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.

How "Temporary" is Fixed Wireless?

Rather suddenly, cable operators have found themselves facing new home broadband competition from Verizon and T-Mobile. In the second quarter of 2022, T-Mobile and Verizon collectively added 816,000 new fixed wireless home broadband customers, while Charter and Comcast collectively lost around 21,000 accounts. 

That might not seem like such a big deal, but for the past two decades, cable operators have gotten almost all the net new account additions while incumbent telcos have lost share. 

The issue for some is whether fixed wireless is a temporary or permanent solution. Long term, capacity is going to be an issue. That is why industry observers always argue that fiber to the premises is the long-term solution. 

But long term is not an immediate solution for many. Verizon has no financial ability to overbuild fiber to home facilities to the 80 percent or so U.S. homes it does not already pass. Neither does T-Mobile have the financial ability to overbuild 100 percent of U.S. homes it does not already pass. 

Fot both Verizon and T-Mobile, the present consumer home broadband market does represent an immediate chance to take market share from cable operators using their 5G nationwide networks. 

The issue for both those firms is not “fixed wireless versus FTTH” but rather “fixed wireless versus doing nothing.” And the simple fact is that, for some time, 5G fixed wireless will provide enough capacity, at a reasonable price, to be attractive to a segment of the market, allowing Verizon and T-Mobile to add accounts, revenue and profit when building “out of region” FTTH simply is not an option. 

In that sense, fixed wireless is best viewed as an immediate driver of market share gains in home broadband where neither Verizon nor T-Mobile have the ability to compete using FTTH facilities they own or might build. 

The long term solution is not yet clear. Advancing technology might allow both firms to keep upgrading fixed wireless to continue to serve a segment of the market. 

Long term, both firms face a problem in the fixed networks space, as capital to overbuild 80 percent to 100 percent of the U.S. home market is not likely to become available. 

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. 

That is a “tomorrow” issue. 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. 

5G Fixed Wireless Forecast
	2019	2020	2021	2022	2023	2024	2025
Revenue $ M @99% growth rate	389	774	1540	3066	6100	12,140	24,158
Revenue $ M @ 16% growth rate	1.16	451	898	1787	3556	7077	14,082
source: IP Carrier estimate

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.

		2022	2023	2024	2025	2026
Home Broadband Revenue $B	60	62	65	67	70	73
Growth Rate 4%
Higher Revenue $B	110	114	119	124	129	134
source: IP Carrier estimate

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.

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.

Connectivity Providers are in a Box

To a signficiant extent, all tier-one connectivity service providers are in the same box: trapped in a highly-competitive business with slow to no growth; with declining profit margins and a "return on investment" problem and lacking the capital resources to make fundamental changes.

AT&T’s forays into media continue to be roundly assailed, but illustrate the problem.

The recent acquisitions and divestitures of DirecTV and WarnerMedia bring to mind earlier “grow the company” efforts that were focused on the core connectivity function, and also cratered, for arguably the same reason: AT&T’s debt burden was too high. 

The strategy might even have been correct, but AT&T could not survive the debt-fueled strategy. And keep in mind "AT&T" has failed in two incarnations: first as a long distance company trying to create local loop facilities; the second time as an integrated provider trying to move beyond a reliance on connectivity revenues.  

In the late 1990s, AT&T made a big move into cable TV, partly to fuel its move into local access services, partly to capitalize on the robust cash flow cable TV was then generating. 

Given the success cable operators have had with broadband access and support for voice services (the networks of the early 1980s were one-way) show the strategy was not wildly off the mark. 

On June 24, 1998, AT&T acquired Tele-Communications Inc. for $48 billion, marking a reentry by AT&T into the local access business it had been barred from since 1984.

When AT&T bought Tele-Communications, the objective was to use those assets to create a national broadband access capability which AT&T did not at that time possess. Recall that the 1983 divestiture of monopoly AT&T created seven local access companies--the “Baby Bells”--while restricting AT&T to long distance. 

When, in 1996 the Telecommunications Act opened all telco markets to competition, AT&T was faced with the challenge of creating a facilities-based local access network capability. That it failed to do so successfully is not too surprising, given the cost of creating an almost-nationwide broadband infrastructure. Think of the continuing cost of creating fiber to home networks nationally. 

Having concluded it had neither the time nor the money to create access networks nationwide, AT&T gambled on upgrading TCI’s cable networks. But the strategy was not the issue, the debt was. 

