Fiber Reaches Less Than Half of U.S. Commercial Locations

U.S. business locations with 20 or more employees reached by an optical fiber connection  reached 49.6 percent in 2016, according to Vertical Systems Group. In 2004, optical connections reached only about 10 percent of such locations.

One reason so many business locations, even those with at least 20 workers, are not connected directly by optical fiber is that so many are small locations that do not provide a business case. Roughly half of all commercial buildings represent about 10 percent of total floor space, showing how small most sites are.

The vast majority of commercial buildings are relatively small. About half of buildings are 5,000 square feet in size or smaller, and nearly three-fourths are 10,000 square feet or smaller. The median building size is 5,000 square feet (i.e., half the buildings are larger than this and half are smaller), while the average size is 15,700 square feet.

Buildings over 100,000 square feet (from large high schools to hospitals to sprawling distribution centers to skyscrapers, for example) make up only about two percent of the building count but about 35 percent of the total floorspace.

Many of those smaller locations are markets for consumer-grade connections or non-fiber moderate-speed access connections, and may never be amenable to optical fiber access.

 

source: U.S. Energy Information Administration

Offices represent the single biggest category of locations, followed by warehouse and storage locations; service businesses and retail.

source: U.S. Energy Information Administration

Historic Shift of U.S. Internet Access Market Share is Coming

Though U.S. cable operators have steadily added to their installed base of internet access customers for two straight decades, at the expense of telcos, that might be on the cusp of significant change. 

Verizon, for example, seems to be taking share from Altice, despite that firm’s conversion from hybrid fiber coax to a fiber to home platform continues, and even as most of the footprint is offering gigabit levels of service. 

In some markets, independent FTTH providers also are gaining share. Tucows, which operates Ting Internet, has been getting market share.of about 31 percent where it chooses to build its symmetrical fiber-to-home networks. 

Coming next is an expansion of the addressable telco FTTH market, based on $65 billion in subsidies to be enabled by a new infrastructure bill passed by the U.S. Congress. 

The passage of an  infrastructure bill by the U.S. Congress means as much as $65 billion in support for broadband access across the United States. While the specific allocations are not yet available, that essentially means the business case for deploying fiber to the home--and other access platforms--is better by about that amount. 

The big implication is that the business case for deploying high-performance broadband networks will improve by a substantial margin, bringing millions of locations to the point where such networks are justified in terms of business case, where they had not been deemed feasible in the past. 

The obvious issue is where to prioritize the spending of money and for how many different types of platforms. As always, there will likely be an effort to award subsidy funds in a “platform neutral” manner, or largely so. 

George Ford, economist at the Phoenix Center for Advanced Legal and Economic Public Policy Studies, argues that about 9.1 million U.S. locations are “unserved” by any fixed network provider. 

Though specifics remain unclear, it is possible that a wide range of locations might see their deployment costs sliced by $2,000 or more. Lower subsidies would enable many more locations to be upgraded to FTTH, for example: not the unserved locations but possibly also many millions of locations that have been deemed “not feasible” for FTTH.

Much hinges on the actual rules that are adopted for disbursement. Simple political logic might dictate that aid for as many locations as possible is desirable, though many will argue for targeting the assistance to “unserved” locations. 

But there also will be logic for increasing FTTH services as widely as possible, which will entail smaller amounts of subsidy but across many millions of connections. The issue is whether to enable 50 million more FTTH locations or nine million to 15 million of the most-rural locations. 

Astute politicians will instinctively prefer subsidies that add 65 million locations (support for the most-rural locations plus many other locations in cities and towns where FTTH has not proven obviously suitable). 

The issue is the level of subsidy in various areas. 

“According to my calculations, if the average subsidy is $2,000 (which is the average of the RDOF auction), then the additional subsidy required to reach unserved households is $18.2 billio,” Ford argues. “If the average subsidy level is $3,000, then $22.8 billion is needed. And at a very high average subsidy of $5,000, getting broadband to every location requires approximately $45.5 billion.”

Such an extensive subsidy system would change the FTTH business model for all telcos operating in rural and even many urban or suburban areas. might affect cable operators and also could affect demand for all satellite and fixed-wireless operators. 

It just depends on the eligibility rules. 

