Unknown "Homes Passed" Data Hampers Revenue Growth Estimates

Some important types of statistics and data are not collected because governments do not force firms or industries to collect it. For example, many governments think it is important to track data on where home broadband exists, where it does not, how fast it operates, who buys and who does not. 

Private firms often have important incentives to track and measure their own revenues, sales, profit margins and growth rates. Financial markets and accounting rules often require measurement of this sort. 

AT&T, for example, reports revenues for mobility, fixed network business revenues and consumer fixed network revenues from internet access, voice and other sources. But those are traditional financial metrics, not operating indices such as penetration or take rates, churn rates and new account gains. 

source: AT&T 

Nobody seemingly believes the same effort should be made to measure the number of home broadband provider locations or dwellings reached by various networks. Better mapping, yes. Metrics on locations passed? No. 

And yet “locations passed” is a basic and essential input to accurately determine take rates (percent of potential customers who actually buy). That input matters quite a lot to observers when evaluating the growth prospects of competitors, even if that figure does not matter much for policymakers, who mainly care about the total degree of home broadband take rates, on an aggregate basis. 

The U.S. Census Bureau, for example, reported some 140.5 million housing units housing units as part of the 2020 census. The estimate for 2021 units is 142.2 million units. Assume 1.5 million additional units added each year, for a 2022 total of about 143.6 million dwelling units. 

Assume vacancy rates of about six percent. That implies about 8.6 million unoccupied units that would not be assumed to be candidates for active home broadband subscriptions. The U.S. Census Bureau, though, estimates there are about 11 million unoccupied units when looking at full-time occupied status. That figure presumably includes vacation homes.

Deducting the unoccupied dwellings gives us a potential home broadband buyer base of about 132.6 million locations. 

More difficult is the degree to which access networks operated by any single contestant actually pass those locations, as firms generally do not report such numbers in quarterly financial or annual reports (they do not have to do so). 

And that is where estimations must be made. AT&T’s 2022 10-K report cites 14.2 million customer locations connected. Assume AT&T has about 20 percent take rates for its home broadband services where it operates. That implies a housing unit coverage of about 71 million dwellings. 

Assume AT&T has a higher take rate of about 39 percent where it operates fixed networks. That implies housing coverage of about 36 million dwellings. 

The estimate of 71 million home passings strikes me as too high, but the estimate of 36 million seems too low. In the past I have used the figure of 62 million homes passed for AT&T. 

Assume Verizon has about 10 million home broadband accounts, with a take rate of 40 percent (a bit high, probably, if we include copper access). That implies housing coverage of some 25.3 million dwellings. 

Leichtman Research Group has estimates of home broadband accounts that vary from company reports. LRG estimates that AT&T has some 15.4 million internet access accounts. The variance might come from business accounts not enumerated. 

Verizon’s consumer accounts might be overstated, as LRG estimates Verizon has about 7.5 million home broadband accounts, not 10 million. Using the LRG account figures, we might estimate Verizon home coverage of about 18.8 million homes, on the high side. 

ISPs

Subscribers at end of 2022

Net Adds in 2022

Cable Companies
Comcast	32,151,000	250,000
Charter	30,433,000	344,000
Cox*	5,560,000	30,000
Altice	4,282,900	(103,300)
Mediacom*	1,468,000	5,000
Cable One**	1,060,400	14,400
Breezeline**	693,781	(22,997)

Total Top Cable

75,649,081

517,103

Wireline Phone Companies
AT&T	15,386,000	(118,000)
Verizon	7,484,000	119,000
Lumen^	3,037,000	(253,000)
Frontier	2,839,000	40,000
Windstream*	1,175,000	10,300
TDS	510,000	19,700
Consolidated**	367,458	724

Total Top Wireline Phone

30,798,458

(181,276)

Fixed Wireless Services
T-Mobile	2,646,000	2,000,000
Verizon	1,452,000	1,171,000

Total Top Fixed Wireless

4,098,000

3,171,000

Total Top Broadband

110,545,539

3,506,827

source: Leichtman Research Group 

Assume Comcast has 31.2 million accounts, with take rates for home broadband of about 52 percent. That implies something on the order of 60 million households. 

Assume Charter Communications has a take rate of about 45.5 percent where it operates fixed networks. Assume Charter has approximately 30.8 million home broadband accounts. That implies a homes-passed figure of about 67.7 million homes. 

If there are 132.6 million U.S. occupied home locations, then Comcast and Charter can reach about 127.7 million of those locations, or about 96 percent of total, as Comcast and Charter essentially have unduplicated networks, not competing in the same geographies. 

That strikes me as unlikely, on the high side. An older rule of thumb is that Comcast and Charter reach about a third of total U.S. locations, each, for a possible reach of up to 66 percent of total U.S. home locations. 

Using different methodologies, I have in the past estimated that Comcast has (can actually sell service to ) about 57 million homes passed, while the Charter Communications network passes about 50 million homes, the number of potential customer locations it can sell to.

Verizon homes passed might number 18.6 to 20 million. To be generous, use the 20 million figure. 

