A closer look at cable vs. 5G fixed wireless

Will 5G and midband spectrum give AT&T, Verizon and T-Mobile the ability to directly challenge the nation's cable Internet providers with their own in-home broadband offerings?

A full-throated, resounding answer appears to be: "Well, not really. At least not right now."

Consider:

T-Mobile said last week it expects to gain between 7 million and 8 million fixed wireless Internet customers within the next five years across both rural and urban locations. While that's dramatically higher than the roughly 3 million customers previously forecast by the financial analysts at Sanford C. Bernstein & Co. over that rough time frame, it's also below the estimates T-Mobile provided in 2018, when it said it would gain 9.5 million customers within that general period. Moreover, T-Mobile's initial, bigger goal did not include the $10 billion in C-band spectrum the operator recently acquired – the operator's new, smaller goal does. This means that, after conducting an LTE fixed wireless pilot with around 100,000 customers, T-Mobile both acquired more spectrum and also lowered its fixed wireless expectations.

Verizon initially said it would cover up to 30 million households with the fixed wireless Internet offering it launched in 2018, presumably on its millimeter wave (mmWave) spectrum holdings. Last week the operator raised that coverage goal to 50 million by 2024 across rural and urban areas, but said only around 2 million of those homes will be covered by mmWave. The rest will likely be covered mainly by Verizon's C-band spectrum holdings. Further, Verizon said it expects revenues from the service to be around $1 billion by 2023, a figure the financial analysts at Sanford C. Bernstein & Co. said implies just 1.5 million subscribers.

AT&T, however, offered perhaps the most damning comments of all. "When you deploy wireless to solve for fiber-like services in a dense environment, you don't have the capacity," AT&T networking chief Jeff McElfresh told Marketplace, noting that the situation may be different in rural areas. This is from a company that already covers 1.1 million rural locations with fixed wireless services and closely tracks in-home broadband usage on its fiber network. (Though it's worth noting that AT&T trails both Verizon and T-Mobile in overall spectrum ownership and C-band buildout targets.)

The nation's cable companies are undoubtedly pleased by all this fixed wireless waffling. Indeed, Charter Communications CEO Tom Rutledge offered some prescient comments at a recent investor event, according to the New Street analysts, when he acknowledged that you can make a business work in fixed wireless. However, he said you'll need to throw an enormous amount of capital and spectrum at the issue considering you will get the same revenues (around $50 per month) from a smartphone customer who consumes 10GB per month as you would from a home broadband customer using around 700GB per month.

Those numbers roughly line up with recent estimates. For example, Ericsson reported that North American smartphone users consumed an average of around 12GB of data per month during 2020. Separately, OpenVault's study of home broadband users found average usage topped 482.6GB per month in the fourth quarter of 2020, up from 344GB in the year-ago quarter.

Ultimately, the question is whether you see the fixed wireless Internet glass as half full or half empty. In the half full view, Verizon, AT&T and T-Mobile are all using the technology to expand into a new market and get revenue they wouldn't otherwise have. And, potentially, over time they could expand their fixed wireless ambitions as technologies improve and new spectrum comes to market.

But in the half empty view, you have a trio of operators that have been working on this topic for the better part of a decade, and so far have almost nothing to show for it, except an almost constant stream of shifted goal posts.

It's clear that fixed wireless Internet services have their place – after all, almost 7 million Americans use the technology today, mostly in rural areas – but is it going to keep the likes of Comcast and Charter up at night? Not really. At least not right now.