Generally speaking, both AT&T and Verizon, where they offer fiber-to-home service, have been getting installed base a bit higher than 40 percent, in markets where they have been marketing for at least a few years. AT&T is hopeful it can, over time, boost share to about 50 percent of the market. 

Unless cable operators fail to respond, and that is highly unlikely, their installed base could  drop from about 70 percent to perhaps 50 percent if telcos adopt FTTH on a wide scale. That obviously leaves little room for third providers at scale, on a sustainable basis. 

To be sure, Ting Internet is “cherry picking” its markets, picking locations where it believes it has the best chance to gain share. 

Those typically are higher-income suburban areas where the main competitor, in terms of speed, is the cable operator, and where a telco remains wedded to copper access. Market share should be lower in areas where both the incumbent cable operator and telco offer gigabit speeds. 

In those markets, assuming pricing is relatively comparable, Ting’s advantage in part will rely on upstream bandwidth capabilities, at least where compared to the cable operator. 

It is harder to predict what might be the case in a decade, when telcos and cable operators alike might be offering access routinely in the gigabit to multi-gigabit ranges, possibly with upstream bandwidth high enough that return bandwidth is not an issue for nearly all customers, even if not fully symmetrical. 

To be sure, terms and conditions and general customer expectations about experience will matter. Internet service providers as a class do not score highly in the American Customer Satisfaction Index, for example. Whether specialist providers can do better, on a sustainable basis, is the issue.  

Brand name preferences and product bundling might also help the largest incumbents. According to ACSI, for example, in 2021 AT&T and Verizon both are ranked higher in customer satisfaction scores than any of the cable companies. 

That is surprising, especially for AT&T, which has not yet converted most of its plant to FTTH. The infrastructure bill is likely to accelerate AT&T deployments of FTTH, if it significantly changes the business case.

23% of U.S. Business Sites Now are Fiber-Served

What percentage of U.S. business locations would you suggest now have optical fiber connections available to them? According to Vertical Systems Group, just 23 percent of U.S. sites and 15 percent of sites in Europe have optical access.


While most large enterprise locations in the United States and Europe are fiber-connected, small and medium business sites generally are underserved with fiber from any service provider.


"The good news is that overall accessibility to business fiber has more than doubled within the past five years," says Rosemary Cochran, Vertical Systems Group principal.


The challenge ahead is to extend fiber connectivity to remote business locations. Of course, not all smaller business locations need the fiber that typically supports gigabit-per-second bandwidth. Given that 1.544 Mbps connections are the mainstay for most smaller and even many mid-sized businesses, many customers might be quite satisfied with speeds in the tens of megabits per second.

Between FTTH and DSL Lies Fixed Wireless

We might all agree that telcos would prefer to build their next-generation networks on fiber to the home. We might also agree that the business case remains difficult in perhaps half of all locations. 

For that reason, 5G fixed wireless has gained traction in some quarters, and might be increasingly attractive to others if fixed wireless traction is gotten. 

AT&T now has about 15 million homes reachable with its fiber to home facilities, with plans to expand to about 30 million locations by about 2025. All together, AT&T’s fixed network passes about 60 million locations, however. 

So the business model--as presently constituted--does not seem attractive for FTTH in about half the total fixed network passings, at the moment. Whether AT&T believes fixed wireless will be important in that regard is less than certain. Up to this point, AT&T has not been as bullish on fixed wireless as Verizon or T-Mobile. 

But AT&T does have national 5G assets that could underpin a wider move to fixed wireless, even if executives do not prefer that strategy at the moment. 

Other major operators without 5G assets would have to rely on partner agreements before such a strategy would make sense. 

Lumen Technologies has about 15 million homes in its access network footprint,  2.5 million of which are passed by the fiber-to-home network. So less than 17 percent of locations presently are deemed feasible for FTTH. 

With 21 million locations served by the access network, that implies about six million business locations. Perhaps more important, Lumen now has about 97 percent of all U.S. enterprises within a five-millisecond latency range. 

After partnering with T-Mobile for 5G access, Lumen argues it can span “the last 100 feet” of the access network in that manner. 

