Cable companies are losing their grip on the home internet market

Cable companies are losing their grip on the home internet market

T-Mobile and Verizon gobble up market share with fixed wireless access service

DENVER, Nov. 15, 2022 (GLOBE NEWSWIRE) — National wireless carriers T-Mobile and Verizon continue to disrupt home internet activity with their Fixed Wireless Access (FWA) service, which they strategically bundle with smartphone packages at an attractive price points. The offering shook up the broadband market and led to unprecedented growth for T-Mobile and Verizon at the expense of cable companies Comcast, Charter and Altice USA.

According to a new report from CoBank’s Knowledge Exchange, wireless companies are offering FWA in markets where they have excess network capacity. This means that ISPs in smaller markets could be exposed to competitive threats from T-Mobile and Verizon. However, Jeff Johnston, chief communications economist at CoBank, suggests the risk is low and national wireless carriers will prioritize urban and suburban markets for the foreseeable future.

“Internet service providers serving smaller, rural markets are at risk because there is usually excess capacity in those parts of the network,” Johnston said. “While it’s possible wireless carriers will target tier two and tier three markets if and when they exhaust more populated markets, that’s likely not happening anytime soon.”

National wireless carriers have spent billions of dollars on midband spectrum which, when combined with 5G, adds an incremental increase in network capacity with faster data speeds. Offering a fixed wireless connection using the same cellular sectors that their smartphones use has only marginal cost implications. And when these two services are combined (smartphone plan and fixed wireless), it can be an attractive offer.

Verizon offers home internet access starting at $25 per month with a qualified 5G mobile plan that comes with a 10-year price guarantee. Cable companies recognized the threat and reacted with their own aggressive pricing. Comcast now offers a 75 Mbps plan on a 2-year contract for $25 per month. Charter Communications recently launched Spectrum One, which includes a single mobile line and Internet service (300 Mbps speed plan) for $49.99 per month.

Will Fixed Wireless Access Maintain Its Momentum?

According to national wireless operators, they have enough capacity to support several years of fixed wireless growth before encountering network problems. However, there is much debate about the long-term sustainability of their current growth trajectory. According to Johnston, it comes down to scalability and cost.

“Wireless networks don’t have the same level of operational leverage as fixed broadband networks,” Johnston said. “In a wireless network, there is a strong negative correlation between network traffic and speeds. As network traffic increases, speeds decrease. Wireless carriers will likely face a critical decision point, particularly if FWA traffic begins to degrade smartphone throughput speeds and smartphone churn increases as a result.

Until then, wireless carriers’ FWA service should continue to be successful by targeting urban and suburban markets where rising customer additions are more attractive than in smaller rural markets.

Watch a video synopsis and read the report, As Fixed Wireless Wreaks Havoc on Cable, are Smaller ISPs Next?

About CoBank

CoBank is a cooperative bank serving vital industries across rural America. The bank provides loans, leases, export financing and other financial services to agribusinesses and rural electricity, water and communications providers in all 50 states. The bank also provides wholesale loans and other financial services to affiliated agricultural credit associations serving more than 76,000 farmers, ranchers and other rural borrowers in 23 states nationwide.

CoBank is a member of the Farm Credit System, a national network of banks and retail lending associations licensed to serve the borrowing needs of agriculture, rural infrastructure and rural American communities. Based out of Denver, Colorado, CoBank serves clients in regional banking centers across the United States and also has an international representative office in Singapore.

CONTACT: Corporate Communications CoBank 800-542-8072

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