This almost sounds like a silly question when looking at the recent growth of FWA wireless, where the big cellular carriers are selling home broadband using cellular spectrum. But I find myself having to ask the question after discussing this with some of my peers. Universally, every person that I put the question to dismissed FWA wireless as a temporary technology with no real long-term legs.
The observations I heard about FWA included the following:
- The product is already oversubscribed, and customers are already getting tired of it.
- Cell towers weren’t designed to handle all-day broadband connections, and this is going to harm the carriers more than help them in the long run.
- The speeds aren’t fast enough, and people will tire of the broadband performance.
- The coverage is spotty and swings from fast to slow during the day.
Interestingly, the numbers seem to be telling a different story. Consider national quarterly broadband growth over the last two years, as shown in the following table. These numbers come from Leichtman Research Group, and they say the big companies represented in these numbers represent about 95% of all broadband subscribers in the country.
|
FWA |
Big Cable Companies | Big Telcos |
Total |
|
| 1Q22 |
532,000 |
482,830 | 50,350 |
1,065,180 |
| 2Q22 |
816,000 |
(60,289) | (87,837) |
667,874 |
| 3Q22 |
920,000 |
39,035 | (136,101) |
822,934 |
| 4Q22 |
913,000 |
55,527 | (95,204) |
873,323 |
| 1Q23 |
916,000 |
67,472 | (21,196) |
962,276 |
| 2Q23 |
903,000 |
9,566 | (61,833) |
850,733 |
| 3Q23 |
941,000 |
4,777 | 3,392 |
949,169 |
| Total |
5,941,000 |
598,918 | (348,429) |
6,191,489 |
Since the beginning of 2022, T-Mobile and Verizon FWA captured 96% of net new customer gains. While cable companies grew by 600,000 over that time, 80% of those gains were in the first quarter of 2022. Since then, the big cable companies have stagnated and collectively added less than 20,000 net new subscribers per quarter. Telcos have continued to bleed customers as they continue to lose DSL customers, but underneath those losses, the telcos are replacing DSL customers with fiber customers.
Some of the observations of FWA I heard ring true. Cell sites weren’t designed for the kind of connections people expect for home broadband. But after seeing this unexpected success, I’m sure that the carriers are working to bolster cell sites. I know that there are a lot of requests floating around the industry asking for faster broadband connections to cell sites. In the long run, accommodating FWA permanently means changing the way that cell sites operate.
It’s also true that the bandwidth is not guaranteed. Both carriers warn customers that FWA broadband might be curtailed any time there is a lot of demand for cellphone traffic. As much as the carriers love this new business, it’s hard to think they will endanger their cellular business. However, a few of the folks I talked to think that’s exactly what they are doing.
The one observation that nobody made to me was that FWA cellular costs less – particularly less than big cable broadband. The standalone list price for T-Mobile FWA is $65 and is $60 for Verizon. Both companies offer a discount for autopay, and Verizon offers an additional $15 discount for existing Verizon cellular customers. Both are clearly trying to grab market share. I saw an advertisement this past weekend for Verizon FWA with a price of $30 guaranteed for four years for existing Verizon cellular customers. In my experience, there are a lot of customers for whom price is the predominant factor.
While my peer group thinks FWA is a flash-in-the-pan, T-Mobile and Verizon predict they will collectively reach 15 million customers, about twice where they sit today. This is clearly the most interesting dynamic in the broadband industry, but I don’t think anybody knows for sure where these carriers are going to top out. But it doesn’t feel to me like they’ve already hit the top of the market.