One area where AT&T should be able to improve is FTTH take rates, which have been at about 35 percent of marketable locations, and might now be up to 37 percent, at the end of the third quarter 2021. 

On the other hand, it appears that take rates for new FTTH accounts might in most cases--80 percent according to AT&T CEO John Stankey--be market share taken from another provider. If that continues, it is reasonable to suggest that AT&T could eventually reach 50 percent share of the installed base, up from the 30 percent or so share it has gotten over the last decade or two. 

At the moment, AT&T’s rule of thumb is that unless 40 percent share is possible, new FTTH does not make sense.

Verizon and T-Mobile, on the other hand, are much more bullish on fixed wireless, for reasons related to their present revenue models. T-Mobile has had zero share of the home broadband market, so fixed wireless offers an opportunity for top-line revenue growth that by shifting just a few percent of market share could generate billions in new revenue. 

Verizon now says it will pass 15 million homes with its fixed wireless services, using both 4G and 5G, while total fixed wireless accounts at the end of the third quarter 2021 were 150,000, of which 55,000 were added in the third quarter alone. 

In the past Verizon has talked about a fixed wireless footprint of about 50 million homes as a planned-for goal as the C-band assets are turned up, possibly by the end of 2021. 

Most of that coverage will occur in areas outside the Verizon fixed network territory. At the moment, about half the Verizon fixed wireless customers represent new accounts, while half are existing Verizon customers. 

“I would say, there are probably, roughly, half and half,” said Hans Vestberg, Verizon CEO. “Half meaning coming from our existing base and half we're taking from other suppliers.”

Significantly, Verizon also reports that fixed wireless average revenue per user is “similar” to a mobility account. That suggests that most of the installed base is on 4G or lower-speed 5G at the moment, and also suggestive of pricing suggesting that most customers also use Verizon for mobility service ($40 a month for Verizon mobility customers, $60 for non-customers). 

Some of us would expect ARPU to begin climbing as more of the customer base adds services using millimeter wave and mid-band spectrum. The pricing for those plans runs from $50 a month (Verizon mobility customers) up to $70 a month (non-mobile subscribers). 

As will be the case for 5G generally, Verizon fixed wireless might come in three flavors. Some customers might only be able to buy 4G versions, which are the most speed-constrained, and generally topping out somewhere between 25 Mbps and 50 Mbps. 

Most customers will be able to buy mid-band 5G fixed wireless, which likely will be able to support the 100 Mbps to 200 Mbps services most households buy at the moment. Some lesser percentage of locations will be able to buy the wireline-equivalent millimeter wave services operating up to a gigabit per second or so. 

Over the last year, though the fiber-to-home footprint grew by 500,000 locations, the fixed wireless footprint added 11.6 million locations. 

In fact, fixed wireless now accounts for about 41 percent of Verizon’s home broadband passings. 

source: Verizon 

It remains to be seen how many customer accounts will be driven by fixed wireless, to be sure. In the past, many observers have suggested fixed wireless suppliers can get take rates in the 15 percent to 20 percent range.

In a saturated market, those gains largely represent market share taken from another supplier. So the market share implications are quite significant, representing a change between 30 percent to 40 percent in overall share. 

The expansion of millimeter radio and C-band radio assets will be important. Roughly half the U.S. home broadband base has been content to buy service in the 100 Mbps to 200 Mbps range. 

C-band will help boost fixed wireless into those ranges, while millimeter wave will enable speeds approaching the top tier of consumer demand (gigabit service).  

Such lower-speed home broadband might appeal to customers content to purchase service operating at the lower ranges of bandwidths at or below 50 Mbps. That still represents 10.5 percent of the market, according to Openvault. 

Notably, the third quarter 2021 earnings report was the first ever when Verizon actually began reporting fixed wireless subscriber growth. That is normally an indication that a firm believes it has an attractive story to tell, with volume growth expected. 

Fiber Capex Contrasts at Lumen

The fourth quarter 2022 Lumen Technologies earnings call was in some ways a study in infrastructure contrasts and an indication that further restructuring could happen. 

Lumen is adding about six million intercity fiber miles of capacity by 2026. That supports the part of Lumen’s business built largely around the intercity capacity business in the United States, and global capacity in the northern hemisphere. 

