Verizon Communications’ 5G fixed wireless access (FWA) home internet business showed slightly decelerated but still strong growth in the second quarter, adding 378,000 subscribers vs. 384,000 during the same April-June period of 2023. 

Verizon now has 3.812 million FWA customers and continues, along with T-Mobile, to disrupt the home internet business, seizing gobs of market share from cable operators, virtually all of which have stopped growing their broadband customer ranks. 

But while FWA has proven disruptive, it's long-term revenue potential for Verizon and T-Mobile is still in question.

Average revenue per customer for Verizon home internet actually was down year over year slightly — again — in Q2, to $47.31.

“The relatively weaker results in FWA are all the more surprising since FWA ARPU is still quite low,” analyst Craig Moffett pointed out. “Given the seasoning of the base, and roll-off of introductory discounts, one might have imagined meaningful growth. FWA APRU was up sequentially, albeit only modestly, and remains slightly lower than a year ago.”

Verizon is still offering FWA service starting at $35 a month. 

T-Mobile reports earnings on July 31. 

As upstart fixed wireless access services launched several years ago by T-Mobile and Verizon undercut them on price, robbed them of market share and ended their customer growth expansion, top cable executives adopted a “what, me worry?” posture. 

Over time, they argued, 5G wireless won't have the capacity to keep up with the speed and quality demanded by consumers for 4K video streaming and other data-intensive tasks now conducted regularly in the American home. 

OpenSignal’s latest Fixed Broadband Experience report, which analyzes key home internet qualitative factors for the five largest home-internet providers in America, may have just proven them right. 

Drawn from a national sample, the report is, frankly, a little janky, as Verizon and AT&T’s metrics are culled from an odd mix of fast, reliable fiber-to-the-home internet, and lesser 4G FWA and legacy digital subscriber line (DSL) delivery platforms. OpenSignal apparently just lumps them all into their national sample with equal weight. (You can read about the research company's methodology in the report.)

More telling is the relationship between Comcast’s Xfinity brand and Charter’s Spectrum Internet services versus T-Mobile, which only offers one home broadband flavor — FWA. Both cable broadband providers offer significantly faster home broadband connections, on both the downstream and upstream side, compared to T-Mobile 5G Home Internet. 

The same was true for both the quality of internet connection and, more specifically to streaming consumers, the quality of video connection. 

The long-expected deceleration of fixed wireless access (FWA) customer expansion appears to be at hand, with T-Mobile reporting first-quarter customer growth of just 405,000 souls for its 5G Home Internet service, down 22.5% from January - March of 2023. 

T-Mobile ended the quarter with 5.181 million FWA subscribers. 

Earlier this week, Verizon reported its FWA business had slowed customer growth by 10% in Q1 to 354,000 customers. AT&T doubled its FWA ranks by adding 110,000 customers to its Internet Air service, but AT&T is just getting started in what it still describes as a very niche platform aimed mainly at business customers. 

For a business originally built around excess 5G wireless network capacity, FWA was always intended to have limits. T-Mobile has said it would stop growing its fixed wireless ranks once the business accounts for around 5% of its total revenue. T-Mobile said it's goal is to have around 7-8 million FWA customers by 2025, and it remains on pace to achieve that objective. 

T-Mobile and Verizon's entry into the home internet market with cheap cellular-based platforms three years ago is a major reason why both Comcast and Charter Communications keep losing wireline broadband customers every quarter -- the two cable giants were down another 65,000 and 72,000 high-speed internet customers respectively in Q1. 

In his note to investors Friday following Charter's Q1 earnings report, equity analyst Craig Moffett remarked, "With FWA now clearly on the downslope, we believe the headwinds to cable broadband very likely peaked in Q4 of last year."

Moffett also noted that AT&T's fiber-to-the-home business also saw diminished customer growth in the first quarter, down to 252,000 customers from 272,000 a year prior. 

But cable investors shouldn't expect a major growth rebound just yet, he said.

"Under other circumstances, these welcome portents might well have already sparked a significant rally in cable stocks, where broadband competition is virtually all that matters," Moffett added. "But the house on fire for the moment isn’t the competitive threat posed by FTTH or FWA, but instead is the [expiration] of the government's Affordable Connectivity Program subsidy program. Charter leaned into ACP like no other peer, building their ACP sub count to five million. No other operator is close to being as exposed."

Verizon’s previously explosive deployment growth of inexpensive fixed wireless access home internet service is decelerating. 

The wireless company reported the addition of 354,000 FWA customers across business and residential channels in the first quarter, down 10% from the 393,000 it tallied in the first quarter of 2023. 

The business side of the equation added a record 115,000 customers during the first three months of the year, but residential growth dropped nearly 21% year over year to 203,000 new Verizon fixed wireless access consumers. 

Verizon, which first began deploying its cellular-based 5G Home internet service back in 2018, now touts 3.48 million FWA customers. (Here's Verizon's Q1 earnings release.)

“Their results in fixed wireless access remain a puzzle,” equity analyst Craig Moffett noted in a Monday morning note to investors. "Growth is still relatively strong, but their quarterly results continue to decelerate, something we wouldn’t have expected given the early stage of deployment and the steady expansion of their Band 76 C-Band footprint. Their results have never approached those of T-Mobile, particularly in the Consumer segment."

T-Mobile, which touted 4.776 million FWA customers as of the end of 2023 and was still witnessing accelerated fixed-wireless customer growth as of the fourth quarter, reports its Q1 data on Thursday. 

For its part, Verizon reported a narrow 0.2% year-over-year expansion in first-quarter operating revenue to $33 billion. 

In the wireline segment of its home internet business, it added 49,000 residential Fios Internet subscribers in the first quarter, down from 63,000 in Q1 2023. Verizon now has 7.02 million residential Fios Internet customers. 

Meanwhile, Verizon's residential Fios TV business dropped below the 3 million customer line, losing 68,000 customers in Q1 (vs. a loss of 74,000 customers a year ago). Verizon now has 2.88 million residential linear pay TV customers left. 

T-Mobile, now the fifth largest supplier of home internet in the U.S. with 4.776 million fixed wireless access (FWA) customers as of the end of 2023, is now imposing usage caps on its customers who exceed 1.2 terabytes of data per month.

T-Mobile instituted a "soft cap" on just new Home Internet users in January, threatening to reduce their speeds during periods of high network usage if the customer was over its allotted 1.2 TB. 

"As of January 18, 2024, new T-Mobile Home Internet customers who exceed 1.2TB of data usage for the current billing cycle will be prioritized last on the network," reads the company's internet policy page.

As noted by The Mobile Report (by way of Light Reading), the soft cap has been extended to all users, not just new ones, with T-Mobile now warning in its terms of service that, "During congestion, Home Internet customers may notice speeds lower than other customers and further reduction if using >1.2 TB/mo., due to data prioritization."

According to data released in February by analytics and SaaS provider OpenVault, average home internet data usage for Q4 was 641 gigabytes. Also, 21.6% of users now exceed 1 TB of monthly data usage. 

Introduced in 2021, FWA services from T-Mobile and Verizon have very quickly undercut what had been accelerating pandemic era broadband customer growth for the cable industry, delivering "unlimited" high-speed internet over cellular networks that's cheap, and can be signed up for and cancelled easily. 

T-Mobile is currently offering 5G Home Internet for $40 a month if customers sign up for autopay. 

Their still dominant market share in U.S. home internet dinged but not destroyed, captains of cable industry have adopted a "what me worry?" ethos in regard to the FWA competition. Since the economics of these cheap home internet services are built on excess capacity from mobile networks, they'll stop thriving when that capacity dries up, cable execs say. 

Meanwhile, cable operators are beginning to fight back with low-priced home internet options of their own. On Wednesday, for example, Comcast introduced Now Internet, which delivers 1 megabit-per-second speeds, and unlimited data, for $30 a month. 

Charter Communications CEO Christopher Winfrey came out swinging against cable's fast-emerging fixed wireless access competition at a Morgan Stanley investor conference Wednesday, repeatedly calling the technology an “inferior product” and labeling it several times as “cellphone internet.”

