Cable Companies Losing Their Grip on Home Internet Market

DENVER (November 15, 2022)—National wireless operators T-Mobile and Verizon continue to disrupt the home internet business with their fixed wireless access (FWA) service, which they’re strategically bundling with smartphone plans at attractive price points. The offering has upended the broadband market and led to unprecedented growth for T-Mobile and Verizon at the expense of cable companies Comcast, Charter and Altice USA. 

According to a new report from CoBank’s Knowledge Exchange, the wireless companies are offering FWA in markets where they have excess network capacity. That means internet service providers in smaller markets could be exposed to competitive threats from T-Mobile and Verizon. However, Jeff Johnston, lead communications economist with CoBank, suggests the risk is small and that national wireless operators will prioritize urban and suburban markets for the foreseeable future. 

“Internet service providers serving smaller and rural markets do have exposure as there tends to be excess capacity in these parts of the network,” said Johnston. “While it’s possible the wireless operators could target tier-two and tier-three markets if and when they exhaust more populated markets, it’s not likely to happen anytime soon.” 

National wireless operators have spent billions of dollars on mid-band spectrum that, when combined with 5G, is adding a step-function increase in network capacity with faster data speeds. Offering a fixed wireless connection utilizing the same cell sectors their smartphones use has only marginal cost implications. And when these two services are bundled—smartphone rate plan and fixed wireless—it can be a compelling offer. 

Verizon is offering home internet starting at $25 per month with a qualified 5G mobile plan that comes with a 10-year price guarantee. The cable companies have acknowledged the threat and responded with aggressive pricing of their own. Comcast is now offering a 75Mbps plan on a 2-year contract for $25 per month. Charter Communications recently introduced Spectrum One, which includes a single mobile line and internet service (300Mbps speed plan) for $49.99 per month.

Will fixed wireless access maintain its momentum?

According to the national wireless operators, they have enough capacity to support several years of fixed wireless growth before they run into network problems. However, there’s a great deal of debate about the long-term sustainability of their current growth trajectory. According to Johnston, it boils down to scalability and cost. 

“Wireless networks do not have the same level of operating leverage as fixed-line broadband networks,” said Johnston. “In a wireless network, there is a strong negative correlation between network traffic and speeds. As network traffic increases, speeds decrease. Wireless carriers will likely face a critical decision point, especially if FWA traffic starts to degrade smartphone throughput speeds, and smartphone churn increases as a result.” 

Until that point, wireless operators’ FWA service is expected to continue succeeding by targeting urban and suburban markets where the upside in customer additions is more attractive than in smaller rural markets. 

Watch a video synopsis and read the report, As Fixed Wireless Wreaks Havoc on Cable, are Smaller ISPs Next?