Tag Archives: Recon Analytics

Fiber Matters in the Market

Roger Entner, of Recon Analytics, published an article in Light Reading that challenges the paradigm of the benefits of convergence. Convergence has most recently come to mean bundling broadband and cellular service. There is a widespread industry belief that ISPs need to have a cellular product to thrive, and cable companies have added a cellular product in the name of convergence. Entner says there is only one kind of convergence that makes a real market difference – fiber ISPs with a cellular product do far better than any other kind of convergence.

He bases his conclusions on different sets of facts. First is the results of 1.2 million surveys given by Recon Analytics between April 2023 and March 2026, asking about ISPs that offer a cellular product. Those surveys showed that, by far, the best indicator of a high cellular market share is the ownership of fiber. Other factors like brand, network quality, price, or specific details of the bundle had a far smaller impact on cellular market share.

Entner also looked at some specific examples. In markets where AT&T has no wireline network, the company has a 13.9% cellular market share. Where AT&T is the incumbent telco but doesn’t own fiber, the cellular market share is 6.2% higher at 20.1%. But where AT&T owns significant fiber, its cellular market penetration rate is 28.9%. These statistics show a bump in cellular market share for being an incumbent, but a bigger bump of an 8.8% market share for having fiber. The statistics for Verizon are similar.

Entner’s findings mean a massive financial boost for a company with both fiber and a cellular product. The statistics show a big extra financial boost for building fiber that I’ve never seen a fiber ISP talk about. This extra boost from a higher cellular market share means there is a greater benefit of building fiber than just fiber revenues, and greatly increases the value of investing in fiber.

What does this mean for cable companies? Comcast first started selling cell service in 2017, and Charter in 2018. If just owning the network was the driver of a high cellular market share, these two companies would be winning the cellular marketing battle since they have far more passings and customers than telcos. Enter concludes that the perceived quality of the ISP is what matters. He compared the Customer Net Promoter Score (cNPS) for the two industry segments. Big fiber ISPs have a cNPS around 27, while big cable is at 2.6. For those not familiar with cNPS, the number is derived by subtracting the percentage of customers that don’t like an ISP (detractors) from those that do (promoters). The difference in customer perception between fiber and cable companies, as shown by the cNPS ratings, is gigantic.

What does all of this mean in the market? First, this one simple rating explains why AT&T is building so much fiber, why Verizon bought Frontier, and why T-Mobile is buying ISPs left and right. These companies all clearly understand the extra market benefit of owning fiber.

This also explains why smaller fiber overbuilders are trying to find a way to add an affordable cellular product, since they assume a big earnings boost from the convergence. That desire comes with a word of caution for rural fiber owners. It could actually be a negative to be the cellular company in a rural market where the cellular coverage is crappy, as is true in much of rural America.

Interestingly, Entner ignored FWA cellular, at least in this article. (The full report is available for a fee.) FWA cellular providers currently have an overall cNPS rating of 40, which is significantly better than the big fiber ISPs at 27. The high cNPS for FWA means that customers are much happier with FWA broadband than with fiber or cable. This might explain why FWA cellular has been outselling all other types of broadband for the last several years.

It’s worth noting that customer sentiment and cNPS scores change over time, so what is true today will probably not be true five years from now. Cable companies got a huge black eye during the pandemic when they struggled to support people working and schooling at home. I think this is when fiber got a better reputation than cable companies. But cable companies have been making big investments to improve both download and upload speeds, and over time, the public will likely eventually feel better about them. Cable companies have also quietly been building fiber, but for now, the big ones seem to mostly be content to improve speeds on existing networks.

This is an interesting way to look at convergence, and it explains a lot about the market experience of fiber ISPs, which are growing, and cable companies, which are losing broadband customers.

Customer Reactions to Outages

On January 14th of this year, Verizon had a major cellular network outage that lasted up to ten hours and that impacted more than 1.5 million wireless customers. Not all Verizon customers lost service, but the impact was felt across the country. Recon Analytics conducted a survey of 1,702 small, medium, and large Verizon business customers to understand their reaction to the outage. I can’t recall having ever seen a public survey of this type related to a single event. The results tell a sobering story for all ISPs and carriers.

The biggest impact was felt by the large businesses, and 44% of them said they were impacted by the outage. That makes sense they tend to operate in multiple locations, across multiple states, with a lot of employees that can be impacted by a day-long outage. 33% of medium-sized businesses were impacted, and 21% of small businesses. On the flip side, only 3% of large businesses were not aware of the outage, while 7% of midsize and 12% of small businesses hadn’t heard about the outage.

