Tag Archives: Mike Dano

The Trajectory for FWA

Mike Dano, in LightReading recently quoted Sowmyanarayan Sampath, the EVP and CEO of Verizon’s consumer business, as saying that Verizon expects to have 4 to 5 million FWA customers at the end of 2024, up from 3.4 million at the end of the first quarter of 2023. Mr. Sampath says that Verizon’s current network can support 4 to 5 million customers, but that the company is assessing how to grow beyond that point – a decision they will make later this year.

Verizon says its FWA growth was a little sluggish at the beginning of 2024, but that sales have picked in March after the company started offering new customers a free Nintendo Switch, the game console that retails for $200 to $300.

Dano also quotes financial analysts at TD Cowen who predict that Verizon will add 888,000 new net subscribers this year while T-Mobile will add 1.3 million more customers this year to add to the 4.8 million customers at the end of 2023. We also can’t forget that AT&T has entered the fray. The financial analysts at New Street Research recently predicted that AT&T will hit a peak of 180,000 new FWA customer additions per quarter by late 2025.

FWA broadband has majorly disrupted the broadband industry. According to the TD Cowen estimates, FWA operators will gain 2.6 million new customers in 2023 while fiber operators will add around 600,000 new customers. They predict that the big cable companies will lose about 1.1 million customers in 2024. That’s a net market change of 2.1 million new broadband customers – down from 3.5 million new customers in 2023.

I don’t know if the TD Cowen estimates include the impact from the end of the ACP program that brought discounts to 10 million landline broadband households. While many of those customers will likely still keep a broadband connection, many of these households got free broadband after applying the discount, and it doesn’t seem unrealistic to think that at least several million households will eventually disconnect broadband without the discount.

FWA broadband has one notable weakness that might define a natural market cap for the product as currently configured. The current version of the product shares bandwidth with cellular customers. Cell sites were not designed to accommodate large numbers of broadband connections that stay connected for long periods of time – and that, according to OpenVault, now use an average of 651 gigabytes of broadband every month. FWA broadband usage has to be eating into the resources at cell sites – and the impact will only get worse as both home and cellular customers use more broadband every year.

I think I’ve already witnessed some evidence of the stresses caused by FWA. I’ve had access to detailed speed test records for entire counties, and I’ve seen FWA customers who test at speeds of 100-300 Mbps down most of the time but who occasionally test at only a few Mbps. The FWA providers all say that they throttle users any time the cell site gets too busy, and I’ve seen enough examples to think this is evidence of severe throttling. That’s a situation that will occur more often as the FWA providers add more customers. Most broadband customers today won’t tolerate occasionally losing all broadband and likely will return to their original ISP if they continue to get throttled.

Mr. Sampath touched on a possible solution to the problem. He says Verizon is exploring the use of millimeter-wave spectrum at cell sites. Both Verizon and T-Mobile are considering C-Band spectrum for FWA customers. Moving at least some FWA customers off the same spectrum used for cellphones would eliminate the biggest weakness of FWA – that it uses the same spectrum that is serving cellphones. As much as carriers like FWA, they are not going to endanger their much larger cellular business – and one has to think that the success of FWA has already degraded cellular quality to some extent.

Interestingly, both Verizon and T-Mobile had originally publicly predicted that they would eventually achieve 15 million customers on FWA. They still have a long way to go to get there. It already looks like Verizon might have tapped into a lot of the households that are choosing FWA strictly due to lower prices. Having to bribe new customers with a new video console is a sign of a market that is already maturing.

It’s clear that FWA growth is probably the most important statistic in the market today since other ISPs are competing for the customers who aren’t opting for FWA. If the overall broadband market is reaching maturity, it gets even harder to predict how any given ISP or technology will perform.

Outlook for FWA Cellular Wireless

Mike Dano at LightReading published a recent article looking at the future of FWA (cellular fixed wireless). For those not familiar with the technology, this is broadband delivered to homes and businesses by cellular companies using the new spectrum bands that have been labeled as 5G. This is a new product that has only been around for a little over the year and has already taken the broadband market by storm. At the end of the first quarter of this year, T-Mobile had almost 3.2 million customers and Verizon had almost 1.9 million. It’s likely that UScellular will be entering the market in a big way along with DISH. AT&T is still somewhat on the sidelines – it has an FWA product but is still making fiber a priority.

Dano talked to analysts at Wells Fargo who track the broadband industry. They are predicting that FWA will capture 10% of the residential market by 2025. To put that into perspective there are currently around 118 million homes with broadband, and FWA has quickly captured over 4% of households with FWA products. Wells Fargo analysts are predicting an additional 6.8 million FWA customers by 2025.

Interestingly, these same analysts predict that the cable company share of the residential market will drop from 67% today to 62% by 2025, a drop of 5.9 million customers. I’m not sure how the explosion of fiber construction plays into that math.