“That’s what it is — cellphone internet,” Winfrey declared repeatedly, noting the cable industry “needs to do a better job of marketing” against its fast-rising wireless competitors. (You can access a replay of Winfrey's Morgan Stanley appearance here.)

"We need to articulate to the customer that the reason you're getting that incrementally low price point [on FWA] is because you're overpaying on your wireless line," he explained. 

Also read: Wireless Org Says Cable Lobbyists Are Trying To Block Allocation of 5G Spectrum To Stymie FWA

After launching their respective FWA platforms in 2021, T-Mobile and Verizon Communications have come to dominate customer additions for home internet service. 

“We’re in a lull right now from a net adds perspective,” Winfrey said, noting that consumers are moving less and that there's still a hangover from the massive uptake of high-speed internet service during the pandemic. 

And there’s new competition from FWA. 

“Any time you have a new competitor inside a marketplace, you're going to see disruption,” Winfrey said. 

Meanwhile, the Charter CEO was also asked about the so-called Spulu joint streaming venture announced recently by Disney, Fox and Warner Bros. Discovery. 

“We don't have a lot of the details, and I'm not sure the deal is final, but whether it’s 60% or 65% of sports content, I'm not sure it scratches the itch of the sports fanatic,” Winfrey said. 

In any case, he added: “You have three of the largest programmers who have decided that genre-based packaging is the way to go. I agree with that. We've been saying that for several decades. And when you step back, it's an admission from programmers that that’s the way to go … And I fully expect that we’ll have the ability to distribute content in the same way.”  

It was only last November that soon-to-retire T-Mobile tech chief Neville Ray described fixed wireless access as an almost a perfect business, relying on "fallow capacity" and provided to customers at "de minimis" incremental costs. 

Of course, nothing so perfect can last. 

A new report compiled by The Brattle Group on behalf of the wireless industry's big trade group, the Cellular Telephone Industries Association (CTIA), suggest U.S. wireless operators will run out of 5G capacity by 2027. (Hat tip to Light Reading, which first picked up the report.)

"Absent any new spectrum, in five years, by 2027, the U.S. is expected to have a spectrum deficit of nearly 400 megahertz," the Brattle report says.

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“Fixed wireless access would likely be the first service to be impacted — already today home broadband over 5G is only offered in locations where operators have available capacity in the network to provide sufficient quality of service for a home connection,” the report adds. 

Earlier this month, equity research company MoffettNathanson published its own report, which illustrated how T-Mobile's FWA service has largely been confined to parts of markets that have extra network capacity. 

Notably, T-Mobile added 524,000 FWA customers in the fourth quarter, but growth actually slowed for the first time on a sequential basis, dropping from 574,000 subscriber additions in Q3. 

This begged the question for some: Is T-Mobile already approaching saturation in the rural-skewing areas in which it has extra 5G capacity?

Of course, top cable operators, which have been undermined by $50-a-month pricing for T-Mobile and Verizon FWA services, are having their “toldja!’ moment, having pointed to FWA capacity issues all along. 

Fixed wireless access home internet services from Verizon and T-Mobile collectively amassed over 4 million customers almost overnight, explosive growth coming as wireline broadband for cable operators came to a screeching stop. 

The puzzlingly consistent response from the leading U.S. MSOs has been dismissive — FWA simply doesn't have the performance or network capacity to register a competitive threat to the “10G” future, top Comcast and Charter Communications executives have said over and over again. 

Also read: Cable Broadband Customer Growth Was Down by Around 500K in Q1 ... but Fixed Wireless Added 500K

A new report on T-Mobile Home Internet, published Monday by equity research firm MoffettNathanson using data provided by Opensignal, seems to support their logic. 

As the Opensignal coverage map of the Seattle area below reveals, T-Mobile has effectively steered FWA signups away from areas with high network congestion. (Notice the lack of white dots in red areas.)

“T-Mobile routinely informs prospective customers that their FWA service is unavailable in certain areas, directing aspiring customers instead to their tightly-managed 'Lite' service that offers very limited aggregate bandwidth,” wrote analyst Craig Moffett. 

On one hand, he noted, T-Mobile is doing a “sensible” job of network management, turning away customers who live in places where its network can’t handle them. 

“At another level, however, it speaks to the capacity question that is everywhere in a discussion of FWA; T-Mobile is clearly aware of the issue and is managing appropriately around it.”

It is perhaps because of this limiting factor that T-Mobile’s $50-a-month Home Internet service over-indexes with rural customers, growing more freely in places where it’s uninhibited by capacity constraints. 

Of the service’s 2.646 million subscribers as of the end of 2022, 54.7% are in urban areas vs. 70.3% of passings, and 21.3% of customers are in rural regions vs. 6.8% of passings. 

Performance has improved marginally since T-Mobile Home Internet launched. T-Mobile’s FAQ has updated the service’s typical download speeds from 35-115 Mbps, when MoffettNathanson first reported on the service a year ago, to 33-182 Mbps. Expected upload speeds remain at 6-23 Mbps.

This comes at a time when cable wireline has reached a baseline of 200 Mbps. 

As the report notes, T-Mobile’s quick FWA growth is marked by limitations, the service expanding rapidly in regions where competition and capacity allow. 

“Our updated Opensignal analysis reveals that the broad patterns of T-Mobile’s FWA service remain remarkably similar to those of a year ago,” Moffett wrote. “Subscribership continues to heavily skew towards rural even as the preponderance of subscribers is sourced from urban and rural areas. Predictably, uptake is much higher in areas with limited fixed-line competition and is especially in areas with only DSL. And subscribership remains almost entirely confined to zip codes where T-Mobile’s network has sufficient capacity to handle the traffic, precisely as one would expect for a capably managed network.”

Are those limitations starting to reveal themselves in slowing subscriber growth?

T-Mobile added 524,000 fixed wireless access customers in the fourth quarter, upping its base to 2.65 million subscribers for its still relatively new home internet product after just two years in the market. 

Combined with Verizon Communications’s 1.45 million FWA customers, the two wireless giants have captured nearly 3% of U.S. home internet market share with what are still nascent services. Most of the growth has happened over the last 12 months, with T-Mobile tacking on nearly 1.7 FWA customers in 2022. 

That's the good news for T-Mobile.

Not so good is that FWA's previously explosive expansion slowed a bit in the fourth quarter, dropping from 578,000 additions in Q3. 

“While T-Mobile continues to show strong growth in fixed wireless, the rate of acceleration has clearly slowed," noted analyst Craig Moffett in a Wednesday morning note. "This matches our long-held expectation. We suspect that there remains a long runway for FWA in rural markets, but its application in urban and suburban can be expected to be limited by capacity constraints.”

Cable operators, who have seen their wireline broadband customer growth stall amid FWA’s sudden emergence, have stated all along that while 5G fixed wireless access services are indeed undercutting them, the speed and capacity of wireless networks won't be able to keep up with good ol’-fashioned DOCSIS cable once these FWA services get to scale. 

There's also the issue of radio interference from large buildings, etc., etc. 

Overall, analysts reacted favorably to T-Mobile's Q4 earnings, with Moffett adding: “T-Mobile’s 2023 subscriber guidance starts precisely where their 2022 guidance started, with an expected gain of 5.0 to 5.5M post-paid net adds. Their cash EBITDA guidance for 2023 calls for approximately a 10% YoY improvement. And their guidance for 2023 implies roughly 75% YoY free cash flow growth.”

Service revenue hit all-time highs of $15.5 billion for the fourth quarter and $61.3 billion for all of 2022. 

You can read T-Mobile's earnings release here.  ▪️

T-Mobile has the fastest growing home internet solution in America right now, with its 5G fixed wireless service taking on 578,000 customers in the third quarter alone and quickly amassing a base of over 2.1 million users in just over a year. 

According to T-Mobile CEO Neville Ray, the entire enterprise is based on "fallow capacity" -- network wherewithal that's not already being tapped by the wireless company's mobile users. 