AT&T also bought Teleport Communications Group, a $500-million-a-year local business phone company, for $13.3 billion; MetroNet, a Canadian phone system, for $7 billion; and the IBM Global Network, which carries data traffic, for $5 billion, as parts of a move into local access. 

But the debt burden was too high and AT&T reversed course in 2004 and sold most of those assets. AT&T Broadband (the former TCI and US West Broadband assets) were sold to Comcast, making that firm the biggest U.S. cable TV company. 

The point is that AT&T could not figure out a way to quickly create a massive facilities-based local access network capability to compete with the Baby Bells and all the other newcomers, after passage of the 1996 Telecom Act. 

As a related issue, AT&T was not able to replicate the success later shown by Comcast in diversifying its product lines beyond the legacy. Comcast now earns significant revenue from content ownership, subscription video, home broadband, business services and voice, where it once relied exclusively on cable TV subscriptions.

AT&T hoped to replicate that feat. Yes, the strategy failed, twice. 

Few--if any--observers note that AT&T has twice been the largest linear video provider in the U.S. market.  The first foray in the 1990s made AT&T the largest cable TV company in the U.S. market. 

The second foray was the purchase of DirecTV, which again made AT&T the largest supplier of linear video subscription services in the U.S. market. 

At the same time, few can recommend any strategy for AT&T--or the other big connectivity providers--that lifts revenue growth beyond a few percent a year. Connectivity is a slow-growth business. If higher growth rates are desirable, that growth almost by definition has to come from outside the traditional connectivity role. 

No firm in the global telco-legacy connectivity industry has really succeeded wildly in that regard. 

By 2005 AT&T itself was acquired by SBC Communications, which promptly rebranded itself AT&T. Yes, AT&T has twice failed to innovate itself out of a box. But it is a box that has imprisoned virtually all global connectivity providers. 

From time to time a segment of the industry, in some regions, is able to grow--for a time--at fast rates. Quite often that growth only compensates for losses in other parts of the business. Mobility growth balancing declining voice revenues is the best example. 

The internet has made matters worse, further limiting the value and revenues connectivity providers can reap while driving value “up the stack” to third party providers. 

Those who castigate AT&T for its strategic failures are too harsh. Debt has been the issue, as the firm never could afford to spend enough, fast enough, to solve its local access problem, or its revenue source problem. 

If any of us were asked whether AT&T could afford to build a national FTTH network--within 10 years--we would rightly doubt it was possible. Even if it had the money, it did not have the time. 

No single firm could afford to spend $300 billion over 10 years to connect even 100 million homes, which is the scale of the problem AT&T faced. 

The first failure was experienced by AT&T the long distance company. The second failure was that of the former SBC Communications, rebranded as AT&T. It always was an unsolvable problem.

Hybrid Access Networks Might Get More Hybrid

The “hybrid” in “hybrid fiber coax” has been a key strategic approach used by the cable industry more generally. Fiber and coax; owned spectrum and mobile virtual network operator; MVNO and Wi-Fi offload; linear video and on-demand streaming; analog and digital; content ownership and distribution.

Keep in mind the "hybrid" business strategy often suggests itself at times of key technological change. Perhaps the classic example is the transition from sailing ships to steam-powered ships, when for 100 years many sailing ships were outfitted with steam boilers, but used both methods of propulsion.

The key point is that any hybrid still represents a transition strategy "from something to something else."

Now hybrid looks to happen for next-generation access networks. Cox Communications, joining others such as Comcast, says it will deploy fiber to the home and DOCSIS 4.0 networks using HFC. 

Though Cox has given few details, the network aims to supply 10 Gbps. Cox does not say whether that is symmetrical or not. DOCSIS 4.0 will feature upstream speeds to 6 Gbps, as the standard calls for. FTTH is almost certainly going to be symmetrical.  

 In a first, Virgin Media O2 plans to operate its gigabit hybrid fiber coax network side by side with the coming fiber to home network. That has never been done before at scale, if ever, by a cable TV company. 

The best analogy is the way mobile network operators run several generations of mobile networks simultaneously, using discrete radios, spectrum and often towers or radio sites. When telcos deploy optical fiber, they decommission the copper access network. 

That decision should have operating cost implications, positive and negative. On the positive side of the ledger, VMO2 will not have to migrate customers from the hybrid fiber coax network to the FTTH network in every case. 

That will save truck roll costs, customer premises equipment costs and some amount of customer service work to explain and convince people to switch over. 

On the negative side of the ledger, supporting two separate networks, with different underlying technologies, will not provide clear operating cost advantages. Energy costs for two networks will be necessary. Support staff will have to be trained to support both networks. 

