Verizon’s Residential 5G Broadband

We finally got a look at the detail of Verizon’s 5G residential wireless product. They’ve announced that it will be available to some customers in Houston, Indianapolis, Los Angeles and Sacramento starting on October 1.

Verizon promises average download data speeds of around 300 Mbps. Verizon has been touting a gigabit wireless product for the last year, but the realities of wireless in the wild seems to have made that unrealistic. However, 300 Mbps is a competitive broadband product and in many markets Verizon will become the fastest alternative competitor to the cable companies. As we’ve seen everywhere across the country, a decent competitor to the big cable companies is almost assured of a 20% or higher market penetration just for showing up.

The product will be $50 per month for customers who use Verizon wireless and $70 for those that don’t. These prices will supposedly include all taxes, fees and equipment – although it’s possible that there are add-ons like using a Verizon WiFi router. That pricing is going to be attractive to anybody that already has Verizon cellular – and I’m sure the company is hoping to use this to attract more cellular customers. This is the kind of bundle that can make cellular stickier and is exactly what the Comcast and Charter have in mind as they are also offering cellular. Verizon is offering marketing inducements for the roll-out and are offering 3 months free of YouTube TV or else a free Apple TV 4K or a Google Chromecast Ultra.

Theoretically this should set off a bit of a price war in cities where Comcast and Charter are the incumbent cable providers. It wouldn’t be hard for those companies to meet or beat the Verizon offer since they are already selling cellular at a discount. We’re going to get a fresh look at oligopoly competition – will the cable companies really battle it out? The cable companies have to be worried about losing significant market share in major urban markets.

We’re also going to have to wait a while to see the extent of the Verizon coverage areas. I’ve been speculating about this for a while and I suspect that Verizon is going to continue with their history of being conservative and disciplined. They will deploy 5G where there is fiber that can affordably support it – but they are unlikely to undertake any expensive fiber builds just for this product. Their recently announced ‘One Fiber’ policy says just that – the company wants to capitalize on the huge amount of network that they have already constructed for other purposes. This means it’s likely in any given market that coverage will depend upon a customer’s closeness to Verizon fiber.

There is one twist to this deployment that means Verizon might not be in a hurry to deploy this too quickly. The company has been working with Ericsson, Qualcomm, Intel and Samsung to create proprietary equipment based upon the 5GTF standard. But the rest of the industry has adopted the 3GPP standard for 5G and Verizon admits it will have to replace any equipment installed with their current standard.

Verizon also said over the last year that they wanted this to be self-installed by customers. At least for now the installations are going to require a truck roll, which will add to the cost and the rate of deployment of the new technology.

Interestingly, these first markets are outside of Verizon’s telco footprint. This means that Verizon will not only be taking on cable companies, but that they might be putting the final nail in the coffin of DSL offered by AT&T and other telcos in the new markets. Verizon is unlikely to roll this out to compete with their own FiOS product unless deployments are incredibly inexpensive. But this might finally bring a Verizon broadband product to neighborhoods in the northeast that never got FiOS.

It’s going to be a while under we understand the costs of this deployment. Verizon has been mum about the specific network elements and reliance on fiber needed to support the product. And they have been even quieter about the all-in cost of deployment.

Cities all over the country are going to get excited about this deployment in the hope of getting a second competitor to their cable company which are often a near-monopoly. It appears that the product is going to work best where there is already a fiber-rich environment. Most urban areas, while having little last mile-fiber, are crisscrossed with fiber used to get to large businesses, governments, schools, etc.

The same is not necessarily the same in suburbs and definitely not true of smaller communities and rural America. The technology depends upon local last-mile fiber backhaul. Verizon says that they believe their potential market will be to eventually pass 30 million households, or a little less than 25% of the US market. I’d have to think that the map for others, except perhaps for AT&T largely coincide with the Verizon map. It seems that Verizon wants to be the first to market to potentially dissuade other entrants. We’ll have to wait and see if a market can reasonably support more than one last-mile 5G provider – because companies like T-Mobile also have plans for wide deployment.

Going Wireless-only for Broadband

According to New Street Research (NSR), up to 14% of homes in the US could go all-wireless for broadband. They estimate that there are 17 million homes which are small enough users of bandwidth to justify satisfying their broadband needs strictly using a cellular connection. NSR says that only about 6.6 million homes have elected to go all-wireless today, meaning there is a sizable gap of around 10 million more homes for which wireless might be a reasonable alternative.

The number of households that are going wireless-only has been growing. Surveys by Nielsen and others have shown that the trend to go wireless-only is driven mostly by economics, helped by the ability of many people to satisfy their broadband demands using WiFi at work, school or other public places.

NSR also predicts that the number of homes that can benefit by going wireless-only will continue to shrink. They estimate that only 14 million homes will benefit by going all-wireless within five years – with the decrease due to the growing demand of households for more broadband.

There are factors that make going wireless an attractive alternative for those that don’t use much broadband. Cellular data speeds have been getting faster as cellular carriers continue to implement full 4G technology. The first fully compliant 4G cell site was activated in 2017 and full 4G is now being deployed in many urban locations. As speeds get faster it becomes easier to justify using a cellphone for broadband.