Also read: Fixed Wireless Access Gets Put to the Test in Major Markets - Why 'Middle of the Pack' Looks Good Enough to Us

“The incremental cost of serving those customers is de minimis," Ray said Wednesday, speaking at the Morgan Stanley European Technology, Media & Telecom Conference. (A transcript provided by Seeking Alpha). "And why would you sit on your hands on all of that capacity that you have no utilization for or line of sight to use? So, we've created a huge business in the space, which is just -- it's gone way better than we'd anticipated.”

So the cable industry, which has watched its share prices crater as its once-incendiary collective broadband growth has come to a screeching halt, is being taken to the woodshed by a wireless industry that's merely utilizing spare network capacity that's lying around?

Damn...  

T-Mobile is looking to have as many as 8 million FWA customers by 2025. Ray said that T-Mobile makes "protecting our mobile" a priority vs. having to compete for network resources with FWA. But at that larger scale, that could become challenging. 

With that in mind, Ray seemed to confirm recent speculation in wireless technology pubs that T-Mobile is looking to possibly exploit its prior investment into millimeter wave (mmWave) spectrum to create an "overlay" network in order to serve two masters at once. 

“Are there capabilities? Can we almost dumb down the radio environment and leverage, for example, millimeter wave to stretch the bounds of propagation there, work on CPE, the customer premise equipment and create a robust link for home broadband services there?” Ray asked. 

At that point, T-Mobile would find itself making an actual capacity investment into its FWA business. But if it were to keep right on growing the way it has been, the opportunity might be worthwhile. 

“Are there going to be opportunities for us to expand that business in different ways? We'll see,” Ray added. 

Fixed Wireless Access services from T-Mobile and Verizon added 920,000 customers alone in the third quarter, a period during which the once fast-growing cable sector remained largely flat in terms of broadband expansion. 

Prices for these insurgent 5G wireless services for the home markedly undercut establishment cable, with T-Mobile 5G Home Internet priced at only $50 a month. The cable industry -- which continues to jack up prices on home internet service -- has countered this revolt by telling consumers they'll get what they pay for -- wireless networks don't have the required density to delivery the kind of performance broadband users are looking for when they watch The Crown on Netflix in 4K, they say.

Also read: T-Mobile's 578K Fixed Wireless Customer Additions in Q3 Come Amid Narrow Broadband Gains for Comcast and Charter

But FWA might just be good enough, according to a new, first-of-its-kind report from Opensignal. 

The widely respected wireless research company compared the performances of T-Mobile and Verizon FWA services in 25 U.S. markets to cable and telco fiber-to-the-home high-speed internet services. 

Generally, FWA did rank in Opensignal's words, "middle of the pack." In fact, in some markets like New York/New Jersey, FWA ranked well below cable and fiber in terms of basic benchmarks like download speeds. 

However, at a time of abject penny-pinching for a lot of cash-strapped consumers, is it enough of a performance difference to negate the huge price break 5G FWA is offering, particularly when bundled wireless services are factored in? ■

Verizon Communications on Friday touted the addition of 234,000 fixed wireless access residential customers in the third quarter and another 108,000 FWA subscribers on the business-services side, upping its total FWA base to over 1 million users.

It's been a rapid emergence for FWA technology, which lets consumers use 5G wireless networks for home internet service. T-Mobile, which reports its Q3 numbers on October 27, now has more than 1.5 million FWA customers.

Verizon added only 38,000 wireline internet customers otherwise, with less-than-expected growth in its legacy Fios internet business being offset by sustained losses of digital subscriber line (DSL) customers.

But the bottom-line addition of 272,000 total wireline broadband users for Verizon will likely be far more than either Comcast or Charter Communications report for the third quarter when they do their earnings calls next week.

For Verizon, the FWA story provides a little buffer from the more challenging economics currently impacting its core wireless business, where it added only 8,000 postpaid customers in the quarter.

And the company's pay TV presence continued to dwindle in Q3, with its Fios TV service losing another 95,000 customers, a 40% year-over-year surge in cord-cutting. Verizon has just under 3.5 million remaining Fios TV subscribers.

Verizon's stock was down around 5% in afternoon trading Friday. ▪️

Comcast has clearly moved beyond its previous strategy of dismissing fixed wireless access (FWA) home internet as a competitive threat.

A new TV ad produced by Comcast’s ad agency, Goodby, Silverstein & Partners, features a family of four in group therapy. The family laments how their T-Mobile FWA home internet service doesn't have enough broadband during the day, forcing them into a “nocturnal” lifestyle pattern … thus turning them into ”vampires.” 

You can now see the commercial via iSpot.tv here.

Comcast has also debuted a new landing page in which it describes FWA as not performing well amid storms, or near cars or tall buildings. The page also says that T-Mobile “plays favorites,” prioritizing network resources to unlimited wireless customers. 

“We’ve seen the spot, and we’re flattered,” Mike Katz, T-Mobile’s chief marketing officer, said in a statement provided to Light Reading, which first reported on the Comcast campaign. “Because of Comcast, millions more people now know they can get home broadband from T-Mobile. And millions across the country can finally drop Big Internet — just like half of our current customers who left Big Cable to join T-Mobile.”

On Monday, Comcast also announced free speed increases impacting over 20 million of its more than 32 million broadband subscribers. 

Comcast experienced flat broadband subscriber growth in the second quarter as T-Mobile reported 560,000 FWA subscriber additions. ▪️

Fixed Wireless Access subscriber additions are expected to rise sharply in the next two years, according to MoffettNathanson senior analyst Craig Moffett, but then moderate in later years, as its rural base begins to saturate.

In a series of slides posted on its website, MoffettNathanson predicted that T-Mobile and Verizon will add 2 million and 1 million FWA customers, respectively, in 2022 and 2023, up from 546,000 and 173,000 in 2021. But that growth is expected to begin to trail off in 2024, to 1.3 million for T-Mobile and 700,000 for Verizon, falling further by 2025 to 500,000 additions for each company, according to Moffett. By 2026, Moffett predicts T-Mobile will add about 200,000 FWA subscribers and Verizon 400,000 FWA customers, according to the report. 

T-Mobile added 565,000 FWA customers in Q2 2022, soundly beating analysts’ estimates, and is expected to finish the year with more than 2 million fixed wireless customers. The company has said it expects to have between 7 million and 8 million FWA customers by 2025. 

Moffett’s predictions are slightly less aggressive than some analysts who have estimated that fixed wireless could add as many as 10 million additional subscribers by 2027, but they’re not that far off. According to his estimates, T-Mobile and Verizon would add a collective 9.6 million additional FWA customers by the end of 2026. 

Though FWA appears to be a viable alternative to cable broadband, Moffett and other analysts have warned, it has mainly been deployed in rural areas and attracted residential and business customers not targeted by wired service. For example, fixed wireless has been extremely popular with construction trailers and food trucks, business customers that aren’t able to receive wired service.

That appears to be backed up by an earlier MoffettNathanson report, which cited estimates from Boston-based market researcher Comlinkdata that 33% of T-Mobile’s broadband customers are in rural areas, representing just 6% of the company’s total homes passed. In addition, Comlinkdata estimated that 88% of T-Mobile’s FWA customers are coming from the 36% of its network that is underutilized.

Looking Beyond Rural Markets

At the Goldman Sachs Communacopia conference earlier this month, Verizon CEO Hans Vestberg said the company plans to expand the service beyond rural markets.

“[W]e’re going to open up new opportunities outside the suburban, out of rural as well, where it's even greater opportunities for us,” Vestberg said of FWA at the Goldman conference. “Our devices coming out on fixed wireless access will basically cover all the frequencies we have, all the way from millimeter wave, C-band and 4G low-band, which is going to make this product enormously great.” 

Cable operators have been keeping an eye on fixed-wireless competition, but have in the past dismissed the service as inferior to wired broadband. But as their own cable broadband subscriber growth has slowed considerably, they are at least giving some credit to the service. 

