You are likely never to hear the CEO of any large U.S. telecommunications company with a fixed network, and serving consumers, ever admit that the fixed network actually has no hope of reversing the lead cable operators have in fixed network broadband.
What you will hear are mobile executives, and executives from firms with both fixed and mobile operations, talking up the ability to use 5G networks as a functional substitute for a fixed network. There is a reason that happens. There arguably is no chance telcos now can recapture market leadership in fixed network broadband.
And the simple fact is that cable companies have been the market share and installed base leaders for more than 20 years, with a lead that likely cannot be reversed by the leading telcos, and possibly not sustainably by many other fixed network competitors at scale, operating without public subsidies of some sort.
U.S. mobile operators are optimistic about both 5G and future networks past 5G because their futures rely on expanding the range of use cases for mobile connectivity and the extent to which mobility can become a platform of sorts. For legacy providers AT&T and Verizon, both of which have mobile and large fixed footprints, 5G matters because it drives revenue growth for each of them.
Consider that a global strategic imperative as well. By 2020, mobile accounted for more than half of all of Internet access revenue in more than 75 percent of countries, researchers at PwC said early in the year. Some analysts noted mobile Internet access revenues already had surpassed fixed network broadband revenue as early as 2013 or 2014.
That trend is expected to continue. By 2024, consultants at PwC say, mobile revenue will account for 68 percent of global Internet access market revenues. In other words, more than two thirds of all internet access revenue globally will be generated by mobile internet access.
For attackers such as Dish Network and new incumbent T-Mobile, 5G and future platforms will matter for a couple of reasons. Both Dish and T-Mobile are “mobile-only” providers, while AT&T and Verizon have both fixed and mobile assets. So the ability to leverage 5G and future networks to create substitutes for fixed network services is a major opportunity to enter a whole set of markets previously unavailable to them.
There is more. At this point, there seems little chance for telcos to actually reverse their fortunes in the fixed networks broadband business. As they continue to lose market share, the economics of the broadband business get worse, as more assets are stranded, forcing the recovery of capital investment from an ever-smaller number of customers.
And since broadband now has become the single most important service offered by any fixed network, for business or consumer customers, the largest fixed network providers are in something of a box.
To compete with cable operators would require more capex than they can hope to recoup. In other words, in the U.S. market, it appears too late to regain leadership from the cable operators in broadband services offered by the fixed network.
There is a bit of an analogy in the U.S. fixed network internet access market. U.S. cable operators have 70 percent of the installed base or market share, telcos and all others just 30 percent, according to researchers at Leichtman Research.
Moreover, cable continues to get virtually all the new net account or subscription gains, and cable operators have been the market share growth leaders (net additions) and installed base leaders (total accounts) since at least 1999.
In other words, U.S. cable operators actually have been the market share leaders (growth) and installed base leaders (total accounts) for more than 20 years. Put another way, telcos and others have been searching for some way to create a platform that could compete with cable sustainably.
One might think the answer always is “fiber to the home,” but that is where the business model becomes an obstacle. Given the lead cable has, it is unclear whether telcos could ever catch up, as cable continues to grow and invest in features of the hybrid fiber coax network that competes well with what FTTH provides, and does not have an insurmountable business sustainability issue.
And all that is why both legacy and attacking mobile service providers are betting so heavily on 5G and beyond. Having lost the ability to catch up with cable in fixed network broadband, they are forced to hope that the wireless and mobile platforms can emerge as functional substitutes for fixed network broadband.
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