These analysts and others foresee the FWA wireless hitting a natural plateau as the technology starts hitting a saturation point in neighborhoods. The FWA technology is not able to serve all homes in an area due to several issues. First, while this product is nice for the bottom line of big cellular companies, their bread-and-butter product is serving cell phones. Since FWA shares the same spectrum, there is a natural limit on how many FWA customers they are willing to serve in any neighborhood. Additionally, both T-Mobile and Verizon tell FWA customers in the fine print that they will throttle the bandwidth anytime cellphone usage gets too busy. When that starts happening, I predict a lot of households will lose interest in the FWA product.

We got a deeper glimpse into the plans for FWA when CEO Mike Sievert of T-Mobile talked about the product at the J.P Morgan Global Technology, Media, and Communications Conference. He says that T-Mobile’s overall market penetration in small and rural markets is now at 16%, and the company’s target is to reach 20% by 2025. He says in prime small markets the company is targeting penetration rates in the mid-30s.

I have my own speculations about FWA. FWA is currently seeing big success because it is filling several market niches. In rural areas, the product delivers speeds from 50 Mbps to 200 Mbps depending on how far a customer lives from a tower. In markets where the alternatives are slower technologies like satellite, DSL, or WISP broadband, customers are happy to have relatively fast broadband for the first time. FWA is also the product for the price-conscious consumer, priced between $50 and $65 when most other broadband technologies cost more. In towns and cities, this product delivers a faster alternative to DSL.

But I have a hard time seeing FWA dominating any market in the long run. Many of the rural markets where it will have gained significant market shares will eventually get fiber from the many rural broadband grant programs. Will households stick with FWA when there is a much faster product?

I’ve already been reading online reviews that talk about the unpredictable bandwidth, which is inherent in a network that shares bandwidth with cellphone customers. Cellular bandwidth already varies throughout the day for a wide variety of reasons – something that anybody who watches the bars on their cell phone understands. FWA is not going to deliver the guaranteed speed performance as a wired technology – quality will vary according to local conditions.

Finally, within a decade, a 100 Mbps connection is going to feel as obsolete as 25/3 Mbps broadband feels today. At the end of the first quarter of this year, Openvault said that only 9.5% of all broadband households are still subscribed to a broadband product of 100 Mbps or less. The public has already abandoned 100 Mbps broadband, and the vast majority of households already have something faster. My prediction is that FWA will have a spectacular market share for the next five years, but a decade from now, the only households still using it will be the same ones that stick with DSL today – homes for whom price is far more important than performance.

Is Fiber Growth Slowing?

In a recent article in LightReading, Mike Dano cites data from industry analyst Cowan that shows that some of the largest fiber builders in the country have already trimmed back their construction plans for 2023.

AT&T has the largest retrenchment and is trimming 2023 plans from 3.5 to 4 million passings back to 2 to 2.5 million. The company says that it is not changing its long-term goal to reach 30 million passings with fiber, but a cutback of this size means it won’t likely reach that target in 2025.

Lumen’s new CEO Kate Johnson said the company is taking a pause while it rethinks its path forward. In doing so, the company trimmed 2023 fiber expansion plans from 1.75 million passings to something under 1 million.

Cowen says other big ISPs will also trim plans a bit. Frontier is probably trimming 2023 plans from 1.6 million to 1.4 million passings. Altice is cutting expectations back from 1.6 million to 1.5 million. Consolidated is reducing 400,000 planned new passings to 350,000.

There are other fiber builders that don’t seem to be cutting plans. Brightspeed, Metronet, and others still seem to be on track for their 2023 plans.

But cutbacks of the size of the AT&T and Lumen plans raise some questions about the trajectory of fiber overbuilding. If construction plans announced two years ago had held steady, there was a massive push to build fiber networks to compete with cable companies. Do these cuts mean that fiber competition won’t materialize as planned?

There have been big external changes affecting the entire industry. Fiber material costs are up, as evidenced by the recent price hike announced by Corning. Prices of fiber components are up across the board for everything from conduit, handholes, drop wires, etc. A bigger cost impact is the cost of labor, with technicians labor rates rising across the industry.

Fiber construction is also not immune from interest rate increases. I already have some clients thinking of shelving fiber expansion projects until interest rates come back to earth.

All of this adds up to a lower return for fiber builders. I was always a bit mystified by the frenetic planned pace of fiber expansion craze in cities since the returns have never been spectacular. I’ve always assumed the push to build fiber has been more of a land grab as big ISPs see other fiber builders encroach on areas they want as markets. I think much of the fiber construction craze has been about either building now or getting locked out of markets in the future.