Of course, cellular data speeds need to be put into context. A good 4G connection might be in the range of 15 Mbps. That speed feels glacial when compared to the latest speeds offered by cable companies. Both Comcast and Charter are in the process of increasing data speeds for their basic product to between 100 Mbps and 200 Mbps depending upon the market. Cellphones also tend to have sluggish operating systems that are tailored for video and that can make regular web viewing feel slow and clunky.

Cellular data speeds will continue to improve as we see the slow introduction of 5G into the cellular network. The 5G specification calls for cellular data speeds of 100 Mbps download when 5G is fully implemented. That transition is likely to take another decade, and even when implemented isn’t going to mean fast cellular speeds everywhere. The only way to achieve 100 Mbps speeds is by combining multiple spectrum paths to a given cellphone user, probably from multiple cell sites. Most of the country, including most urban and suburban neighborhoods are not going to be saturated with multiple small cell sites – the cellular companies are going to deploy faster cellular speeds in areas that justify the expenditure. The major cellular providers have all said that they will be relying on 4G LTE cellular for a long time to come.

One of the factors that is making it easier to go wireless-only is that people have access throughout the day to WiFi, which is powered from landline broadband. Most teenagers would claim that they use their cellphones for data, but most of them have access to WiFi at home and school and at other places they frequent.

The number one factor that drives people to go all-wireless for data is price. Home broadband is expensive by the time you add up all of the fees from a cable company. Since most people in the country already has a cellphone then dropping the home broadband connection is a good way for the budget-conscious to control their expenses.

The wireless carriers are also making it easier to go all wireless by including some level of video programming with some cellular plans. These are known as zero-rating plans that let a customer watch some video for free outside of their data usage plan. T-Mobile has had these plans for a few years and they are now becoming widely available on many cellular plans throughout the industry.

The monthly data caps on most wireless plans are getting larger. For the careful shopper who lives in an urban area there are usually a handful of truly unlimited data plans. Users have learned, though, that many such plans heavily restrict tethering to laptops and other devices. But data caps have creeped higher across-the-board in the industry compared to a few years ago. Users who are willing to pay more for data can now buy the supposedly unlimited data plans from the major carriers that are actually capped between 20 – 25 GB per month.

There are always other factors to consider like cellular coverage. I happen to live in a hilly wooded town where coverage for all of the carriers varies block by block. There are so many dead spots in my town that it’s challenging to use cellular even for voice calls. I happen to ride Uber a lot and it’s frustrating to see Uber drivers get close to my neighborhood and get lost when they lose their Verizon signal. This city would be a hard place to rely only on a cellphone. Rural America has the same problem and regardless of the coverage maps published by the cellular companies there are still huge areas where rural cellular coverage is spotty or non-existent.

Another factor that makes it harder to go all-wireless is working from home. Cellphones are not always adequate when trying to log onto corporate WANs or for downloading and working on documents, spreadsheets and PowerPoints. While tethering to a computer can solve this problem, it doesn’t take a lot of working from home to surpass the data caps on most cellular plans.

I’ve seen a number of articles in the last few years talking claiming that the future is wireless and that we eventually won’t need landline broadband. This claim ignores the fact that the amount of data demanded by the average household is doubling every three years. The average home uses ten times or more data on their landline connection today than on their cellphones. It’s hard to foresee the cellphone networks able to close that gap when the amount of landline data use keeps growing so rapidly.

Verizon’s Case for 5G, Part 4

Ronan Dunne, an EVP and President of Verizon Wireless recently made Verizon’s case for aggressively pursuing 5G. This last blog in the series looks at Verizon’s claim that they are going to use 5G to offer residential broadband. The company has tested the technology over the last year and announced plans to soon introduce the technology into a number of cities.

I’ve been reading everything I can about Verizon and I think I finally figured out what they are up to. They have been saying that within a few years that they will make fixed 5G broadband available to millions of homes. One of the first cities they will be building is Sacramento. It’s clear that in order to offer fast speeds that each 5G transmitter will have to be fiber fed. To cover all neighborhoods in Sacramento would require building a lot of new fiber. Building new fiber is both expensive and time-consuming. And it’s still a head scratcher about how this might work in neighborhoods without poles where other utilities are underground.

Last week I read of an announcement by Lee Hick’s of Verizon for a new initiative called One Fiber. Like many large telecoms Verizon has numerous divisions that own fiber assets like the FiOS group, the wireless group and the old MCI business CLEC group. The new policy will consolidate all of this fiber under into a centralized system, making existing and new fiber available to every part of the business. It might be hard for people to believe, but within Verizon each of these groups managed their own fiber separately. Anybody who has ever worked with the big telcos understands what a colossal undertaking it will be to consolidate this.