At the Bank of America Securities conference earlier in September, Charter Communications chief financial officer Jessica Fischer acknowledged that fixed wireless played a role, albeit small, in its Q2 subscriber declines. Later at the BofA conference, Comcast deputy chief financial officer Jason Armstrong said that although fixed wireless is seeing gains, he is most concerned about fiber competition. 

Also: Wireless Connectivity Will Determine Winners in Broadband, Streaming Race, Rutledge Says 

Even other telcos have joined in on the fixed-wireless bashing. Frontier Communications CEO Nick Jeffery said at the Communacopia conference that comparing fixed wireless to fiber was like “comparing a Ferrari to a horse.”

According to Moffett, telcos and cable service providers should worry more about fiber. Planned fiber to the home passings more than doubled in 2021 to 4.2 million from 1.9 million in 2020, and he predicts that they should nearly double again to 7.8 million passings by 2022. He added that planned fiber passings will rise to 9.4 million in 2023, 9 million in 2024 and 8.3 million in 2025. Most of those gains will come from projects from three carriers: AT&T, Lumen (with Apollo Global) and Frontier. Moffett estimates that AT&T will add 4,000 fiber passings in 2022, 3.75 million in 2023, 3.25 million in 2024 and 2.6 million in 2025. Lumen is expected to add 1 million, 2.4 million, 2.5 million and 2.5 million passings in the same time frame, while Frontier should add 1 million, 1.5 million, 1.6 million and 1.6 million, according to Moffett.

But those deployments are not without risks, mostly on the cost side, where labor and equipment expenditures are expected to rise, Moffett wrote. As providers build out in less populated areas the cost per home passed will also increase, as well as capital costs due to inflation and a “higher equity risk premium,” Moffett wrote. ■ 

Frontier Communications CEO Nick Jeffery said he believes his company's fiber-based networks will ultimately win the battle with cheaper fixed wireless offerings from competing telcos, adding that measuring the differences between the two technologies is like "comparing a Ferrari to a horse."

Fixed wireless access (FWA) has emerged as a viable broadband alternative, especially in rural markets where building fiber is costly. In Q2, T-Mobile said it added 565,000 FWA subscribers, beating analyst predictions soundly.

Also: Charter Says Fixed Wireless Was a Factor in Q2 Subscriber Declines 

Cable operators have criticized FWA service as an inferior technology, adding that while it may be an alternative to even slower copper-based digital subscriber line service from telcos, it hasn’t been a major factor in the overall broadband subscriber slowdown.  

Frontier embarked on its "Gigabit America" initiative — its plan to bring fiber to 10 million homes by 2025 — shortly after emerging from bankruptcy protection in 2021. So far, the company has extended the network to about 4.4 million homes and expects to build out 1.1 million to 1.2 million new locations this year. 

At the Goldman Sachs Communacopia + Technology conference Tuesday, Jeffery said that data usage among its customers is just too high — fiber customers average 1 Terabyte per month of data usage, with top tier subscribers consuming 2 Terabytes — for fixed wireless to make a dent.

Also: Fixed Wireless Could Add 10 million Subscribers By 2027, Analysts Say  

“If you had a choice between high-speed symmetrical fiber and FWA, you’d always choose fiber,” Jeffery said at the conference. “Which means FWA is probably picking up segments of younger people in shared homes that move, and they’re a very difficult segment to make money out of. And eventually those customers, once they settle into their homes, they will flip to fiber. I think FWA will grow, it will have some impact on our copper base, we’re watching it closely, but at the end of the day we’re really comparing a Ferrari to a horse.”

Jeffery was equally confident about Frontier’s position versus cable operators, who until recently, have dominated the broadband market. He added that Frontier has three sources of growth — movers, copper-to-fiber migration and winning share from cable. 

“It’s very, very clear that we are taking the majority of our customers from cable, no doubt about that,” he said. “It’s based on the underlying truth that fiber is a fundamentally better product than cable.”

Jeffery expects that momentum to continue as cable operators build out DOCSIS 4.0 networks. DOCSIS 4.0 is expected to deliver up to 10 Gigabit per second speeds over hybrid fiber-coax networks. The Frontier CEO said DOCSIS 4.0 is too expensive, will take years to fully deploy and still would be inferior to existing fiber networks.

“Frontier’s fiber network is 10-gig capable end-to-end today to the home,” Jeffery said.

Jeffery joined Frontier in 2020 after serving as CEO of European telecom giant Vodafone UK, which went through its own problems in the past. When he took the helm of Vodafone UK in 2016, Jeffery said the company had a terrible brand reputation, negative NPS scores and poor employee engagement. Five years later Vodafone UK is taking market share from every segment, has the highest NPS scores in its markets and has the highest employee engagement among its peers. 

“It’s winning left, right and center,” Jeffery said, adding he sees Frontier moving along the same path.

“If I map that across into Frontier’s early experience, we are already taking share against every competitor in every geography that we work, the brand is repairing, NPS is going up, internal engagement is accelerating,” Jeffery added. “All of those things are happening. It does take a number of years for those things to fully embed in the market, but when they do, customers will come to us because they want the best product, they want the best service. They want to be associated with a modern, fun, agile tech company and that’s what we’re setting out to build.” ■ 

The same day the company launched a major broadband initiative, Comcast executive VP, deputy chief financial officer and treasurer Jason Armstrong told an industry audience that while fixed wireless competition may be getting a lot of attention lately, the bigger threat to the cable business is coming from fiber broadband providers.

On Thursday, Comcast unveiled a multi-gig broadband strategy that will bring higher speeds and DOCSIS 4.0 capabilities to 50 million homes by the end of 2025. At the Bank of America Securities Media, Communications & Entertainment Conference, Armstrong said that the rollouts are further proof of Comcast’s broadband superiority.

Comcast’s broadband subscriber growth was flat in Q2, as the rest of the industry struggled with subscriber losses during the period. While there have been several factors attributed to the accelerated slowdown in cable broadband growth -- sluggish new home formation, minimal housing moves and the transition to a new federally subsidized program for low income families -- competition from both fixed wireless and fiber-based broadband providers have emerged as significant players. Fixed wireless access has gained momentum after T-Mobile reported adding 560,000 FWA customers in Q2 and yesterday Charter Communications CFO Jessica Fischer said while the technology hasn’t made a major dent in broadband growth, it is still a factor.

While Armstrong acknowledged fixed wireless, he saw fiber as a bigger threat. And he noted that during the period when fiber competition went from 0% to 40% of Comcast’s footprint, Comcast became the No. 1 broadband provider in America with 32 million customers, even adding 3 million subscribers during the pandemic.

“Dave [Watson, Comcast Cable CEO] and his team have had a terrific playbook against fiber,” Armstrong said. That will continue for the foreseeable future.”

But Armstrong was less concerned about fixed wireless, which he said is enjoying some popularity because of its low cost, but still falls short on speeds -- which average between 5 Megabits per second and 50 Mbps -- and reliability.

“Fixed wireless is newer. It’s new, it's national, a gross add equals a net add because there’s not any churn in the system, although there will be,” Armstrong said. “When you step back and say,  ‘longer term, how do we compete, how do we win?’ fiber is the real long-term competitor.

“Fixed wireless is clearly having its moment right now, but when you think about the product offering and the long term competitive  advantages, I think we feel great about our positioning,” he continued.

While he admitted that it is going to be more difficult to grow broadband subscribers in the current macro environment, Armstrong noted that Comcast has been down this road before. In 2017, the company’s largest competitor aggressively lowered its broadband prices, but Comcast held its ground, keeping its ARPU stable and subscriber growth rebounded the next year.

“You don’t chase disruption at the low end or the value conscious end of the base and disrupt the whole base by doing it,” Armstrong said. “...I think that’s the way you treat this.”

He also mentioned Comcast’s strong performance in wireless -- it added 317,000 Xfinity Mobile customers in Q2, its best Q2 ever -- and Business Services as growth drivers for the future.

