It was virtually inevitable that T-Mobile, in the U.S. market, would eventually move beyond its “mobile-only” approach to services. Virtually everywhere globally, dominant service providers have both mobile and fixed network retail operations. In the U.S. market, where T-Mobile primarily competes with AT&T and Verizon, those competitors have large-scale fixed networks businesses that T-Mobile cannot presently confront, head to head.
So it is not surprising that T-Mobile is looking to create a joint venture, funded at perhaps $4 billion in total, with T-Mobile investing $2 billion initially, to enter the home broadband market using a fixed network platform.
For those of you who have watched other internet service providers get into the fiber-to-home business, the initial foray would not have huge scale. At network costs of perhaps $900 per location, that level of investment--in suitable markets-- might create a network passing about 400,000 home locations. And the actual number of connected customers would require an additional incremental capital investment of perhaps $600 each.
So the initial footprint would not change national installed base or market share figures. At first, the joint venture would reasonably expect to connect 20 percent of locations passed, ramping over perhaps five years to as much as 40 percent.
Still, the move is not unexpected. As well as T-Mobile is doing in gaining mobile customer market share, it could not forever ignore the fixed networks business as a growth driver. In fact, the foray into fixed wireless was a half step in that direction, allowing T-Mobile to compete for some portion of the existing home broadband market where it has not been present before.
But most observers would agree that fixed wireless competes best in the value segment of the market.
Fixed wireless has been the go-to platform for wireless internet service providers operating in U.S. rural areas. The issue now seems to be how important fixed wireless could be for some internet service providers such as Verizon and T-Mobile, who do not have the financial resources to overbuild 80 percent of the U.S. home market (Verizon) or all of that market (T-Mobile).
And that would not change were T-Mobile to invest a few billion dollars in FTTH.
Perhaps the fixed network equivalent of mobile virtual network operators will eventually emerge at scale, allowing T-Mobile and Verizon to partner in some way with other entities to create or use FTTH facilities. In the meantime, joint ventures are likely the fastest way to start scaling into the business.
“Scale” is largely a “tomorrow” issue for T-Mobile. The immediate issue is whether fixed wireless can shift a few points of home broadband market share.
By some estimates, U.S. home broadband generates $60 billion to more than $130 billion in annual revenues.
If 5G fixed wireless accounts and revenue grow as fast as some envision, $14 billion to $24 billion in fixed wireless home broadband revenue would be created in 2025.
If the market is valued at $60 billion in 2021 and grows at four percent annually, then home broadband revenue could reach $73 billion by 2026.
If we use the higher revenue base and the lower growth rate, then 5G fixed wireless might represent about 10 percent of the installed base, which will seem more reasonable to many observers.
Assuming $50 per month in revenue, with no price increases at all by 2026, 5G fixed wireless still would amount to about $10.6 billion in annual revenue by 2026 or so. That would have 5G fixed wireless representing about 14 percent of home broadband revenue, assuming a total 2026 market of $73 billion.
If the home broadband market were $134 billion in 2026, then 5G fixed wireless would represent about eight percent of home broadband revenue.
That is a serious incremental share gain for the likes of T-Mobile and Verizon, even if it leaves the long-term strategy undeveloped. To be sure, 6G will come, and will increase capacity at least 10 times over 5G. Using other tools, it might still be possible to boost fixed wireless capacity further, or to create mechanisms for offloading much mobile traffic to the fixed networks. *-/9+88/7
Comcast and Charter continue to claim that fixed wireless is not damaging its home broadband business, and that might well be partly correct. For any internet service provider, a customer move is an opportunity to gain or add an account, so lower rates of dwelling change should logically reduce the chances of adding new accounts.
But that is akin to retailers blaming “the weather” when they have a revenue miss. Weather does play a role, but most often is not the only driver of results.
In the second quarter of 2022, Comcast reported a net loss of customer relationships and “flat” home broadband accounts.
Fixed wireless might not be a “long term” solution for every customer. But it might remain an option for a significant percentage of customers, especially if the long-term solution for T-Mobile and Verizon is yet to be created. But it appears T-Mobile is about to move on that part of the strategy.
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