Sharing existing fiber and new fiber builds among its various business units is the change that will unleash the potential for 5G deployment. My guess is that Verizon has eyed AT&T’s fiber the strategy and is copying the best parts of it. AT&T has quietly been extending its fiber-to-the-premise (FTTP) network by extending fiber for short distances around the numerous existing fiber nodes in the AT&T network. A node on an AT&T fiber built to get to a cell tower or to a school is now also a candidate to function as a network node for FTTP. Using existing fiber wisely has allowed AT&T to claim they will soon be reaching over 12 million premises with fiber – without having to build a huge amount of new fiber.

Verizon’s One Fiber policy will enable them to emulate AT&T. Where AT&T has elected to build GPON fiber-to-the-premise, Verizon is going to try 5G wireless. They’ll deploy 5G cell sites at their existing fiber nodes where it makes financial sense. Verizon doesn’t have as extensive of a fiber network as AT&T and I’ve seen a few speculations that they might pass as many as 7 million premises with 5G within five years.

Verizon has been making claims about 5G that it can deliver gigabit speeds out to 3,000 feet. It might be able to do that in ideal conditions, but their technology is proprietary and nobody knows the real capabilities. One thing we know about all wireless technologies is that it’s temperamental and varies a lot by local conditions. The whole industry is waiting to the speeds and distances Verizon will really achieve with the first generation gear.

The company certainly has some work in front of it to pursue this philosophy. Not all fiber is the same and their existing fiber network probably has fibers of many sizes, ages and conditions using a wide range of electronics. After inventorying and consolidating control over the fiber they will have to upgrade electronics and backbone networks to enable the kind of bandwidth needed for 5G.

The Verizon 5G network is likely to consist of a series of cell sites serving small neighborhood circles – the size of the circle depending upon topography. This means the Verizon networks will  not likely be ubiquitous in big cities – they will reach out to whatever is in range of 5G cell sites placed on existing Verizon fiber. After the initial deployment, which is likely to take a number of years, the company will have to assess if building additional fiber makes economic sense. That determination will consider all of the Verizon departments and not just 5G.

I expect the company to follow the same philosophy they did when they built FiOS. They were disciplined and only built in places that met certain cost criteria. This resulted in a network that, even today, bring fiber to one block but not the one next door. FiOS fiber was largely built where Verizon could overlash fiber onto their telephone wires or drag fiber through existing conduits – I expect their 5G expansion to be just as disciplined.

The whole industry is dying to see what Verizon can really deliver with 5G in the wild. Even if it’s 100 Mbps broadband they will be a competitive alternative to the cable companies. If they can really deliver gigabit speeds to entire neighborhoods then will have shaken the industry. But in the end, if they stick to the One Fiber model and only deploy 5G where it’s affordable they will be bringing a broadband alternative to those that happen to live near their fiber nodes – and that will mean passing millions of homes and tens of millions.

Verizon’s Case for 5G, Part 3

Ronan Dunne, an EVP and President of Verizon Wireless recently made Verizon’s case for aggressively pursuing 5G. In this blog I want to examine the two claims based upon improved latency – gaming and stock trading.

The 5G specification sets a goal of zero latency for the connection from the wireless device to the cellular tower. We’ll have to wait to see if that can be achieved, but obviously the many engineers that worked on the 5G specification think it’s possible. It makes sense from a physics perspective – a connection of a radio signal through air travels for all practical purposes at the speed of light (there is a miniscule amount of slowing from interaction with air molecules). This makes a signal through the air slightly faster than one through fiber since light slows down when passing through fiberglass by 0.83 milliseconds for every hundred miles of fiber optic cable traversed.

This means that a 5G signal will have a slight latency advantage over FTTP – for the first few connection from a customer. However, a 5G wireless signal almost immediately hits a fiber network at a tower or small cell site in a neighborhood, and from that point forward the 5G signal experiences the same latency as an all-fiber connection.

Most of the latency in a fiber network comes from devices that process the data – routers, switches and repeaters. Each such device in a network adds some delay to the signal – and that starts with the first device, be it a cellphone or a computer. In practical terms, when comparing 5G and FTTP the network with the fewest hops and fewest devices between a customer and the internet will have the lowest latency – a 5G network might or might not be faster than an FTTP network in the same neighborhood.

5G does have a latency advantage over non-fiber technologies, but it ought to be about the same advantage enjoyed by FTTP network. Most FTTP networks have latency in the 10-millisecond range (one hundredth of a second). Cable HFC networks have latency in the range of 25-30 ms; DSL latency ranges from 40-70 ms; satellite broadband connections from 100-500 ms.

Verizon’s claim for improving the gaming or stock trading connection also implies that the 5G network will have superior overall performance. That brings in another factor which we generally call jitter. Jitter is the overall interference in a network that is caused by congestion. Any network can have high or low jitter depending upon the amount of traffic the operator is trying to shove through it. A network that is oversubscribed with too many end users will have higher jitter and will slow down – this is true for all technologies. I’ve had clients with first generation BPON fiber networks that had huge amounts of jitter before they upgraded to new FTTP technology, so fiber (or 5G) alone doesn’t mean superior performance.