Contrast that with what happened to the fiber-to-home program. “As we've said previously, we hit the pause button during the fourth quarter,” said Kate Johnson, Lumen CEO.  “Now, to be frank, it was more of a stop button than a pause.”

“A natural outcome of our assessment of Quantum is a more focused build target,” said Johnson. “We believe the overall Quantum enablement opportunity is eight million to 10 million locations.”

For Lumen, that suggests up to half the homes in its service territory are the best chances to monetize fiber-to-home investments. Lumen has an estimated 21 million to 24 residential and small business locations passed by its networks in 16 states. 

The latest statements suggest Lumen believes between 38 percent and 43 percent of mass market locations are suitable for FTTH investment over the next half decade or so. 

The issue for Lumen, as was the case for the former US West--which has had the least-dense footprint of all the former Baby Bells--is what to do about the rest of the customer base, assuming copper access is not a long term solution.

Divesting rural assets already has been the answer, as Lumen sold off access assets in 20 states. That raises the theoretical possibility that Lumen sells still more of its rural assets over time, as about 60 percent of its local access locations are deemed insufficiently profitable to serve with FTTH facilities at the moment. 

Keep in mind that 79 percent of Lumen’s revenue is earned serving large and mid-sized business customers. Most of that revenue comes from the intercity network and local connections and services to customers in the larger urban markets. 

Much small business revenue is counted in mass markets, where, increasingly, revenue is anchored in fiber-based internet access (home broadband) of about $60 a month. 

source: Lumen Technologies 

FTTH investments rarely offer a “no brainer” business case. In Lumen’s case, the issue will be what to do about the 60 percent of mass market locations that do not seem amenable.

AT&T Critics are Simply Wrong About Linear Video

Inevitably, aside from claims that the “wheels are coming off” the linear video business, there will be renewed criticism that AT&T should instead have spent the capital used to acquire DirecTV, and then (if approved by regulators) Time Warner, to upgrade its consumer access networks.

The critics are wrong; simply wrong, even if it sounds reasonable that AT&T could have launched a massive upgrade of its fixed networks, instead of buying DirecTV or Time Warner (assuming the acquisition is approved).

AT&T already has said it had linear video subscriber losses of about 90,000 net accounts in the third quarter. In its second quarter, net losses from U-verse and DirecTV amounted to about 351,000 accounts.

Keep in mind that, as the largest U.S. linear video provider, AT&T will lose the most customers, all other things being equal, when the market shrinks.

Some have speculated that AT&T potential losses could be as high as 390,000 linear accounts.

Such criticisms about AT&T video strategy might seem reasonable enough upon first glance.

Sure, if AT&T is losing internet access customers to cable operators because it only can offer slower digital subscriber line service, then investing more in internet access speeds will help AT&T stem some of those losses.

What such criticisms miss is that that advice essentially is an admonition to move further in the direction of becoming a “dumb pipe” access provider, and increasingly, a “one-service” provider in the fixed business.

That key implication might not be immediately obvious.

But with voice revenues also dropping, and without a role in linear or streaming subscription businesses, AT&T would increasingly be reliant on access revenues for its revenue.

Here is the fundamental problem: in the competitive era, it has become impossible for a scale provider (cable or telco) to build a sustainable business case on a single anchor service: not video entertainment, not voice, not internet access.

In fact, it no longer is possible to sustain profits without both consumer and business customers, something the cable industry is finding.

So the argument that AT&T “should have” invested in upgraded access networks--instead of moving up the stack with Time Warner and amassing more accounts in linear video with the DirecTV buy--is functionally a call to become a single-service dumb pipe provider.

That will not work, and the problem is simple math. In the fiercely-competitive U.S. fixed services market, any competent scale player is going to build a full network and strand between 40 percent and 60 percent of the assets. In other words, no revenue will be earned on up to 60 percent of the deployed access assets.

No single service (voice, video, internet access) is big enough to support a cabled fixed network. Period.

That is why all scale providers sell at least three consumer services. The strategy is to sell more units to fewer customers. Selling three services per account is one way to compensate for all the stranded assets.

Assume revenue per unit is $33. If one provider had 100-percent adoption, 100 homes produce $3,000 in gross revenue per month. At 50 percent penetration (half of all homes passed are customers), just $1650 in gross revenue is generated.