“You add all this up and it tells you we have great growth runners in cable,” Armstrong said. "We absolutely have the ability to continue to grow that business.” ■ 

Charter Communications chief financial officer Jessica Fischer kind of acknowledged the impact of fixed wireless access competition on broadband subscriber growth Wednesday, telling the audience at an industry conference he technology was one of four factors that led to the cable operator’s first-ever broadband customer loss in Q2.

Charter lost about 21,000 broadband customers in the second quarter, one of several cable operators that experienced actual declines in that segment after months of slow growth. According to Leichtman Research Group, cable operators lost about 60,000 broadband customers in Q2.  Analysts had been predicting a slowdown in broadband subscriptions for months, but didn’t expect growth to go negative so soon. 

At the Bank of America Securities Media, Communications & Entertainment conference Wednesday, Fischer said Q2 performance was impacted by four factors: sluggish new home growth, seasonality, fixed wireless competition, and fiber overbuilds.

"I think we have to acknowledge that there is a new competitor in the market in the form of fixed wireless," Fischer said. 

Fischer was quick to clarify that the impact from fixed wireless was more due to customers who may have chosen Charter broadband had FWA technology not been available, rather than existing Charter customers switching providers. And she said she doesn’t anticipate that impact to last long. 

“We expect those customers to come back to us over the long term,” Fischer said. 

Also: Fixed Wireless Will Temper Q1 Broadband Slowdown, Analyst Says 

But the fact that a senior cable executive has actually acknowledged the impact of fixed wireless service on their own wireline offerings is kind of a big deal. In the past, most top cable executives have dismissed the technology as either targeting customers cable has ignored — food trucks and such — or that it has had little to no impact at all. 

In July, Comcast chairman and CEO Brian Roberts, after the company reported flat Q2 broadband growth, was a little less dismissive of fixed wireless’ effect than he had been in the past, adding that although the technology “had no discernible impact” on Q2 performance, its early growth appeared to be a contributor to lower connect activity. But he still stressed that FWA is a poor substitute for cable broadband, with slower speeds and less reliability.  

Also: Fixed Wireless Could Add 10 Million Subscribers by 2027, Analyst Says  

Fixed wireless has been available for a while, but the service has been hampered in the past by slow speeds — while the technology is capable of reaching up to 1 Gigabit per second, most offerings are in the 5 Megabit per second to 50 Mbps range, according to BroadbandNow. That compares to top speeds of 10 Gbps for cable, with some companies offering minimum speeds of 300 Mbps. While 5G has increased speeds and reliability for FWA service — T-Mobile, which added about 565,000 FWA customers in Q2, claims typical fixed wireless speeds of 33 Mbps to182 Mbps — it still lags cable broadband, a fact Fischer believes will keep cable in the high-speed driver seat for at least a while.

Also: Cable’s Broadband Slowdown: Saturation or Share Loss?

“It might be a more robust offering than the offerings that have previously been available in terms of fixed wireless,” Fischer said of 5G, “but in terms of speed and reliability, sort of being able to consistently deliver broadband speeds to customer  in a way that is going to meet the needs of the market, I think it’s still not there.”

Fischer said offering competitive fixed wireless requires the construction of a lot of fiber between radio sites, something she hasn’t seen a lot of telcos committing to. 

“The best wireless networks have a lot of wires,” she said. “As a sale of additional capacity on their networks that works temporarily, I think it’s fine. In the long term, I think that those customers end up being our customers.” ■

As the cable industry debates, deliberates and denies the impact of fixed wireless access on its suddenly stalled broadband subscriber growth, top U.S. MSOs continue to expand its own encroachment on wireless turf, as well. 

Comcast, Charter Communications and -- to a more nascent extent -- Altice USA, collectively added nearly 700,000 wireless customers in the second quarter, matching their Q1 mobile growth performance.

Together these three tier 1 U.S. cable operators now have 9.2 million mobile lines between them. 

And their being followed into the mobile fray by what one wireless analyst has termed "junior cable" -- privately held Cox Communications, WideOpenWest (WOW) and -- possibly -- Mediacom will soon enter the wireless market in "phase 2" of cable's mobile expansion. 

According to Jeff Moore, who runs Wave7 Research, it's been the collective weight of the cable industry, not the nascent 5G building efforts of Dish Network, that has replaced swallowed-up Sprint as the nation's No. 4 wireless carrier. 

Beyond that, NCTC CEO Lou Borrelli told Next TV in June that his cooperative is now aggressively involved with negotiating wholesale "MVNO" network lease deals with wireless companies on behalf of its some its more than 700 member cable operators, who he said have become interested in mobile very quickly upon seeing the quick growth experienced by Comcast and Charter. 

The growing influence of cable in the U.S. mobile industry  creates an interesting narrative of competitive juxtaposition, with T-Mobile and Verizon collectively adding 800,000 fixed wireless access customers in Q2, while Comcast and Charter flatlined on fixed high-speed internet expansion. 

But this modern telecom-centric retelling of the ol' East Coast vs. West Coast rivalry is deceiving. 

Both Comcast and Charter have built, largely in partnership, their respective Xfinity Mobile and Spectrum Mobile businesses on the backs of an MVNO deal with Verizon, while Altice USA recently established a new MVNO arrangement with T-Mobile. 

These cable mobile operations are designed to heavily tap into the Wi-Fi resources provided by the MSO's fixed broadband networks, but there's still significant reliance on the MVNO partner -- so the more MVNO customers Verizon and T-Mobile have, the more they benefit. 

According to information compiled by Recon Analytics Data (via FierceWireless), 27% of Xfinity Mobile and Spectrum Mobile customers acquired in July were Verizon defectors. 

But Verizon is earning $13.13 a month from MVNO partnerships that not only include Comcast and Charter, but myriad other wireless providers, including  US Mobile, Red Pocket Mobile, Lively and Affinity Cellular. Since Verizon doesn't have to market to those customers and support the subscriber relationship, it actually makes more money on the MVNO customers, Recon said. 

Conversely, not only do top cable executives, including Comcast Chief Executive Brian Roberts, continue to dismiss the capacity of wireless networks to be able to compete with cable at scale over time, Recon also said that many of the 2.1 million FWA customers acquired by T-Mobile and Verizon so far have been new fixed high-speed internet subscribers, not cable defectors.

"It's not a zero sum game," Recond founder Roger Entner said. 

Cable One reported Q2 results on Thursday, missing analysts’ consensus targets for broadband subscriber growth, as one influential analyst believes its problems may only be beginning.

Cable One added 1,300 residential broadband customers in Q2, soundly missing analysts’ consensus estimates of 5,200 additions. While some analysts wrote off the miss as part of the overall decline in broadband growth the rest of the industry is experiencing -- the top three publicly traded cable operators either reported flat or negative broadband customer growth in Q2 -- MoffettNathanson senior analyst Craig Moffett feared it could be a sign of stiffer competition from fixed wireless access providers. 

Cable One, like the rest of the cable industry, has seen its stock price slip this year. As of Thursday (August 4), Cable One shares were down about 18% for the year to $1,441.80 each. On Friday (August 5), the stock slipped another 5% to $1,368.19 per share in early trading.  

Also: Analyst Says Telcos Better Positioned to Chip Away at Cable's Broadband Lead 

But even through that difficulty, Cable One has enjoyed one of the strongest trading multiples in the cable business. Cable One stock was trading at a 37% premium to Charter Communications on August 4 -- mainly because its largely rural footprint was free from serious fiber broadband competition and its relatively low market penetrations meant it had a long runway for growth. In a research note on August 4, Moffett noted that those days may be over as fixed wireless offerings take hold. 

“Fixed wireless has found its greatest success in rural markets, where the market is underserved and price sensitive, and when carriers tend to have excess capacity,” Moffett wrote. “Cable One’s broadband growth has slowed along with everyone else’s, and they may now arguably face more competition than peers, at least from FWA.”

Fixed wireless growth has been strong in Q2, with T-Mobile adding 560,000 FWA customers in the period, well above analysts expectations, and Verizon adding about 256,000 FWA subscribers. T-Mobile overlaps between 40% and 50% of Cable One’s footprint, according to Wells Fargo Securities media analyst Steven Cahall, but the company said it hasn’t seen much of an increase in FWA competition so far. 