It is possible migration will not be necessary in a majority of cases, for some time. So we will have to wait and see how the operating cost advantages and disadvantages appear over time. 

Take rates will be important. Though VMO2’s national FTTH network will  not operate in parallel everywhere, it will do so in areas where the HFC network already operates, which might mean 15.6 million or so homes. Seven milliion homes will have FTTH only.  

Cox and Comcast will operate two networks as well; just not two networks in the same area, as a rule. FTTH will undoubtedly be targeted to business-rich areas or higher-demographic suburban areas first, where the demand for multi-gigabit service is expected to develop first.

U.S. Population Density is a Bigger Problem Than Maps

Few observers, it seems, are completely happy with the state of home broadband maps. Some argue the maps distort availability by as much as 21 percent.  Others argue the degree of distortion likely is less than many believe, perhaps on the order of five percent, according to an analysis by George Ford, Phoenix Center for Advanced Legal and Economic Public Policy Studies chief economist.  

Others note that the lack of access to fixed network “broadband internet access” at a minimum of 25 Mbps is between five percent and six percent. If satellite access is included in the analysis then virtually all continental U.S. locations have access to service at 25 Mbps. 

Inaccurate maps are only part of the story, however. U.S. population density is quite thin across most of its geography. That directly affects the cost of building broadband networks, as hefty subsidies are required to reach the last one percent or two percent of remote locations. 

And the United States has a huge percentage of its land mass that is thinly settled, if at all settled. 

In Canada, 14 percent of the people live in areas of density between five and 50 people per square kilometer. In Australia, 18 percent of people live in such rural areas.

In the United States, 37 percent of the population lives in rural areas with less than 50 people per square kilometer.

Put another way, less than two percent of Canadians and four percent of Australians live in such rural areas. In the United States, fully 48 percent of people live in such areas.

Coverage is an issue in such rural areas. About six percent of the U.S. land mass is “developed” and relatively highly populated. Those are the areas where it is easiest to build networks. 

But about 94 percent of the U.S. land surface  is unsettled or lightly populated, including mountains, rangeland, cropland and forests. And that is where networks are hardest to build and sustain. 

Industry statistics often suggest coverage is far better than critics say. The reality is likely that the maps are faulty, but coverage is still far better than some believe. 

The Federal Communications Commission says 98 percent of U.S. homes have access to  internet access at a minimum of 25 Mbps and 84 percent subscribe. Critics say those numbers are inflated by bad maps. 

But one virtually never hears complaints that the leading U.S. cable companies do not, in fact, supply 500 Mbps (Charter Communications to 0gigabit internet access (Comcast) to nearly 100 percent of their customer locations. Add in Cox Communications and those three firms cover more than 75 percent of U.S. homes. Cox supplies gigabit access to 100 percent of its customer locations. 

Gigabit speeds now are available to more than 88 percent of all U.S. homes, according to the Federal Communications Commission. Other estimates peg the percentage of homes with cable high-speed access at 90 percent. 

One can disagree with the FCC statistics and still not quibble that cable operators generally do supply coverage within their franchise areas that is substantially at 100 percent and offering speeds between 500 Mbps and 1 Gbps. 

Consider rural telco networks. “Respondents to this year’s survey report an average of 4,467 residential and 469 business fixed broadband connections in service,” NTCA says, with an  average of 7,581 serviceable locations. 

Respondents report an average of 72 percent  of customers in their areas subscribe to a broadband service of some speed. 

“On average, three-quarters (75.0 percent) of serviceable locations are served by fiber to the home (FTTH) in 2021; this is an increase of 5.1 percentage points from the prior year’s survey, says the latest Broadband/Internet Availability report issued by NTCA says. 

An average of 15 percent of locations continue to be served via copper loops while fiber to the node (FTTN) is used to serve an average of six percent serviceable locations. Cable modems service 2.7 percent of locations, licensed fixed wireless 0.7 percent and unlicensed fixed wireless 0.6 percent of locations. 

source: NTCA 

As for maximum speeds 55 percent of locations can get speeds between 100 Mbps but less than 1 Gbps. Some 20 percent of locations have maximum speeds between 25 Mbps and 100 Mbps.

Some 10 percent of locations have maximum speeds between 10 Mbps and 20 Mbps. About 3.7 percent of locations get speeds below  10 Mbps. 

To be sure, the data is self reported. One might argue that firms that did not respond to the survey have coverage, speed or physical media attributes quite different from firms that did report. 

Still, coverage in rural areas might be less a problem that generally is talked about.