At 40-percent take rates, gross revenue from 100 passed locations is $1320.

But consider a scenario where--on average--each account buys 2.5 services. Then, at 50-percent take rates, monthly gross revenue is $4125 per month. At 40-percent adoption, monthly revenue is $3300. You get the point: selling more products (units) to a smaller number of customers still can produce more revenue than selling one product to all locations passed.

The point is that it is not clear at all that AT&T could have spent capital to shore up its business model any more directly than by buying DirecTV and its accounts and cash flow.

That the linear model is past its peak is undeniable. But linear assets are the foundation of the streaming business, and still throw off important cash flow that buys time to make a bigger pivot.

One might argue AT&T could have purchased other assets, though it is not clear any other assets would have boosted the bottom and top lines as much as did DirecTV.

What is relatively clear is that spending money to become a dumb pipe internet access provider will not work for AT&T, even if all the DirecTV capital had been invested in gigabit networks. At best, AT&T might have eventually slowed the erosion of its dumb pipe internet access business. It would not have grown its business (revenue, profits, cash flow) enough to justify the diversion of capital.

Would AT&T be better off today, had it not bought DirecTV, and invested that capital in gigabit internet access? It is hard to see how that math would play. Just a bit after two years since the deal, AT&T would not even have finished upgrading most of the older DSL lines, much less have added enough new internet access accounts to justify the investment.

AT&T passes perhaps 62 million housing units. In 2015, it was able to deliver video to perhaps 33 million of those locations. Upgrading just those 33 million locations would take many years. A general rule of thumb is that a complete rebuild of a metro network takes at least three years, assuming capital is available to do so.

Even if AT&T was to attempt a rebuild of those 33 million locations, and assuming it could build three million units every year, it would still take a decade to finish the nationwide upgrade.

In other words, a massive gigabit upgrade, nationwide, would not have generated enough revenue or cash flow to justify the effort, one might well argue.

Assume AT&T has 40 percent share of internet access accounts in its former DSL markets. Assume that by activating that network, it can half the erosion of its internet access accounts. AT&T in recent quarters has lost perhaps 9,000 accounts per quarter. Assuming AT&T saves 10 percent of those accounts, that amounts to only about 900 accounts, nationwide.

That is not enough revenue to justify the effort, whatever the results might be after a decade, when all 33 million locations might be upgraded.

source: Bruce Kushnick

The simple point is that AT&T really did not have a choice to launch a massive broadband upgrade program, instead of buying DirecTV, and instead of buying Time Warner. The financial returns simply would not have been there.

AT&T, Comcast and Verizon Collectively Generate about $212 Per Home Passed, Annually

It is not easy to run a big fixed network business these days. As Verizon CEO Hans Vestberg said on Verizon’s fourth quarter earnings call, Verizon faces a “secular decline in wireline business that is continuing.” 

Secular means a trend that is not seasonal, not cyclical, not short term in nature. For multi-product companies such as AT&T, Verizon and Comcast, it can be argued that "everything other than the core business is doing a lot worse than the core business, both at Comcast and at AT&T and at Verizon.

One supposes the “core business” for AT&T and Verizon is mobility, while the core business for Comcast is fixed network broadband. The conclusion analyst Craig Moffett of MoffettNathanson reaches is that AT&T, for example, will have to be broken up. 

The suggestion to focus on the “core business” often produces financial returns when conglomerates are broken up. 

What might not be so clear is how breaking up triple play assets, or separating mobile from fixed assets necessarily helps the surviving connectivity assets to generate greater revenue and profits. 

Is it logical to assume that the AT&T and Verizon businesses would all do better if the fixed network assets, mobile assets and media assets were separated? Would Comcast’s financial returns be better if the content assets were separated from the fixed network, or the video entertainment business separated from the network connectivity business?

Given the “secular decline” of the fixed network business, could a fixed services only approach (internet access, voice and perhaps video entertainment) actually work, at the scale the separated Comcast, AT&T or Verizon assets would represent?

The issue is not whether a small firm, with a light cost structure, might be able to sustain itself in some markets selling internet access alone, or internet plus voice. The issue is whether an independent AT&T fixed network or an independent Verizon fixed network business could sustain itself. 