In a conference call with analysts Thursday, Cable One CEO Julie Laulis said that T-Mobile hasn’t had much of an impact on Cable One, adding that it appears that most of T-Mobile’s additions in Cable One’s footprint are former telco digital subscriber line customers. Verizon’s impact, she said, has been “virtually nothing.”

“Overlap does not take into account network quality/capacity, which we think accounts for the difference here,” Cahall wrote in a note to clients. “[Cable One] has also segmented its customer base with higher speed offerings, which we think further insulates the threat.”

Also: Cable's Broadband Slowdown Hasn't Hit Bottom Yet, Analyst Says

Moffett stressed that he  wasn’t criticizing Cable One management or its business, but merely pointing out that the hefty premium its stock price has enjoyed over the years may not be entirely justified. 

“What we are struggling with is stock selection within a cable sector that we believe is oversold and underappreciated,” Moffett wrote. “As much as we admire Cable One, we struggle to see why such a large premium – indeed, any premium – is warranted here. We believe there are better opportunities to be had elsewhere in the group.”

The analyst also worried that without a wireless play to fall back on, the outlook could be even bleaker. Wireless has been the biggest growth engine for Comcast and Charter as broadband growth has declined.  

“Is any premium at all justified if Cable One’s growth prospects are no better – and arguably, without wireless, worse – than Charter’s?” Moffett asked. 

Adding to the pressure is Cable One’s relatively high prices for broadband -- its $80.44 residential ARPU is 23% higher than Charter’s. Although its ARPU can be a bit misleading -- it has extremely low penetration of video, meaning that those remaining generally pay for much more expensive tiers of service, which helps boost the number -- Moffett noted that Cable One customers also tend to pay for higher speeds of broadband which are more costly. That could mean that Cable One has extracted most of the benefit from the video/broadband mix that lies ahead than its cable peers, he said.

That, Moffett wrote, could be enough to send growth metrics southward. He added that with a predominantly rural footprint with customers that have the least disposable income in MoffettNathanson’s coverage universe, Cable One is more vulnerable to price competition. While that had little effect when competitors couldn’t justify building out their networks to its markets, lower cost FWA makes it a whole new ballgame.

“As a percentage of disposable income, Cable One’s prices are the highest in the industry. This could make them more vulnerable to competitive price-based offers and to macroeconomic weakness,” Moffett wrote.  ■ 

Barclays Group media analyst Kannan Venkateshwar downgraded his ratings on Comcast and Charter Monday in the wake of disappointing Q2 broadband performance, adding that the rapid growth of fixed wireless service from telcos may end up being more of a threat than cable operators think.

Barclays lowered the rating on Comcast to “Equal Weight” from “Overweight” and on Charter to “Underweight” from “Equal Weight,” citing their poor Q2 performance. In addition to non-existent broadband growth in Q2, video subscriber losses at both companies rose significantly during the period -- to 521,000 and 266,000 respectively -- reigniting fears of accelerated cord-cutting for traditional cable. While mobile subscriber growth for both Comcast and Charter exceeded analysts’ consensus estimates for the period, Venkateshwar split from his peers, doubting that wireless will be able to take up the slack. 

Broadband Forecasts Lowered Again

Venkateshwar noted that he now expects Comcast to add about 300,000 broadband customers this year, down from 1.4 million in 2021, and Charter to add about 200,000, down from 1.2 million additions in 2021. He said the debate has shifted to whether or not cable broadband subscribers will actually decline in 2023 and beyond.

The broadband slowdown has weighed on cable stocks for months. So far this year, Comcast stock is down 24%, Charter down 34%, Altice USA fell 35% and Cable One is down 22%. The sector probably will fall even further after Altice USA reports Q2 results on August 3. 

Most analysts have reduced their forecasts for cable broadband subscriber growth again in light of the Q2 results, with Wells Fargo Securities media analyst Steven Cahall cutting his estimates for Comcast and Charter nearly in half. 

Prior to the Q2 results, Cahall had estimated Comcast would add 688,000 broadband customers in 2022 and another 630,000 in 2023. Now, his estimates call for 298,000 residential additions in 2022 and 300,000 in 2023. For Charter, Cahall had estimated residential broadband growth of 499,000 in 2022 and 549,000 additions in 2023. Those predictions have been revised to 152,000 customer additions in 2022 and 295,000 in 2023. 

Fixed Wireless Threat 

The analysts pointed to the potential threat of fixed wireless -- T-Mobile USA added 560,000 fixed wireless subscribers in Q2, far exceeding consensus expectations -- and Comcast’s and Charter’s seeming indifference to that competition. In conference calls with analysts to discuss Q2 results, both Comcast chairman and CEO Brian Roberts and Charter chairman and CEO Tom Rutledge said they believe fixed wireless isn’t much of a threat. 

Roberts called the fixed wireless access Q2 performance a fluke, as excess capacity created a “temporary opportunity targeted at value-oriented customers.” And while he said FWA isn’t having any “discernible impact” on churn, he did acknowledge it was a factor in Comcast’s flat Q2 performance. Not exactly an admission of a threat, but close, even though he added that performance and capacity restraints will likely limit FWA’s overall penetration.

On the call, Rutledge appeared to dismiss the long-term impact of fixed wireless while admitting that it is “an issue affecting growth at the moment.”  

Rutledge said fixed wireless access’s impact is small when compared to Charter’s overall footprint. He said activity levels were the major driver for subscriber losses. And he said that there are other economic factors at play, including low housing occupancy and new construction because of supply chain issues.

“And so we're pretty optimistic, relatively speaking, that as the post-pandemic market activity levels return and normalize, that our share of broadband growth will rise,” Rutledge said on the call. 

Also: Analyst Says Telcos Better Positioned to Chip Away at Cable’s Broadband Lead  

But Venkateshwar warned that fixed wireless could become a factor very quickly, adding that if T-Mobile meets its guidance of 500,000-plus additions each quarter, it will be larger than Altice USA (the fourth largest cable operator in the country) by the end of next year.

Also: Broadband Slowdown Hasn’t Hit Bottom Yet, Analyst Says 

“It is tough to see this not impacting cable structurally when cable [broadband] net adds overall have been [about] 3 million in normal years and T-Mobile and Verizon alone could add 2 million to 2.5 million FWA subs a year,” Venkateshwar wrote. “This is even before the existing DSL base converts to fiber driven by government funding and AT&T’s fiber expansion, which we estimate will result in an additional 20% of cable footprint having fiber overlap.” 

Blame Game

Cable operators have mainly blamed the broadband growth slowdown on lower household moves, an excuse that the Barclays analyst is not buying.

“[T]his is a market share argument and it is not clear why this would drag growth down for the industry as a whole,” Venkateshwar said of slower housing moves. “While cable has gained share vs DSL over time and therefore lower moves would impact growth rates, it is mathematically impossible to get to negative growth as seen last quarter, purely on account of lower move activity. In addition, the decline in move activity is not new and has been going on for years and tends to worsen during recessions. Even if move activity recovers, there are new elements that are likely to reduce cable’s share of gross adds given fiber and FWA entrants.”

Going Mobile 

Other analysts have seemed to side, partly, with cable operators' view on fixed wireless access. In a research note Friday, MoffettNathanson senior analyst Craig Moffett said that while investors will likely focus on broadband performance for a while going forward, they will eventually come around to the thesis that wireless is the new growth engine for cable. According to Moffett, if video was Act I for cable operators and broadband was Act II, wireless is poised to be the industry’s third Act..

Charter added 340,000 wireless customers in Q2, ending the period with 4.3 million customers. Mobile now accounts for 5.5% of Charter’s total revenue. Though the segment isn’t profitable yet, once Charter’s CBRS offload initiatives are completed in the next few years, it will be more profitable than most could imagine, according to Moffett.

