The success of FWA: not a short-term miracle after all?

In mid-July 2023, Comcast announced that it would start implementing Full-Duplex Docsis 4.0 to its first customers in the last quarter of the year. Comcast should be followed in the coming years by the other main cable operators. Can this network upgrade, and therefore the promise of multi-gig symmetrical speeds, really help cable operators regain traction in a saturated broadband market? With the decline of their linear video business over the last years, connectivity, and especially broadband, has become cable operators' core focus towards the future. Yet, the short-term perspectives are not looking very bright now, as they have experienced modest not to say negative growth. We can observe that this situation applies to the whole cable industry overall, and only fixed wireless access, notably by T-Mobile and Verizon, is gaining momentum right now. But long-term perspectives look more promising, as a result of this upcoming deployment of Docsis 4.0 and new subsidized broadband projects, through the BEAD (Broadband, Equity, Access & Deployment) Program, allowing cable operators to gain ground, especially in rural areas.

The rise of FWA, set to continue?

The narrative around FWA has been changing over the last months. First, T-Mobile and Verizon keep recording robust growth for their fixed wireless 5G offers, quarter after quarter. The latter has increased its number of clients - now at 2.26M – by 55% in six months. The former exceeded 3.6 million subscribers and intends to reach 8 million customers by 2025. The doubts around both capacity and the sustainable potential of this growth have been largely dismissed. Besides, Verizon got access to new C-band spectrum licenses in August. Moreover, FWA’s key strength to consumers still essentially lies in its non-prohibitive price (starting from $30 per month) for satisfying speed performance, something that fiber and cable operators can hardly compete with in the long term. So FWA’s momentum can probably endure over time, probably at a lower growth rate though. As proof, AT&T, which was initially reluctant to really get involved in the FWA segment to better focus on FTTH deployments, recently expanded its fixed wireless Internet Air product to 16 new locations, including Los Angeles or Chicago for instance. The goal is mainly to help copper subscribers transition until FTTH is available. Indeed, legacy copper networks are doomed to decline, and AT&T already plans to cut its copper footprint by half by 2025, giving priority to fiber rollout.

Fiber buildouts are slowing down, while broadband connections are speeding up

FTTH expansion is not solely the result of telcos like AT&T investing in the FTTH deployment and upgrading their copper networks, but also of legacy cable operators extending and upgrading their fixed networks to full fiber premises. It also benefits from government subsidy plans, like the BEAD or the RDOF. However, it is important to remain careful about operators’ plans to build and roll out fiber networks. Indeed, such plans require significant spending, and the current economic situation might be perceived as a hurdle for the operators to get the requisite capital and debt to support the increasingly higher costs of fiber rollout. As proof, some operators such as Lumen, Consolidated Communications, or Verizon have already started to scale back expansion plans, or at least to reduce the pace of their rollout. The relatively high cost of building fiber (at the very least 500$ per passing, against 100-200$ per home upgraded with Docsis 4.0) is also becoming a source of questions.
The capital-intensive degree of fiber deployments will also require actors to join forces with each other (MetroNet and Vexus Fiber,) and/or with private equity firms (e.g. AT&T with Blackrock for Gigapower, Apollo Global Management with Brightspeed through Lumen’s former assets) to secure the needed investments and/or scale to develop fiber. Consolidation has already started with smaller regional providers getting acquired by bigger fiber players looking to expand their footprint (Ziply Fiber could serve as a relevant example, with multiple acquisitions over the last months). Both cable operators and telcos are pressured to pursue the multi-gig approach to compete against each other in the coming years. Since the beginning of the year, AT&T has launched 2-Gig and 5-Gig residential and broadband business offers in all its fiber markets, the ultimate goal being the development of 10 (or even 20) Gbps symmetric speeds, already hit in labs, but whose availability for customers is yet to announce. On their side, cable operators Charter, Cox, and Cable One, following Comcast, already outlined plans to deploy Docsis 4.0 in the near future. Operators such as AT&T, Frontier, or Hotwire Communications are already working on 25G services.

Subscriber growth: a metric of the past?

Even though the federal BEAD funding will enable operators to get back on the subscriber growth track, the saturation of the market has led operators to increasingly eye a stronger ARPU as the relevant metric to assess the value of their broadband business. Despite losing 19K subscribers in Q2 2023, Comcast experienced a 4% growth of its revenue over the period thanks to higher rates. At the overall market level, market shares gained by FTTH and FWA used to come mainly at the expense of DSL, but are now slowly eating the cable business. Nevertheless, and despite losing ground, cable operators are expected to maintain their historically dominant market position, and should still account for around 45% of the total market by 2033, according to Dataxis' ten-year estimations. In this increasingly stiff competitive landscape, if operators are increasingly looking at the value of customers through the ARPU metric, the value that customers themselves attribute to operators’ broadband services, which depend on many more factors than just speeds, will probably be as equally decisive in the battle for gaining and retaining customers. This research highlight is based on our data coverage of Telecom in North America. Please contact us to get a demo and see the depth of our service. Discover CTV Ad Days New York, the event about with CTV, FAST, AVOD, hybrid SVOD/ad-supported, addressable and programmatic advertising in North America.

Guillaume Perrin

Senior Analyst

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Published on: Wednesday, 04 October, 2023

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