The answers arguably are tougher than they were twenty years ago, when a telco and a cable company faced each other with a suite of services including internet access, voice and entertainment video. Basically, they traded market, at best. Telcos ceded voice share, but cable lost some video share, and both competed for internet access accounts. 

At a high level, the strategy was that both firms would trade share, but by selling three services on one network, instead of one service on each network, the numbers would still be workable.

But the math gets harder when every one of those three services faces sustained declining demand and falling prices. 

That being the case, it is hard to see how a sustainable business can be built on connectivity services alone, especially for either AT&T or Verizon. Perhaps Comcast could survive with a strong position in internet access and smaller contributions from voice and possibly video entertainment. 

In the fourth quarter of 2019, Comcast Cable generated $14.8 billion in revenue.  Total revenue that quarter was $28.4 billion. 

Verizon’s fixed network business, on the other hand, generated about $7 billion, out of total revenue of nearly $35 billion. 

AT&T had fourth quarter 2019 total revenue of nearly $47 billion. AT&T’s fixed network, plus satellite TV, generated about $18 billion in revenue.  AT&T’s “fixed network plus satellite” operations generate 38 percent of revenue. Perhaps $8 billion or so of that revenue comes from the satellite operations. So the fixed network business might generate $10 billion in revenue. 

Comcast Cable passes 58 million consumer and business locations. Comcast has 26.4 million residential high-speed internet customers, 20.3 million residential video customers and 9.9 million voice accounts, generating average cash flow (EBITDA) of $63 per unit. 

At a high level, the problem is that Verizon’s entire fixed network operation generates about 20 percent of total revenue. AT&T’s fixed network generates perhaps 21 percent of revenue. Comcast, which has a small mobile operation, generates close to $15 billion from the fixed network. 

And that, it seems to me, illustrates the problem. Comcast, AT&T and Verizon all put together generate about $32 billion in fixed network revenue, and revenue is likely to remain flat to negative. 

Verizon homes passed might number 27 million. Comcast has (can actually sell service to ) about 57 million homes passed.

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. 

Looking only at Comcast, AT&T and Verizon, $32 billion in annual fixed network revenue is generated by networks passing about 146 million U.S. homes. That works out to about $212 per home passed, per year. 

How that is sustainable is a clear challenge.

Indoor Services Could Drive Many New Revenue Niches

We do not typically think of the internet and mobile business as a matter of “indoor” and “outdoor” business models. Rather, we tend to look at the ecosystem as an “edge provider” and “service provider” dichotomy, or sometimes in a broader context, including chips, infrastructure, devices, apps, connectivity and sometimes other categories such as retail distribution.

The point is that the whole internet ecosystem contains many segments, and opportunities for any stakeholder to grow by occupying adjacent niches. The other issue is that the share of ecosystem revenue might well change, over time. In many cases, growth is not so much the issue as rates of growth.

Still, businesses and revenue built on “indoor” parts of the ecosystem are substantial, and have offered most of the opportunities for businesses that are not tier-one service providers.

That always has been the case, if you think about it. Phone interconnects, value-added resellers, system integrators, venue Wi-Fi, cable TV and the device business all rely principally on solving indoor problems, not “access.”

Many believe such opportunities could grow as new platforms, such as Citizens Broadband Radio Service (CBRS) emerge. CBRS and private LTE could underpin a new wave of business models that drive revenue by solving indoor connectivity problems and create new value propositions.

The existing models include Wi-Fi, local areas networks, the distributed antenna system business, Wi-Fi offload and small cell deployments (which can take carrier, venue or end user forms).  

Boingo says it has 54 distributed antenna system (DAS) venues live, with another 73 venues in backlog. Boingo, which already is heavily in the DAS and indoor venue Wi-Fi business, believes the addressable market for DAS is about 20,000 more locations (in addition to the sites already installed).

While there are five million commercial buildings in the United States, more than 90 percent of those buildings occupy 200,000-square-feet or less, according to the U.S. Energy Information Administration. That might imply that 30 percent, or roughly 1.5 million sites, are the best candidates for lower-cost CBRS systems providing indoor coverage.