Any level of cutbacks is good news for cable companies, since the above cutbacks mean several million fewer fiber passings to compete with by the end of 2023. Any relaxing of the competitive pressure gives cable companies more time to upgrade upload speeds over the next three years. I have to wonder if the cable company’s plans to increase upload speeds play into any of the decisions to cut back on fiber expansion. It would be really interesting to sit inside the Board rooms as the big ISPs debate these strategies. The broadband environment is getting more complex by the day.

Using Wireless Backhaul

Mike Dano of Light Reading reports that Verizon is considering using wireless backhaul to reach as many as 20% of small cell sites. Verizon says they will use wireless backhaul for locations where they want to provide 5G antennas but can’t get fiber easily or affordably. The article sites an example of using wireless backhaul to provide connectivity where it’s hard to get the rights-of-way to cross railroad tracks.

This prompts me today to write about the issues involved with wireless backhaul. Done well it can greatly expand the reach of a network. Done poorly it can degrade performance or cause other problems. This is not an anti-Verizon blog because they are one of the more disciplined carriers in the industry and are likely to deploy wireless backhaul the right way.

Dano says that Verizon has already addressed one issue that is of concern today to municipalities that are seeing small cell deployments. Cities are worried about small cell devices that are large and unsightly. There are already pictures on the web of small cells gone awry where a mass of different electronics are pole-mounted to create an unsightly mess. Verizon describes their solution as integrated, meaning that no additional external antennas are needed – implying that the backhaul is likely using the same frequencies being used to reach customers. The small cell industry would do well to take heed of Verizon’s approach. It looks like courts are siding with municipalities in terms of being able to dictate aesthetic considerations for small cells.

Another issue to consider is the size of the wireless backhaul link. For instance, if Verizon uses millimeter wave backhaul there is a limitation today of being able to deliver about 1-gigabit links for 2 miles or 2-gigabit links for about a mile. The amount of bandwidth and the distance between transmitters differ according to the frequency used – but none of the wireless backhaul delivery technologies deliver as much bandwidth as fiber. Verizon has been talking about supplying 10-gigabit links to cell sites using next-generation PON technology. Wireless backhaul is going to be far less robust than fiber. This is likely not an issue today where many cell sites are using less than 2 gigabits of bandwidth. However, as the amount of broadband used by cellular networks keeps doubling every few years it might not take long for many cell sites to outgrow a wireless backhaul link.

The primary issue with wireless backhaul is the bandwidth dilution from feeding multiple wireless sites from one fiber connection. Consider an example where one cell site is fiber-fed with a 10-gigabit fiber backhaul. If that site them makes 2-gigabit wireless connections to four other cell sites, each of the 5 sites is now upward limited to 2 gigabits of usage. The bandwidth of the four secondary sites is limited by the 2-gigabit link feeding each one. The core site loses whatever bandwidth is being used by the other sites.

That’s probably a poor example because today most cell sites use less than 2 gigabits of bandwidth. Verizon’s use of 10-gigabit fiber backhaul moves them ahead of the rest of the industry that has cell sites with 1- to 5-gigabit backhaul connections today. The weaknesses of wireless backhaul are a lot more apparent when the wireless network beings at a site that only has a 1- or 2-gigabit fiber connection.

I’m sure that over time that Verizon plans to build additional fiber to relieve network congestion. Their use of wireless backhaul is going to push off the need for fiber by a decade or more and is a sensible way to preserve capital today.

The issues with wireless backhaul are far more critical for carriers that don’t have Verizon’s deep pockets, fiber networks, or discipline. It’s not hard today to find wireless networks that have overdone wireless backhaul. I’ve talked to numerous rural customers who are buying fixed wireless links from WISPs who are delivering only a few Mbps of bandwidth. Some of these customers are getting low speeds because they live too far away from the transmitting tower. Sometimes speeds are low because a WISP oversold the local antenna and is carrying more customers than the technology comfortably can serve.

But many rural wireless systems have slow speeds because of overextended wireless backhaul. In many cases in rural America, there are no fiber connections available for fixed wireless transmitters, which are often installed on grain elevators, water towers, church steeples or tall poles. I’ve seen networks that are making multiple wireless hops from a single gigabit fiber connection.

I’ve also seen preliminary designs for wireless ‘mesh’ networks where pole-mounted transmitters will beam wireless broadband into homes. Every wireless hop in these networks cuts the bandwidth in half at both radio sites (as bandwidth is split and shared). If you feed a mesh wireless network with a gigabit of bandwidth, then by the fifth hop a transmitter only sees 62 Mbps of raw bandwidth (which is overstated because by not accounting for overheads). It’s not hard to do the math to see why some rural wireless customers only see a few Mbps of bandwidth.

I’m sure that Verizon understands that many of the cell sites they serve today wirelessly will eventually need fiber, and I’m sure they’ll eventually build the needed fiber. But I also expect that there will be networks built with inadequate wireless backhaul that will barely function at inception and that will degrade over time as customer demand grows.