The bottom line is that a 5G network might or might not have an overall advantage compared to a fiber network in the same neighborhood. The 5G network might have a slight advantage on the first connection from the end user, but that also assumes that cellphones are more efficient than PCs. From that point forward, the network with the fewest hops to the Internet as well the network with the least amount of congestion will be faster – and that will be case by case, neighborhood by neighborhood when comparing 5G and FTTP.

Verizon is claiming that the improved latency will improve gaming and stock trading. That’s certainly true where 5G competes against a cable company network. But any trader that really cares about making a trade a millisecond faster is already going to be on a fiber connection, and probably one that sits close to a major internet POP. Such traders are engaging in computerized trading where a person is not intervening in the trade decision. For any stock trades that involve humans, a extra few thousandths of a second in executing a trade is irrelevant since the human decision process is far slower than that (for someone like me these decisions can be measured in weeks!).

Gaming is more interesting. I see Verizon’s advantage for gaming in making game devices mobile. If 5G broadband is affordable (not a given) then a 5G connection allows a game box to be used anywhere there is power. I think that will be a huge hit with the mostly-younger gaming community. And, since most homes buy broadband from the cable company, lower latency with 5G ought to be to a gamer using a cable network, assuming the 5G network has adequate upload speeds and low jitter. Gamers who want a fiber-like experience will likely pony up for a 5G gaming connection if it’s priced right.

Verizon’s Case for 5G, Part 2

This is a second in a series of blogs that look at Verizon’s list of ways that the company thinks they can monetize 5G. The first blog looked at medical applications. Today I look at the potential market use for 5G for retail.

Verizon’s retail vision is interesting. They picture stores that offer an individualized shopping experience that also uses augmented and virtual reality to communicate with and sell to customers. This is not a new idea and the idea of using 3D graphics and holograms in stores was one of the first future visions touted by augmented reality developers. We are just now on the verge of having technology that could make this possible.

Verizon obviously envisions using 3G bandwidth to enable these applications. Stores will want the flexibility to be able to put displays anywhere in the store, and change them at will, so doing this wirelessly would be a lot cheaper than stringing fiber all over stores. Streaming holograms requires a lot of bandwidth, so this seems like a natural application for millimeter wave spectrum. Our current cellular frequencies are not sufficient to support holograms.

The new 5G standard calls for the use of millimeter wave spectrum to deliver gigabit data paths wirelessly indoors. These frequencies don’t pass through walls, so transmitters in the ceilings could be used to beam down to displays anywhere in a store.

Verizon envisions companies using Verizon licensed spectrum. However, the FCC has already set aside several bands of millimeter wave spectrum for public use and there will soon be a whole industry developing millimeter wave routers for use as WANs – likely the same companies that today make WiFi routers. I have a hard time seeing how Verizon will have any market advantage over the many other companies that will be developing millimeter wave WANs using public spectrum.

The personalized shopping experience is a different matter. Verizon is envisioning a network that identifies customers as they enter the store, either through facial recognition, through cell phone signals, or perhaps because customers voluntarily use an app that identifies them. Verizon envisions using the 5G network tied into big data applications to enable stores to craft a unique shopping experience for each customer. For regular customers that would meaning using a profile based on their past shopping history, and for everybody else it means using a profile cobbled together from the big data all of the ISPs are gathering on everybody.

Verizon and the other big ISPs have invested in subsidiaries that can crunch big data and they are hungry to snag a piece of the advertising revenue that Google has monetized so well. Using big data to enhance the shopping experience will likely be popular with the kinds of shoppers who use in-store apps today. Customers can be offered live specials as they walk down aisles, with offers personalized to them. This could be tied into the holographic product displays and other in-store advertising systems.

However, this application could quickly get creepy if it is done for all shoppers. I know I would never visit a store a second time that recognizes me as I walk in the door and that uses a cloud-based profile of me to try to direct my shopping. Perhaps my distaste for this kind of intrusion is a generational thing and it might be attractive to younger generations of shoppers – but I would find it invasive.

There are physical issues to consider with this kind of network. I tried to use my cellphone from the rear of a grocery store yesterday and I had zero bars of data and couldn’t connect to the voice network. Dead spots can be fixed by installing one or more small cell sites inside a store to reach all parts of a store – something that will become more affordable over time.

Verizon will have an advantage if smartphones are a needed component of the customized shopping experience. But the shopping applications don’t necessarily require smartphones. For example, screens built into shopping carts could fulfill the same functions and not tie a retailer to pay Verizon.

One of the biggest hurdles I see for Verizon’s vision is that retail stores are slow adapters of new technology. This kind of application would likely start at the big nationwide chains like Target or Walmart, but it’s a decades-long sales cycle to get stores everywhere to accept this. Verizon’s vision also assumes that stores want this – but they are already competing for their own survival against online shopping and fast delivery and they might be leery about using a technology that could drive away a portion of their customer base. From what I can see, stores that provide a personal touch are the ones that are competing best with online shopping.