In terms of all small cell venues, there are perhaps 400,000 such potential locations where CBRS provides the same benefits as DAS.

So one way of setting parameters is to assume the number of U.S. venues where either DAS or CBRS makes sense ranges from a low of 20,000 locations to a high of 1.5 million locations, with 400,000 possibly representing reasonable CBRS potential.

Boingo’s business opportunities point up the role of indoor mobile coverage in the mobile ecosystem.

But that is not a new issue, since the advent of deregulation and the end of the monopoly era. Since the breakup of the AT&T Bell System, when indoor and outdoor networks were owned by AT&T, “indoor” or premises networking has been the province of private networks owned by consumers or businesses, while “outdoor” networking has been the province of the service providers.

That is why consumers own their phones and PCs, why Wi-Fi exists, why distributed antenna systems and coming in-building small cell networks, as well as private mobile networks, will exist.

Traditionally, service providers have been essentially barred from owning facilities infrastructure, terminating their networks at a demarcation point on the property. Mobility was the new wrinkle, as mobile networks, to be valuable, must provide service everywhere, indoors and outside.

Still, mobile service providers shy away from investing in in-building infrastructure, for cost reasons. Wi-Fi has eased those concerns to a large degree. And some service providers, especially firms such as Comcast, see new value in “owning” the indoor Wi-Fi experience.

So a big new business question is what new opportunities might exist, in the indoor networking environment, for service providers and others in the ecosystem.

Though it now seems “natural,” virtually all the businesses now associated with private networks, end user equipment and software, consumer and business applications, Wi-Fi and other local area networks have been created only as the end of monopoly phone service era began.

Apple’s device business, the Android ecosystem, Wi-Fi ecosystem, local area networks, cable and satellite TV, the phone interconnect and computing system integration and value-added reseller businesses all exist because the public network was deemed to end at a demarcation point on every customer’s premises.

Though in a regulatory sense the rise of Facebook, Google, Amazon and all other app providers (edge providers) was not enabled by telecom deregulation, they were enabled by legal frameworks that left computing services completely unregulated.

To understand why many firms work to create new roles for themselves, consider that, in the monopoly era, AT&T supplied not only connectivity services, but also the network’s equipment and software; the customer equipment (phones) and owned the inside wiring as well as the rest of the network.

In a revenue sense, AT&T made money building and selling infrastructure (as Nokia, Ericsson and others now do); building and selling the CPE (as Apple, Samsung and others now do) and providing all the connectivity (instead of retaining only a fraction of such revenues).

These days, service providers mostly must rely on connectivity revenues alone, in competitive markets, to generate revenue.

So one way to look at efforts to create additional roles in mobile banking; entertainment services; applications and computing is to understand them as ways of recreating the once more-robust involvement in greater portions of the communications ecosystem.

It is not exactly “back to the future,” but it is close.

Historically, only the public network existed. When U.S. consumers or businesses purchased a phone service, the wiring inside the home and the phones were owned by the telco.

That began to change in 1968, when in the Carterphone decision, people gained the right to use their own equipment on the AT&T network.  

With the breakup of the Bell system in 1984, inside wiring became the property of the building or homeowner. That, in turn, lead to the creation of  private networks (local area networks, for example).

The in-building or campus communication systems, equipment and software became the province of private networks. Where in the monopoly era, all customer premises equipment was produced and owned by AT&T itself, today all sorts of companies produce CPE, and AT&T has gotten out of the business of building either network infrastructure products or CPE.

Ironically, the strategic imperative many telcos embrace is an effort to recreate the “multiple roles in the ecosystem” position they once had in the monopoly era.

After 50 years of shrinking roles in the communications ecosystem, major service providers seek to create new roles offering higher revenues, greater profits and diversified revenue streams, as once was the case.

That does not mean firms want to recreate roles in most of the former areas, such as becoming manufacturers of network infrastructure or end user devices. But firms now seek roles beyond connectivity.

Firms whose roles were legally prohibited, curtailed or opened to competition, are trying to find additional and profitable roles in many parts of the ecosystem that were curtailed or forbidden by the deregulation process of the 1980s and earlier.

But indoor coverage and services might well create many new opportunities for service providers and specialists in the ecosystem as well.