AT&T’s fixed network represents perhaps 62 million U.S. homes passed. CenturyLink never reports its homes passed figures, but likely has 20-million or so consumer locations it can market services to. 

Ignoring the variance in potential customer locations passed, AT&T would seem to have the greatest opportunity in the home broadband space, if it can build optical access connections faster, as has the biggest home footprint and low home broadband market share. 

On the other hand, AT&T revenue is driven by mobility, not the consumer fixed network. So then the question has to be posed as "how much to invest in the consumer fixed network?" compared to other oportunities. A rational person might argue that answer is "not so much."

Capital availability--and financial returns--are always the issue. Even if it dramatically escalated fiber-to-home capital investment, it is not clear AT&T would gain as much new revenue, compared to investing in mobility or business services, for example.

The point of the wider exercise is that we are forced to guess about how many homes each of the major fixed network contestants actually can reach. That, in turn, affects our ability to estimate adoption rates and potential growth opportunities. 

The key point is that the estimates are imprecise. Pinning down the “homes passed” figure, essential as the denominator in any calculation of take rates, requires estimations with variable degrees of uncertainty, especially for the larger networks.

Business Context Shapes Access Network Strategy

As often happens in any industry, service providers have different opinions about fixed wireless access versus fiber-to-premises versus hybrid fiber coax versus satellite platforms for access services. 

As always, different firms have different views on strategy because of their business circumstances. Perhaps in principle, all former telcos would say fiber-to-premises is the ideal long-term solution where the economics exist. But the economics are daunting in many cases, leading to a “yes, but” strategy that uses other platforms as the economics dictate. 

Verizon has a relatively small “in region” footprint of U.S. homes and businesses--perhaps no more than about 20 percent--and cannot afford to “fiberize” another 80 percent of U.S. homes. So fixed wireless, which piggybacks on the 5G network, makes sense. 

T-Mobile, with close to zero fixed network coverage of U.S. homes and businesses, benefits even more from 5G fixed wireless. 

AT&T, on the other hand, has the biggest footprint of U.S. homes and businesses, so out-of-region coverage magnitudes are correspondingly reduced. 

Comcast and Charter have “homes passed” totals close to AT&T’s footprint and already have HFC networks they believe will be marketplace competitive for quite some time, as multi-gigabit speeds are coming next on the HFC platform. 

Of a total of 140 million U.S.  homes, AT&T’s landline network passes 62 million. Comcast has (can actually sell service to) about 57 million homes passed.

The Charter Communications network passes about 50 million homes, the number of potential customer locations it can sell to.

Verizon homes passed might number 27 million. Lumen Technologies never reports its homes passed figures, but likely has 20-million or so consumer locations. 

Assuming no further significant consolidation, AT&T only “needs” to fiberize within its footprint to reach 44 percent of U.S. homes (and virtually all the homes regulators are likely to allow it to pass). 

Assuming Verizon has no appetite to significantly expand its fixed network footprint, that leaves about 81 percent of U.S. homes that could be passed by the 5G network, and would be impossible to significantly serve using FTTH. 

Comcast already has HFC offering gigabit speeds reaching about 41 percent of U.S. homes. Charter already passes about 29 percent of U.S. homes. Again, regulators are unlikely to allow either firm to get significantly bigger, in terms of homes passed. 

Lumen has a largely-rural territory that includes perhaps 14 percent of U.S. homes, but Lumen has no mobile network assets it can use to offer fixed wireless on a facilities basis. 

The point is that each firm’s view of strategy is shaped by its existing legacy assets. Cable operators, though not denying FTTH makes sense in the future for a growing percentage of customers, also believe HFC is a viable platform, without major reliance on FWA or FTTH to serve mass market customers. 

Verizon and T-Mobile have good reasons for using FWA that piggybacks on their nationwide 5G networks. 

AT&T believes FTTH is the best solution, but also has the largest in-region fixed network footprint of any major ISP, and therefore has the most to lose if copper access facilities are not upgraded to fiber access.

There is no universal answer for “which access platform” makes most sense. Each major ISP has key business model constraints and opportunities that shape the access network choices.

Comcast Expects 10-Gbps Downstream Upgrade to Cost "Less than $200 Per Passing"

Comcast says it can initially upgrade its network to eventually handle symmetrical 10-Gbps internet access (supporting 10 Gbps initially) for “less than $200 a home passed,” according to Elad Nafshi, Comcast EVP and chief network officer. 

It is a nuanced statement. 

That initial upgrade cost includes revamping networks from low-split to mid-split, including changes to active and passive network elements when necessary to support an upgrade to DOCSIS 4.0 10-Gbps downstream bandwidth. Upstream will increase to perhaps 1 Gbps. 

Significantly, Comcast’s initial deployment does not require full fiber distribution, but can accommodate as many as four amplifiers in cascade. 

That means the upgrade to 10-Gbps downstream service can be done without upgrading the whole network to fiber, which uses passive coaxial cable only for the last 100 feet or so of drop cable. 

Upgrading to symmetrical 10-Gbps service will require replacing all the radio frequency amplifiers. Typically, Comcast has built out fiber to an optical node, then delivered signals to home using a string (cascade) of up to four amplifiers running on coaxial cable. 