The same holds true for Comcast. The largest cable operator in the country added 317,000 wireless customers in Q2, ending with 4.6 million customers. Wireless makes up about 4.9% of Comcast’s total cable revenue and is growing at a 30% annual rate.

“[W]e believe wireless growth remains underappreciated,” Moffett wrote. 

Wells Fargo Securities' Cahall said the jury was still out on mobile valuations, and while unit economics are positive, they don’t yet exceed the cost of service. On the other hand, increased capital spending on wireless could make operators less  reliant on MVNO partnerships and more competitive with telcos. 

“Add it all up, and it's a very logical strategy, but we think the value is too uncertain at flattish adjusted EBITDA margins to offset the [broadband and capex] challenges,” Cahall wrote.

Venkateshwar also was impressed by cable’s wireless performance, but he added that any war between cable wireless and telco FWA will be won by the telcos. 

“Telecom operators have their own issues but their narrative around new revenue sources like FWA is more feasible, at least over the short term, because it is backed by significant capital investments in a fixed cost infrastructure that should provide operating leverage over time,” Venkateshwar wrote. “Cable companies on the other hand have no plans to invest in a full infrastructure based offering, but still believe they can do better with an MVNO model than operators elsewhere in the world have managed. This strategy makes sense to test out the market and launch a service, but to anchor [a] long term strategic pivot of the scale that cable companies are attempting on someone else’s network is not viable in our view.” ■

Comcast reported zero customer growth in the area of high-speed internet in the second quarter, right after T-Mobile and Verizon collectively touted the addition of more than 800,000 fixed wireless access customers from April - June.

Keeping with the cable industry's ongoing broader mantra, Comcast CEO Brian Roberts insisted he's still not worried about it.

Citing the significant "longterm limitations" of FWA, Roberts described the technology as a "temporary opportunity targeted to value-oriented customers," one driven by a short-term excess of wireless capacity that will soon abate as FWA proliferation increases.

Also read: Comcast Reports Flat Broadband Growth in Q2

Meanwhile, Roberts conceded that the quickening uptake of FWA is impacting Comcast's connections metrics, it hasn't influenced churn. 

Comcast added 354,000 high-speed internet customers in the second quarter of 2021 and 323,000 in the pandemic-impacted April-June period of 2020. 

Writing for our Multichannel News vertical Thursday, Mike Ferrell took a deep dive into whether the growth slowdown being experienced by Comcast and other cable operators is more a matter of saturation than competition from fiber, FWA and other technologies. 

Also read: Cable Broadband Customer Growth Was Down by Around 500K in Q1 ... but Fixed Wireless Added 500K

Certainly, FWA has to be considered a factor. T-Mobile this week reported the addition of 560,000 high-speed internet customers, right after Verizon touted 256,000 FWA additions in Q2. 

And whether it's "temporary" or not, that's influencing Comcast investors, who tanked the stock over 8% Thursday. Charter Communications, which reports earnings Friday, also saw its stock drop over 8%. 

Analysts have been waiting for the other broadband shoe to drop for months after most cable companies missed broadband subscriber growth targets in Q1, and they got it Thursday after Comcast, the largest cable operator in the land, reported zero broadband additions for Q2, a bit earlier than expected. Now, as cable pundits consider dropping their growth estimates for cable’s cash cow yet again, the big question for at least one analyst is whether the drop-off is due to saturation or share loss.

Just what caused the largest cable operator in the country to have precisely 0 broadband customer growth will matter for the rest of the industry because cable can rebound from saturation, but share loss is another thing entirely.

Also: Broadband Slowdown Forces Some Analysts To Go Negative on Cable Sector  

In a research note Thursday, MoffettNathanson senior analyst Craig Moffett wrote that at the moment it appears that the overall broadband slowdown is a combination of encroaching saturation and sluggish new household formation instead of share loss. And, in his note, he stressed that the former is much better than the latter. 

“If the problem is saturation, then we should be slowing towards zero (or, more precisely, towards the rate of new household formation),” Moffett wrote. “If the problem is share loss, well, then let your imagination run wild. There’s no floor. And if the problem is saturation, then pricing power isn’t jeopardized. If the problem is share loss, broadband ARPU is at risk.”

Also: Most Eyes Should Be on Comcast Q2 Broadband Performance 

Comcast managed to grow broadband ARPU in Q2 by about 3.6%, not great but respectable, given that it lost 10,000 residential and gained 10,000 business high-speed data customers in the period. ▪️

The Waiting Is the Hardest Part

Most analysts have been waiting for this day ever since Comcast reported 262,000 broadband additions in Q1 -- a number that beat most estimates but was fueled by a large portion of customers on free plans that converted to paying plans. Absent those customers, Comcast would have added about 175,000 broadband customers in that period, well behind some estimates of 180,000 to 225,000 additions.  

Prior to Thursday, most analysts were expecting broadband additions to fall off considerably, a factor of seasonality -- Q2 is when students and snow birds cancel service for the summer -- and other macroeconomic trends. But many analysts expected losses to come from other cable operators -- consensus was for Comcast to add about 84,000 high-speed internet customers in the quarter -- not the largest one. Now, some are changing their minds.

Also: Has Cable Broadband Hit the Wall? 

“We expected Charter to post negative growth in consumer broadband in 2Q22 but had expected a slightly better result at Comcast largely because Comcast has more levers to pull with respect to its product set (Flex, Peacock, TV etc.) but despite all this, Comcast performance may not really be that different from Charter after all,” wrote Barclays Group media analyst Kannan Venkateshwar in a note to clients Thursday, adding that Comcast “seems to be seeing negative growth thus far in 3Q as well, although it expects some seasonal improvement in August and September.”

That will likely cause analysts across the board to shift their estimates for overall cable broadband subscriber growth downward. Charter is scheduled to report Q2 earnings tomorrow (July 29), so depending on those numbers, predictions may have to be rejiggered again. 

Also: Cable Broadband Slowdown to Continue in Q1 and Beyond, Analysts Say 

Movin’ On Up [Not]

Comcast tried to downplay the lack of broadband growth on a call with analysts, stressing that it has added about 800,000 high-speed internet customers in the last 12 months and 3 million in the last two years. But that included the pandemic, when most Americans needed high-speed connections to work, school and play from home and many were receiving government subsidies for service. As those requirements were lifted, some decided they didn’t need cable broadband, or perhaps found a lower cost alternative. 

Comcast’s flat growth comes a day after T-Mobile said it added 565,000 fixed wireless access customers in Q2, soundly beating even the most optimistic analyst estimates. Fixed Wireless Access (FWA) has been feared to be a major threat to cable wireline broadband,  but Comcast execs said FWA wasn’t a factor in Q2 results.

Comcast chairman and CEO Brian Roberts said during a conference call with analysts that although fixed wireless is a new competitor targeted mainly at price-conscious consumers, it has had “no discernible impact” on churn, but its early growth appeared to be another contributor to lower overall connect activity. Instead, Roberts blamed the flat growth on three factors -- a slowdown in housing moves (Q2 was 12% below 2019), the reversal of some pandemic trends -- the surge in lower income households getting broadband has waned -- and competition. 

Roberts vowed to turn around the broadband product, adding that Comcast is confident it can return to residential growth and is expanding its footprint, accelerating edge-outs, “playing offense when it comes to government subsidies,” aggressively competing for market share and increasing the value of the broadband product by bundling it with mobile service and its Flex offering. 

Also: Analyst Says Telcos Better Positioned to Chip Away at Cable’s Broadband Lead  

“We are in a unique environment with some headwinds,” Roberts said of the cable business. “But move activity should return to some level of normalcy, mobile substitution will eventually  stabilize and we believe fixed wireless has inherent performance and capacity limitations that sharply limit the number of people on a network using a given amount of spectrum, which should provide a natural cap on their overall industry penetration.”   

