to sell any of its remaining copper networks like it did with sale of the twenty easternmost states to Apollo Global Management. It would be a more drastic affair to liquidate last-mile customers in the states where US West was formally the Bell company incumbent provider.

Any more sales of last-mile networks would be an interesting step where Lumen would be retracting to be a large business ISP. The company already had a sizable share of the business market that got bolstered by the acquisition of Level 3.

Lumen shares one characteristic with all of the big telcos in that it knows it must reinvent itself. After many years of no activity, Verizon is expanding FiOS again while also pushing a nationwide FWA network. AT&T is fully committed to building last-mile fiber networks and continues to add millions of new passings per year. The smaller telcos like Frontier and Windstream have clearly decided they must build fiber or fade away. Lumen is still the big wild card that hasn’t fully committed to any single expansion strategy and is pursuing different paths. From folks who track what the big ISPs are doing, if nothing else, this makes them the most interesting company to watch.

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The Industry

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.
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