To summarize, Verizon is espousing a future vision of retail where the retailer can interact electronically with shoppers on a personalized basis. The first big hurdle will be convincing retailers to try the idea, because it could easily go over the top and be viewed by the public as invasive. More importantly, licensed 5G from Verizon isn’t the only technology that can deliver Verizon’s vision since there will be significant competition in the indoor millimeter wave space. This is one of those ideas that might come to pass, but there are enough hurdles to overcome that it may never become reality.

Verizon’s Case for 5G, Part 1

Ronan Dunne, an EVP and President of Verizon Wireless recently made Verizon’s case for aggressively pursuing 5G. On an investor call he talked about potential ways that the company might monetize the new technology. Over a series of blogs I’m going to look at the various market applications of 5G envisioned by Verizon.

Mr. Dunne thinks 5G cellular can be used to develop advanced networks to provide better long-term patient monitoring. The solution he envisions would use cellular technology to power medical monitoring devices worn by patients or used in homes.

This one application gets to the heart of Verizon’s vision of the future with using 5G as the primary technology to connect to IoT devices. Today there are already health and medical devices connected through the cellular network. For example, there are GPS-enabled running watches today that require a cellular subscription. These devices communicate 2-way with the cloud through cellular. They can upload a runner’s statistics like heart rate and can also download things like a map of the runner’s location.

However, there are huge numbers of similar devices that don’t use cellular. For example, there are running monitors that provide the same features by connecting through a runner’s smartphone, which the runner must carry to get the same kind of feedback. Many of the most popular devices like Fitbit don’t require cellular at all and can store runner’s statistics until they can sync with their home WiFi network. There are also many in-home medical monitors that connect only through WiFi.

Verizon wants to capture the IoT market, and medical devices are just one of the many market niches they envision. In their vision of the future, all medical monitors would come with a cellular subscription. For medical devices that need to be connected 24/7 this application makes a lot of sense. For example, out-patients after surgery could be monitored at all times and wouldn’t be restricted to being in range of a WiFi network.

But this comes with a cost, at least today. Currently WiFi and Bluetooth technology is cheap and there is very little incremental cost of building these technologies into the chips in devices – many common chips already have built-in WiFi. It’s more expensive today to provide a 2-way cellular device.

There are also weaknesses with cellular coverage that would need to be addressed. For example, I can see a weak Verizon signal from my upstairs office, but I have zero bars of coverage on the first floor or in my yard. There are still a lot of homes today who have no cellular coverage, or coverage only outside or in some parts of their home.

Like many of the applications that Verizon has in mind, the goal is for them to sell many more cellular subscriptions. Practically everybody in the country now has a cellphone and Verizon envisions IoT-monitoring subscriptions as a way to boost sales. But this is going to require a public willing to pay more for the extra connectivity. In the case of medical monitoring, a device that can connect to WiFi in the home or to a smartphone outside the home can provide the same connectivity at zero extra cost to the consumer. My guess is that Verizon will be pushing sales of medical monitoring through doctors and hospitals, because a lot of consumers would choose the cheaper alternative if they are given a choice.

The battle to connect to in-home medical devices will be an even harder sale for Verizon to win because most homes today have WiFi. Verizon pictures a future world where all of our IoT devices connect using cellular. This connectivity is made easier with 5G since the new specification calls for allowing 100,000 simultaneous connections to devices from each cell site. However, WiFi already has a huge market lead in this area and IoT devices come WiFi enabled, I foresee a huge uphill fight for Verizon to try to capture this business. I know personally that, given a choice, I’m going to buy an appliance with WiFi connectivity over a model that requires an additional cellular subscription, no matter how small the extra fee. Verizon ultimately foresees homes paying an additional $20 or $30 per month for IoT connectivity, which translates to huge profits for the company.

As a consumer I also worry about privacy using the cellular network. Today my landline ISP needs to somehow pick out my IoT signals from the rest of bits generated from my home – something I can easily hide if I wish to. But Verizon would automatically know the source of the communication from each IoT device connected to their network, allowing them to more easily spy on my IoT outputs – particularly if they are the ones translating the signals to send back to doctors, hospitals or whoever is at the other end of each IoT device. I really don’t trust Verizon enough to let them peer that easily into my personal data.

This application is no slam dunk for Verizon. There is certainly an opportunity for them to convince health care companies to use devices that require an extra 5G connectivity charge each month. But when this choice is left up to consumers I think most of them will choose to keep using WiFi once they understand all of the facts.

Who WIll the Big ISPs Blame Now?

For the last few years the biggest ISPs have blamed regulations for reducing the amount of capital they are willing to invest. They specifically blamed Title II regulation of broadband and net neutrality rules as being a disincentive for them to invest in broadband infrastructure.

The FCC Chairman Ajit Pai adopted this same narrative and used it for justification to repeal net neutrality. He is still sticking to this story now that Title II regulation has been repealed and this week will be telling this story to the House Communications Subcommittee. In a prepared statement he claims that the repeal of the net neutrality rules is now paving the way for increased capital investment and better broadband service.

