The most recent round of corporate earnings reports made it crystal clear US MNOs and cable ISPs are targeting each other’s businesses, with wireless executives highlighting their home internet services and cable operators trumpeting mobile broadband subscriber gains.
T-Mobile US leads the mobile industry in reported fixed wireless access (FWA) home internet subscribers, with 646,000 at end-2021. This is 1 per cent of the total number of domestic broadband customers reported by Comcast and Charter Communications, the two largest ISPs in the country.
By 2025, T-Mobile projects it will have 7 million to 8 million home internet subscribers. These are not expected to be exclusively rural customers lacking other options: CEO Mike Sievert has stated many of the operator’s existing FWA customers switched from cable ISPs.
AT&T previously told investors fibre is the focus for its internet business, but analyst Jeff Moore, principal at Wave7 Research, reported the operator is also serving 500,000 FWA subscribers.
This is consistent with Qualcomm citing AT&T as a major customer for its FWA hardware.
Verizon trails the pack when it comes to reported FWA subscribers, but not when it comes to marketing the technology.
Home internet was the first 5G service Verizon introduced and was also the focus of its launch of 5G using C-Band spectrum. On its latest earnings call, CEO Hans Vestberg stated the operator aimed to “be nationwide with broadband” when quizzed about FWA.
Verizon ended 2021 with 223,000 FWA subscribers, more than a third of which were added during Q4.
Jeff Heynen, VP and analyst at research company Dell’Oro Group, told Mobile World Live (MWL) the fixed wireless customer premise equipment market is currently estimated at just less than $2 billion globally and is dominated by LTE devices.
Dell’Oro Group recently predicted the market will be worth $2.8 billion by 2026, a CAGR of 7 per cent, driven by shipments of sub-6GHz and mmWave 5G units.
The forecast suggests mobile operators will continue to add FWA subscribers, but won’t build wireless internet businesses big enough to seriously threaten incumbent ISPs. “I think mobile operators do have to carefully watch subscriber growth to ensure they are not exceeding traffic levels that could jeopardise the performance of their mobile services”, Heynen told MWL.
Mobile broadband also appears to be more valuable: analysis by research company Mobile Experts found US consumers willing to pay up to 20-times more per GB of data delivered over a mobile network versus a fixed line.
Principal analyst Kyung Mun does not foresee imminent, large-scale convergence of mobile and fixed services.
If they do ultimately converge, Mun predicts it will be more likely to happen through mergers and acquisitions than through one company’s technology or business mix.
For now, a small minority of US consumers and businesses are purchasing internet and mobile broadband service from a single supplier, but MNOs and cable ISPs are working hard to sell customers on this idea.
Competition heats up
While MNOs are busy beaming 5G into the homes of customers old and new, incumbent cable ISPs are marketing mobile services using spectrum leased from Verizon. Charter Communications claimed 3.6 million mobile lines at end-2021 and Comcast 4 million.
The pair have less than 3 per cent of the overall US mobile market, Mun said, noting his analysis includes tablets and IoT devices connected to mobile networks. “I believe Comcast and Charter largely gained mobile subscribers from the prepaid/MVNO segment and during the T-Mobile-Sprint merger”, he told MWL. “I suspect that net-additions will decelerate without significant churn and spending on customer acquisition”.
If more spending is needed, cable may be ready. In late 2021, Charter Communications chairman and CEO Tom Rutledge told an investor conference mobile is the “biggest single opportunity we have and the biggest growth driver going forward”, beginning this year.
When asked to discuss the company’s priorities for 2022, Rutledge named mobile first.
Comcast CEO Brian Roberts said on his company’s Q4 earnings call “there’ll be a mobile component in everything that we do” and, like Rutledge, described mobile as “a really big opportunity over time”.
Roberts explained the bundling of mobile with broadband can add value for customers and reduce churn.
Cable executives are also aware mobile penetration exceeds home broadband penetration in the US, a gap likely to widen.
A study conducted by Pew Research Centre in 2021 found 85 per cent of US citizens own a smartphone, 77 per cent have a broadband subscription and 15 per cent use a smartphone as their only internet connection.
5G, spectrum and private networks
Comcast and Charter Communications customers with 5G smartphones can now connect to the C-Band spectrum Verizon spent billions to purchase and deploy. Bitter as this may be for the operator, it is not expected to kick cable off its networks any time soon.
Its lease agreement with the cable operators has a perpetuity clause, and even if Verizon could find a way out, it might not want to because Comcast and Charter Communications could turn to AT&T, T-Mobile or Dish Network.
If one of those were to lease spectrum to the cable companies, Verizon could face just as much competition as it does now, but with none of the wholesale revenue.
Hosting the cable MVNOs also gives Verizon some visibility into their network operations.
The battle between mobile and cable is heating up, but in Mun’s opinion it is not a full-fledged war. “Both sides are indeed threatened”, he acknowledged. “But the threat remains somewhat contained until we see facilities-based entries providing owner economics”.
Even without owner economics, Comcast and Charter Communications are already reporting profits in their mobile businesses and expanding into services delivered on spectrum they do own, with both big winners in an auction of CBRS spectrum.
Charter Communications predicted its first CBRS field trial will launch early this year and Comcast plans to use its CBRS spectrum for private networks in the near term, having already announced a deal covering at the Wells Fargo Centre sports stadium in Philadelphia, through a non-exclusive partnership with Nokia.
On the other side of the equation, MNOs own the infrastructure used for FWA, with AT&T and Verizon also owning fibre connections which reach millions of homes.
But most of the infrastructure and spectrum MNOs own is dedicated to mobile, and the networks are designed and architected with wireless in mind.
In the end, it is reasonable to expect MNOs will pursue fixed wireless internet services until these initiatives tax the infrastructure resources needed for their mobile businesses.
But cable operators may eventually try to pursue mobile even at the expense of their legacy businesses.
Mobile offers greater service revenue potential and is becoming a primary internet connection for a growing number of people. US MNOs have the wind at their backs and the cable industry at their heels.
The editorial views expressed in this article are solely those of the author and will not necessarily reflect the views of the GSMA, its Members or Associate Members.