In the first stage of DOCSIS 4.0 deployment,  most of Comcast’s facilities can continue to operate with fiber distribution to a node, then retain as many as four RF  amplifiers for service to homes. There are huge cost implications for retaining that capability, since Comcast can continue to use the in-place amplifiers and coaxial cable. 

Future “Node + 0 amplifier” networks will transition to Full-Duplex (FDX) DOCSIS, to significantly increase the upstream bandwidth to multi-gigabit speeds, such as symmetrical 10-Gbps service. But that also will require deploying a full fiber network, using coaxial cable only for the drops. 

The first step will be a shift to a 5-MHz to 204-MHz upstream bandwidth and 1218 MHz downstream bandwidth, supporting a 1 Gbps upstream tier and multi-Gbps downstream. In the following illustration, blue frequencies are available for downstream traffic, while red frequencies are available for upstream traffic. 

As usual, the upgrades can be implemented incrementally, in stages, with incremental capital investment. . 

source: Comcast 

Then overlapping bidirectional spectrum from 108 to 204 MHz can be activated. that eventually increases up to the full 108-MHz  to 684-MHz FDX limit. In that implementation DOCSIS 3.0 can be supported up to the 1002 MHz limit and legacy DOCSIS 3.1 to the 1218-MHz limit.

The point is that Comcast still believes it can upgrade its bandwidth over time to symmetrical 10-Gbps service while remaining the low-cost provider compared to rival fiber-to-home networks.

Verizon Uses Owned Optical Fiber for 48% of its Mobile Site Backhaul

Verizon now says it connects 48 percent of its cell sites using owned optical fiber. That might not seem like such a big deal, but consider that Verizon’s fixed network only reaches about 20 percent of U.S. homes. 

That matters because ownership of a fixed network reaching homes and businesses provides cost advantages for deploying optical fiber backhaul to cell towers and sites. AT&T, in contrast, has fixed network assets passing about 44 percent of U.S. homes. That also provides advantages for cell site backhaul. 

Building fiber backhaul to towers outside the Verizon fixed network territory requires construction or long-term leases of capacity from other providers who can provide the access. It appears that a substantial percentage of Verizon backhaul uses built or owned facilities. 

For U.S. cable operators, who prefer to sell mobile service only to their own existing customer base, the same logic applies. Owning their own landline facilities reduces the cost of creating a cell network. 

Of a total of 140 million homes, AT&T’s landline network passes 62 million. Comcast has (can actually sell service to) about 57 million homes passed.

The Charter Communications network passes about 50 million homes, the number of potential customer locations it can sell to.

Verizon homes passed might number 27 million. Lumen Technologies never reports its homes passed figures, but likely has 20-million or so consumer locations.

Home Broadband Strategy is Heavily Dictated by the Business Model

AT&T is targeting about 30 million homes for new fiber-to-premises availability. Verizon is emphasizing fixed wireless. As always, strategy is based on firm strengths and weaknesses. AT&T has the largest footprint of homes; Verizon’s fixed network possibly reaches 20 percent of U.S. homes. 

Of a total of 140 million homes, AT&T’s landline network passes 62 million. Comcast has (can actually sell service to) about 57 million homes passed.

The Charter Communications network passes about 50 million homes, the number of potential customer locations it can sell to.

Verizon homes passed might number 27 million. Lumen Technologies never reports its homes passed figures, but likely has 20-million or so consumer locations. 

AT&T has more fixed network share to protect, compared to Verizon, while Verizon has bigger upside in taking home broadband share outside its footprint.

The same holds for T-Mobile, which historically had zero percent share of home broadband. 

“If all I had was a wireless network, if I did not have a scaled physical infrastructure fiber thriving and growing network, I might have no other choice than to leverage my wireless spectrum portfolio to go grow my business,” said Jeff McElfresh, AT&T COO.

The point is that business strategy around home broadband platforms is not based strictly on what is "best" long term. Strategy also must be based on how fast competitive home broadband access can be enabled; at what cost and how fast.

Cable operators have differing opinions about whether to upgrade directly to FTTH now, or conduct at least one major hybrid fiber coax upgrade before doing so. Sheer technology performance is but one consideration. The payback model is more important.

Cable Leads U.S. ISP Accounts, Telcos have Most to Gain

AT&T, Comcast and Charter Communications own networks covering the most U.S. residents (and presumably housing units). But it is difficult to directly correlate population covered with “homes passed” or even “locations served.” 

Most locations are served by at least two different terrestrial providers. Subscriber percentages hinge at least partly on marketing strengths (cable operators have at least 70 percent of the installed base). 

U.S. ISP Population Coverage and Subscribers
Firm	Population %	Subscriber %
AT&T	42	15
Comcast	36	29
Charter	34	27
Verizon	17	7
Lumen	9	2
Cox Comm.	7	5
Altice	5	4
sources: FCC, Leichtman Research

Still, the numbers suggest telcos have lower take rates than do cable operators, which corresponds to reality. Also, the telcos arguably have the greatest upside from network upgrades that would match or exceed cable performance metrics. With appropriate pricing, that should allow telcos to eventually close the take rate gap with cable companies, all other things being equal.