However, the whole narrative is false. There is no evidence that big ISPs held back on broadband investments before Title II authority was repealed and there is no evidence that the repeal has somehow unleashed a wave of new broadband investment. I’m not going to track the numbers in this blog, but the capital budgets of all of the big ISPs have been relatively steady for a number of years.

This particular narrative is just the latest iteration on a theme that the big ISPs have used for decades. The big ISPs have always publicly claimed that regulations were killing them, while privately admitting that they were able to successfully work around most regulations. It’s the nature of regulated industries to push back against regulation and ISPs don’t differ from the many other regulated industries in this regard.

A quick look at each of the major ISPs shows a different story than is being pushed by Chairman Pai. AT&T is a good example. They were required by an agreement from the purchase of DirecTV to pass 12 million homes and businesses with fiber. For a while it looks like they were shirking that requirement, but somewhere along the line they seem to have embraced it. They have been quietly extending fiber to apartment complexes and also to any homes or business that are located close to any of their many fiber nodes around the country. This expansion started well before the net neutrality repeal. AT&T for now has no plans to deploy 5G and says they don’t see a business case for it yet. The company is quietly walking away from rural copper and only beefing up rural cellular broadband where the FCC funded it with CAF II money.

Comcast doesn’t seem to have changed strategies for a number of years. They build fiber to shrink node sizes to relieve local network congestion. They made a decision well before the net neutrality appeal to embrace upgrades to DOCSIS 3.1. The company has entered the cellphone business, but for now resells minutes from the other cellular company networks, and only in their operating footprint. They say they plan to eventually build cellular networks to increase the profitability of the business.

Verizon has been shrinking their landline broadband networks and sold a pile of customers, including many on FiOS fiber to Frontier. The company made an announcement several years ago, and before the repeal of net neutrality that they were going to build new FiOS fiber in Boston – but it appears that project has largely been put on hold. Verizon might be the only big ISP who claims to have plans to expand residential broadband and says it will build 5G in a number of markets outside of its traditional footprint. But there is a lot of industry skepticism that this will be much larger trials of new technology and not a major capital outlay.

CenturyLink recently made it clear that they are walking away from making new broadband investments. They new CEO made it clear that the company will not be making any new capital expenditures that will earn infrastructure levels of returns. That is a 180-degree turnaround from a company that built fiber in 2017 to pass 900,000 premises and is the opposite of what Chairman Pai is claiming.

All of the big telcos have largely abandoned DSL and haven’t made new investments for years, even though there are faster DSL technologies available. To make matters worse the telcos are trying to kill the regulations from the Telecommunications Act of 1996 that allows competitors to offer faster DSL using telco copper – a move that would kick hundreds of thousands of customers nationwide off of decent broadband and force the back to the more expensive cable monopolies.

I can’t see any evidence from the big ISPs that the repeal of net neutrality made any difference in their capital spending plans. When you look at what these ISPs tell their investors the topic of regulation never arises – which it shouldn’t. The big ISPs have always invested in areas where they could foresee returns and regulation had no real negative impact on those returns. The whole false narrative has been a lobbying effort to get out from under regulation – and with this FCC the lobbying worked.

Now that Title II regulation is dead I wonder what the ISPs will blame for not investing in residential and rural broadband? They can’t point the finger any longer at regulations and I’m sure they will find a new story that sounds good. The only ISP that seems to be telling the truth is CenturyLink, and I suspect that they will soften that narrative since they are telling existing residential customers that they no longer care about them.

Shrinking Cellular Backhaul Revenues

There are a few carriers that rely on cellular backhaul as a major part of their revenue stream, but there are many more carriers that provide transport to a handful of cell sites. In all cases these are some of the highest-margin and lucrative products sold on the market today, and a business line that every carrier wants to keep. However, there are big changes coming in the cellular market and today I will look at the trends that are going to affect this market over the next decade.

Increasing Bandwidth Demand. The growth in bandwidth demand at many cell sites is explosive with the overall growth in cellular data doubling every 18 months. This growth is not the same everywhere with growth coming in cell sites serving residential customers and not in older cell sites built to satisfy highway phone coverage.

The demand growth is being driven by several factors. First, it’s becoming far more prevalent for customers to use cellphones to watch video. Part of that growth in demand comes directly from the big cellular companies which are bundling in access to content as part of the service. But a more important reason for the growth in demand is that the historic reluctance of customers to use cellular data is eroding as the cellular companies push ‘unlimited’ data plans.

Demands for Lower Transport Costs. Cellular service has become a commodity. The industry is no longer adding many new customers since almost everybody has a cellphone. This has led to price wars between cellular providers, and lower average customer prices are driving the cellular companies to look to cost reductions. At least in urban areas they are starting to also lose significant customers to Comcast, with Charter just entering the fray.

Recently I’ve seen cellular companies ask for lower prices as contracts get renewed or else demand greater bandwidth for the prices already in place. This means that fiber owners are not likely to see increases in revenues even as the bandwidth they are delivering grows.