For all sizes of businesses, about two-thirds said the outage didn’t change their opinion of Verizon. That’s a scary statistic for anybody who sells to businesses, because it means one-third changed their opinion. About 5-6 % of all these customers said they were much more negative about Verizon, with 32-35% said they were somewhat more negative.

When asked if they were more likely after the outage to shop around for an alternative to Verizon, small businesses were the most forgiving, with 28% saying they were more likely to shop around, while 50% of midsize companies, and 59% of large businesses said they were likely to look for alternatives. Anybody who has worked is sales and marketing knows that there is a big difference between somebody who will consider changing service and somebody who will definitely change service.

But still, the survey results have to be worrisome for Verizon. The Verizon business sales team had been pushing the story for years that the reason to Verizon is because the service is reliable. An outage that lasted throughout a workday is the opposite of reliable.

While this survey concerned a long cellular outage, it’s something ISPs should also be aware of. Not only business customers, but also residential customers now believe that cellphone and broadband coverage should always be on, and never off. My friend Travis, who owned US Broadband, tells the story of how he had a ten minute outage in the middle of the night in Minneapolis, after years with no outages, and his negative Google reviews went through the roof.

It’s virtually impossible to never have a network outage, at least in some portion of a network. The Verizon outage of ten hours was particularly negative for the public, especially after the company eventually said the cause of the outage was some unspecified software issue. We don’t expect big companies to have software problems they can’t resolve quickly.

This outage raises the issue of what ISPs and carriers should do after an outage. First is probably having an internet definition of what constitutes an important outage – is it an outage that lasts ten minutes, an hour, or half a day? Should an ISP pretend short outages didn’t happen, or should they fully explain outages to every customer who was impacted?

Is Broadband Inflation-proof?

Inflation has returned to the historical average of around 2.5% per year, but we’ve experienced several years in a row of much higher-than-average inflation. In times of inflation and rising prices, consumers and businesses normally cut back on expenditures.

For years, I’ve believed that broadband and cellphones usage is somewhat immune to inflation, meaning that people don’t ditch these services unless they have no other choice. In a very ad hoc and non-scientific poll, I’ve been asking ISPs about the impact of inflation on customer subscription rates. Many small ISPs don’t do an exit interview with customers who are disconnecting, so they don’t always know why they lose customers. But no ISP I talked to said that they were aware of losing any significant numbers of customers who could no longer afford their broadband plan.

For a more detailed look at the question, I found a survey done by Recon Analytics in April 2023 at the height of inflation. The survey asked consumers the kinds of expenditures they expected to cut back in a time of increasing prices.

The responses were what you might expect. About 20% of households said they didn’t plan to cut spending. But most respondents said they would trim expenses. The biggest category of planned savings was to reduce dining out, and 50% of respondents said they planned to dine in-home more. Next on the list was clothing, with 39% of respondents saying they would buy fewer clothes. 19% of respondents said they would cut back on streaming video and audio services. 16% of consumers were considering cutting the cord on linear cable TV. 14% of consumers planned to cut back on driving and gas costs. 14% of consumers were going to cut back or cancel gym memberships.

Only 8% of consumers planned to cut back on home internet or cellphone expenses. A deeper dive into these customers showed that customers planned to save money without discontinuing service. Some households planned to switch to less expensive broadband or cell plans, which probably explains a lot of the success of FWA cellular broadband. Some consumers planned to downgrade broadband to a slower speed tier. I saw a different survey that showed that people were hanging onto cellphones longer before upgrading.

The survey found almost nobody willing to discontinue broadband or cellphone usage completely. This is a testament to how embedded broadband and cellphones are in our lives. The average American adult spends an average of over 7 hours per day online – which is evenly split between computer and cellphone usage.

Most of us have good reasons for not wanting to lose broadband. At the end of 2023, over 12% of U.S. employees worked remotely. A huge percentage of homes use broadband for entertainment to stream video and music. 70% of American adults use social media. Three out of four Americans plan games online. Most households now bank online. An increasing number of people use telemedicine. And who doesn’t shop online?

Since I’m in the broadband business I often talk to folks about these issues, and it’s become clear to me that people value broadband as much as they do having electricity and water in their homes.