Monday, May 21, 2018

Will New Internet Access Platforms Disrupt the Market?

Among the bigger questions coming to the fore in the internet access business is whether 5G can become an effective replacement for the fixed network, and whether fixed wireless can do the same to the cabled networks.

The corollary is that some contestants have more motivation to ask such questions than others. Verizon, for example, has the smallest fixed network footprint among tier-one internet access suppliers in the U.S. market.

Comcast, for example, passes (can actually sell service to these homes) about 54 million homes. Charter Communications passes some 50 million home locations.

AT&T’s fixed network passes perhaps 62 million U.S. homes. Verizon, on the other hand, passes perhaps 27 million locations.

If fixed wireless proves to be a more-affordable way to create high-speed internet access at gigabit rates, Verizon can use the platform inside and outside its present fixed network territory. That is important in several ways.

Use of 5G fixed wireless could allow Verizon to offer fiber to home speeds without the cost, in major urban areas where it has not yet ubiquitously deployed Fios FTTH.

Just as important, out of region fixed wireless offers a brand new, and sizable, revenue opportunity. Today, Verizon is unable to compete, out of region, for perhaps 102 million fixed network internet access locations it cannot reach today. Verizon itself has argued the 5G fixed wireless opportunity is about 30 percent of U.S. household locations, or perhaps 43 million locations.

Similar questions will be raised about the use of unlicensed spectrum to support commercial access operations. Though a proven approach, tier-one service providers traditionally have eschewed that approach.

That does not mean every potential contestant will have the same predilections. Wi-Fi obviously has been deemed commercially feasible in a number of deployment situations. Other access platforms of a non-traditional nature are theoretically possible as well, and arguably will be studied much more seriously by potential new challengers to tier-one access providers.

Just as obviously, the tier-one providers will move to deploy their own solutions that obviate the “need” for other solutions.

That means choices made by some would-be competitors can, and likely will, be different from choices made by tier-one providers. Typically, no single choice is “best” for every deployment scenario. So mixed platform choices are common, even one platform is preferred.

Small rural ISPs have used fixed wireless. Tier-one telcos have used cabled networks (all copper, fiber to node or fiber to home). Cable companies have used hybrid fiber coax. Mobile operators have used radio networks. Satellite operators use those networks.

Platform possibilities are multiplying, though. Wide availability of new radios, lots of new unlicensed spectrum, ways to aggregate licensed and unlicensed spectrum and commercialized millimeter wave frequencies all will make a difference. The ability to create private access networks could well emerge as well, especially for venue access.

The point is that we likely to see new debates about the “best” access technology, or at least debates about “commercially viable” access platforms.

The context there is the extent to which any platform choice works well enough to support the existing business model, is flexible enough to evolve, while offering a hook to better platforms that will be needed in the future.

Platform and standards wars are anything but unusual in the technology business, and quite common in the telecom and networking businesses as well.

In recent decades, we have seen big debates about:
  • fiber to home versus fiber to curb versus hybrid fiber coax
  • Whether metro Wi-Fi can compete with mobile access
  • Value of CDMA and GSM in the U.S. market
  • Wi-Fi as an access technology to rival a mobile network
  • whether a 5G network can be an effective substitute for fixed network access
  • fixed wireless using unlicensed 60-GHz spectrum (Terragraph) as cable substitute
  • Whether low earth orbit satellites and perhaps other methods (unmanned aerial vehicles, balloons) can be substitutes for traditional cabled networks.

In all likelihood, the outcome will not be decided on technological grounds. Virtually always, the business model (deployment cost; fit with existing operations; user acceptance) drives the decision.

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