Cellular Carriers Building Fiber. I’ve had several clients tell me recently that Verizon or AT&T is building fiber in their area. While this construction might be to reach a new large customer, the most likely reason these companies are building right now is to eliminate leased transport at cell sites. This is not just happening in urban areas and one of my clients who serves a market of 10,000 homes tells me that Verizon is building fiber to all of the cell sites in the area.

Verizon made headlines last year when they ordered $1 billion in fiber. AT&T is also building furiously. If you believe the claims made by T-Mobile and Sprint as part of the proposed merger – they also will be expanding their own fiber.

I also expect the cellular carriers to make reciprocal deals to swap fiber connections at cell sites where they now own fiber. If Verizon and AT&T each build to 2,000 cell sites they could easily swap transport and both gain access to 4,000 cell sites – that’s a huge nationwide decrease in transport revenues for others.

Growth of Small Cells. Layered on top of all of this is the predicted growth of small cell sites. I don’t think anybody knows how big this might market grow. I’ve seen optimistic predictions that small sell sites will be everywhere and other predictions that the business case for small cell sites might never materialize. Many of my clients are seeing the deployment of a few small cell sites to relive 4G congestion, but it’s hard to predict in smaller markets if this will ever expand past that.

One thing we can know for sure is that the cellular carriers will not be willing to pay the same prices for connection to small cell sites that they’ve been paying for the big cell tower sites. By definition, a smaller cell site is going to serve a smaller number of customers and the pricing must be reduced accordingly for it to make sense for the cellular providers.

Conclusion. My best guess is that cellular transport will be hit and miss depending up the specific local situation. There are many who will lose all cell site transport where the cellular carriers decide to build their own fiber. But even where they don’t build fiber I would expect the cellular carriers to bring the threat of physical bypass into price negotiations to drive transport prices far below where they are today.

This is a natural economic consequence of cellular becoming a commodity. As the cellular industry tightens its belt it’s going to demand lower costs from its supply chain. Transport costs are one of the major costs of the cellular industry and the most natural place for them to look to reduce costs. The big cell companies already understand this future which is one of the primary reasons they are furiously building fiber today while they have the cash to do so.

Predicting Broadband Usage on Networks

One of the hardest jobs these days is being a network engineer who is trying to design networks to accommodate future broadband usage. We’ve known for years that the amount of data used by households has been doubling every three years – but predicting broadband usage is never that simple.

Consider the recent news from OpenSource, a company that monitors usage on wireless networks. They report a significant shift in WiFi usage by cellular customers. Over the last year AT&T and Verizon have introduced ‘unlimited’ cellular plans and T-Mobile has pushed their own unlimited plans harder in response. While the AT&T and Verizon plans are not really unlimited and have caps a little larger than 20 GB per month, the introduction of the plans has changed the mindset of numerous users who no longer automatically seek WiFi networks.

In the last year the percentage of WiFi usage on the Verizon network fell from 54% to 51%; on AT&T from 52% to 49%, and on T-Mobile from 42% to 41%. Those might not sound like major shifts, but for the Verizon network it means that the cellular network saw an unexpected additional 6% growth in data volumes in one year over what the company might normally have expected. For a network engineer trying to make sure that all parts of the network are robust enough to handle the traffic this is a huge change and means that chokepoints in the network will appear a lot sooner than expected. In this case the change to unlimited plans is something that was cooked-up by marketing folks and it’s unlikely that the network engineers knew about it any sooner than anybody else.

I’ve seen the same thing happen with fiber networks. I have a client who built one of the first fiber-to-the-home networks and use BPON, the first generation of electronics. The network was delivering broadband speeds of between 25 Mbps and 60 Mbps, with most customers in the range of 40 Mbps.

Last year the company started upgrading nodes to the newer GPON technology, which upped the potential customer speeds on the network to 1 gigabit. The company introduced both a 100 Mbps product and a gigabit product, but very few customers immediately upgraded. The upgrade meant changing the electronics at the customer location, but also involved a big boost in the size of the data pipes between neighborhood nodes and the hub.

The company was shocked to see data usage in the nodes immediately spike upward between 25% and 40%. After all, they had not arbitrarily increased customer speeds across-the-board, but had just changed the technology in the background. For the most part customers had no idea they had been upgraded – so the spike can’t be contributed to a change in customer behavior like what happened to the cellular companies after introducing unlimited data plans.

However, I suspect that MUCH of the increased speeds still came from changed customer behavior. While customers were not notified that the network had been upgraded, I’m sure that many customers noticed the change. The biggest trend we see in household broadband demand over the last two years is the desire by households to utilize multiple big data streams at the same time. Before the upgrades households were likely restricting their usage by not allowing kids to game or do other large bandwidth activities while the household was video streaming or doing work. After the upgrade they probably found they no longer had to self-monitor and restrict usage.

In addition to this likely change in customer behavior the spikes in traffic also were likely due to correcting bottlenecks in the older fiber network that the company had never recognized or understood. I know that there is a general impression in the industry that fiber networks don’t see the same kind of bottlenecks that we expect in cable networks. In the case of this network, a speed test on any given customer generally showed a connection to the hub at the speeds that customers were purchasing – and so the network engineers assumed that everything was okay. There were a few complaints from customers that their speeds bogged down in the evenings, but such calls were sporadic and not widespread.

The company decided to make the upgrade because the old electronics were no longer supported by the vendor and they also wanted to offer faster speeds to increase revenues. They were shocked to find that the old network had been choking customer usage. This change really shook the engineers at the company and they feared that the broadband growth curve was going to now be at the faster rate. Luckily, within a few months each node settled back down to the historic growth rates. However, the company found itself instantly with network usage they hadn’t expected for at least another year, making them that much closer to the next upgrade.

It’s hard for a local network owner to predict the changes they are going to affect the network utilization. For example, they can’t predict that Netflix will start pushing 4K video. They can’t know that the local schools will start giving homework that involves watching a lot of videos at home. Even though we all understand the overall growth curve for broadband usage, it doesn’t grow in a straight line and there are periods of faster and slower growth along the curve. It’s enough to cause network engineers to go gray a little sooner than expected!

Who’s Pursuing Residential 5G?

I’ve seen article after article over the last year talking about how 5G is going to bring gigabit speeds to residents and give them an alternative to the cable companies. But most of the folks writing these articles are confusing the different technologies and businesses cases that are all being characterized as 5G.

For example, Verizon has announced plans to aggressively pursue 5G for commercial applications starting later this year. The technology they are talking about is a point-to-point wireless link, reminiscent of the radios that have been commonly used since MCI deployed microwave radios to disrupt Ma Bell’s monopoly. The new 5G radios use higher frequencies in the millimeter range and are promising to deliver a few gigabits of speed over distance of a mile or so.

The technology will require a base transmitter and enough height to have a clear-line-of-sight to the customer, likely sited on cell towers or tall buildings. The links are only between the transmitter and one customer. Verizon can use the technology to bring gigabit broadband to buildings not served with fiber today or to provide a second redundant broadband feed to buildings with fiber.

The press has often confused this point-to-point technology with the technology that will be used to bring gigabit broadband to residential neighborhoods. That requires a different technology that is best described as wireless local loops. The neighborhood application is going to require pole-mounted transmitters that will be able to serve homes within perhaps 1,000 feet – meaning a few homes from each transmitter. In order to deliver gigabit speeds the pole-mounted transmitters must be fiber fed, meaning that realistically fiber must be strung up each street that is going to get the technology.

Verizon says it is investigating wireless local loops and it hopes someday to eventually use the technology to target 30 million homes. The key word there is eventually, since this technology is still in the early stages of field trials.

AT&T has said that it is not pursuing wireless local loops. On a recent call with investors, CFO John Stevens said that AT&T could not see a business case for the technology. He called the business case for wireless local loops tricky and said that in order to be profitable a company would have to have a good grasp on who was going to buy service from each transmitter. He says that AT&T is going to stick to it’s current network plans which involve edging out from existing fiber and that serving customers on fiber provides the highest quality product.

That acknowledgement is the first one I’ve heard from one of the big telcos talking about the challenges of operating a widespread wireless network. We know from experience that fiber-to-the-home is an incredibly stable technology. Once installed it generally needs only minor maintenance and requires far less maintenance labor that competing technologies. We also know from many years of experience that wireless technologies require a lot more tinkering. Wireless technology is a lot more temperamental and it might take a decade or more of continuous tweaking until wireless local loop become as stable as FTTH. Whoever deploys the first big wireless local loop networks .better have a fleet of technicians ready to keep it working well.

The last of the big telcos as CenturyLink and their new CEO Jeff Storey has made it clear that the company is going to focus on high-margin enterprise business opportunities and will stop deploying slow-payback technologies like residential broadband. I think we’ve seen the end of CenturyLink investing in any last-mile residential technologies.

So who will be deploying 5G wireless local loops? We know it won’t be AT&T or CenturyLink. We know Verizon is considering it but has made no commitment. It won’t be done by the cable companies which have upgraded to DOCSIS 3.1. There are no other candidates that are willing or able to spend the billions needed to deploy the new technology.

Every new technology needs to be adopted by at least one large ISP to become successful. Vendors won’t do the needed R&D or crank up the production process until they have a customer willing to place a large order for electronics. We’ve seen promising wireless technologies like LMDS and MMDS die in the past because no large ISP embraced the technologies and ordered enough gear to push the technology into the mainstream.

I look at the industry today and I just don’t see any clear success path 5G wireless loop electronics. The big challenged faced by wireless local loops is to become less expensive than fiber-to-the-home. Until the electronics go through a few rounds of improvements that only come after field deployment, the technology is likely to require more technician time than FTTH. It’s hard to foresee anybody taking the chance on this in any grand way.

Verizon could make the leap of faith and sink big money into an untried technology, but that’s risky. We’re more likely to keep seeing press releases talking about field trials and the potential for the 5G technology. But unless Verizon or some other big ISP commits to sinking billions of dollars into the gear it’s likely that 5G local loop technology will fizzle as has happened to other wireless technologies in the past.