Other Than That… 

Despite the less than expected broadband performance, the rest of Comcast’s businesses appear to be doing well. Theme Parks cash flow nearly tripled in the period, its highest quarterly cash flow growth in that segment ever, movie studio revenue was up 33% driven by strong theatrical releases, wireless subscriber additions at 317,000 was the best Q2 ever for that segment. Even Sky, Comcast’s European satellite unit, saw cash flow rise 54% in the period. But for investors, that didn’t seem to make a difference.

“With full acknowledgement that the broadband debate isn’t just the most important debate right now, but in fact is the only debate right now, it is worth noting that everything else in Comcast’s report was very strong,” Moffett wrote, adding that the overall takeaway is “almost certainly going to be negative.

“Broadband subscriber growth is all that matters,” he continued. “And even if our ‘saturation rather than share loss’ thesis is correct, there is a risk that by the time the evidence of causality becomes a little clearer, competitive share losses to fiber actually will have begun to accelerate… even if the growth rate of FWA has by then abated.”

Moffett noted that although housing moves is a common excuse for the slowdown, Comcast was less dismissive of fixed wireless than it has been in the past, and seems to be committed to growing the footprint. 

“None of this is likely to shift sentiment, which, in the face of slower broadband growth, remains rather dour indeed,” Moffett wrote. ■ 

MoffettNathanson joined the recent chorus of a steeper-than-anticipated slowdown in broadband subscriber growth for the second quarter, expecting large operators like Comcast and Charter Communications to report less than half the customer gains they did in Q1, while wireless customer additions are anticipated to maintain their recent upward momentum.

After its purchase by SVB Financial Group, MoffettNathanson was required to reinitiate its coverage of the sector, and on Tuesday (July 12) it did just that. Of the nine cable and telecom stocks MoffettNathanson follows, four have an “outperform” rating: T-Mobile, Comcast, Charter and fixed-wireless access provider Starry. The rest — Altice USA, Cable One, AT&T, Verizon Communications and Dish Network — have a “market perform” rating.

Several analysts have already modified their broadband subscriber growth forecasts for the bigger operators, with some expecting full-year 2022 additions to be nearly one-third of those of the peak year of 2020. Driving those modifications are the added pressure of increased fiber buildouts by telcos like AT&T and Verizon, aggressive pricing, the near disappearance of digital subscriber line customers — once a top feeding ground for cable broadband — and sluggish new household formation. 

In his report, MoffettNathanson senior analyst Craig Moffett estimated that both Comcast and Charter would report broadband growth of 91,000 and 90,000 in Q2, less than half the 262,000 and 185,000 they added, respectively in Q1. 

Broadband to Rebound a Little

Moffett, like other analysts, expects the declines to soften over the next five years, but not enough to reach even the prepandemic levels of 2019. He expects Comcast, the largest cable operator in the country, to end 2022 with an additional 698,000 broadband customers, about half the 1.358 million it added in 2021. Charter, he wrote, should add about 716,000 broadband customers in 2022, compared to 1.2 million additions in 2021. 

In later years, the gap between Comcast and Charter should widen. Moffett expects Comcast to add 751,000 broadband customers in 2023; 767,000 in 2024; 784,000 in 2025; and 800,000 in 2026. For Charter, year-end additions should be 824,000 in 2023; 873,000 in 2024; 902,000 in 2025; and 925,000 in 2026.

But in his report, Moffett attributed the slowdown in broadband additions for both Comcast and Charter to the fact that the market is nearing saturation, not new or more competition. That, he wrote, is “a view that implies further slowing but no outright reversals.”

Moffett also believes that the market is not giving either Comcast or Charter enough credit for their respective wireless businesses. And he expects them to continue to grow robustly.

In the report, Moffett estimated that Comcast would add 320,000 wireless subscribers in Q2, up slightly from Q1 additions of 318,000 customers. For the full year, he predicts Comcast will add about 1.3 million customers — up from 1.15 million in 2021. Between 2023 and 2026, Moffett anticipates wireless additions to be a steady 1.25 million customers per year. 

Charter’s wireless additions should dip to 318,000 in Q2 from 373,000 in Q1, but for the full year Moffett anticipates growth to 1.4 million additions, up from 1.2 million in 2021. However, he sees wireless additions slowing to 1.2 million in 2023, 1.1 million in 2024; 960,000 in 2025 and 860,000 in 2026.

Altice USA, which reported a loss of 13,000 broadband subscribers in 2021, should lose about 9,000 in Q2 and 6,000 for the whole of 2022. From there, the prospects look a little better — Moffett estimates it will gain 23,000 broadband customers in 2023; 78,000 in 2024; 81,000 in 2024 and 83,000 in 2025. Wireless additions are expected to be about 41,000 in 2022, rising to 76,000 by 2026, according to Moffett. 

Cable One should continue with modest gains in broadband customers, adding 7,100 in Q2 —  down from 13,000 in Q1 — and 41,700 for the full year. Growth should be fairly steady from there, according to Moffett, who estimates it will add 42,100 in 2023; 41,700 in 2024; and 41,900 in 2025. Cable One does not have a wireless offering yet.

On the telco side, aggressive fiber buildouts and pricing should help boost subscriber numbers significantly. 

High Upside for T-Mobile

Moffett was most impressed with T-Mobile, his top pick in the telecom sector, for its aggressive deployment of 5G technology and its competitive pricing structure. 

“The combination of a single telecom operator having both the industry’s best network and its lowest prices is unprecedented, and we believe paves the way to significant share gains,” Moffett wrote, adding that opportunities in rural markets and business customers “underscore the attainability of these gains.”

As a result, Moffett expects T-Mobile’s postpaid net additions to be 1.3 million in Q2, even with Q1. For the full year, he expects postpaid net additions to be 5.9 million, up from 5.6 million in 2021.

Telcos AT&T and Verizon aren’t expected to fare as well, mainly due to saturation and the wireless threat from cable. Moffett expects AT&T to have about 750,000 postpaid additions in Q2, down from 965,000 in Q1. For the year, net additions should be 2.8 million (down from 4.4 million in 2021) and sliding to 1.1 million in 2023, 850,000 in 2024 and 650,000 in 2025 and 2026. 

“As subscriber growth in an already-saturated wireless industry decelerates back towards population growth, we believe AT&T will be hard-pressed to post positive unit growth,” Moffett wrote.

At Verizon, aggressive pricing should boost subscriber numbers briefly -- Moffett predicts they will add 440,000 postpaid subs in Q2, nearly double the 269,000 additions in Q1. And though that will boost growth in 2022 above the prior year (2.3 million versus 2.1 million), those additions are expected to temper in later years. Moffett predicts postpaid net additions at Verizon will slip to 2.1 million in 2023, 1.8 million in 2024, 1.5 million in 2025 and 1.4 million in 2026.  

“We believe Verizon faces a challenging path forward,” Moffett wrote.

Fixed-wireless access provider Starry should continue to do well, reaching about 63,200 customers in 2021. That number could increase ten-fold by 2026 to 649,200 according to Moffett, but it will depend on the company’s ability to raise capital. It already has proven its technology works and can reach apartment dwellers relatively easily, and Moffett wrote that he expects costs to serve single-family homes will fall enough to make serving that segment attractive. 

“We believe they can achieve sufficient penetration at sufficiently high prices to earn an attractive return on capital in each individual market they launch, and that they can, in turn, ‘stack’ markets to achieve attractive returns as a whole,” Moffett wrote. “The fly in the ointment may be a circular argument related to their stock price itself: scaling their business will require raising additional capital. If their stock price is close to or above warranted value, it would not be a problem (and it won’t be dilutive). If, on the other hand, their stock price is meaningfully below warranted value (as it currently is), then a capital raise — which should be necessary one way or the other — would be substantially dilutive.” ■

With the second-quarter earnings season almost upon us, cable investors should prepare themselves for an even steeper falloff in broadband subscriber growth, according to Barclays Group media analyst Kannan Venkateshwar.

Comcast is expected to kick off the Q2 earnings season on July 28, followed by Charter Communications on July 29. But in a research report Thursday, Venkateshwar wrote that there is little hope that the months-long slowdown in broadband growth is nearing an end.

It’s been almost a full year since analysts began bracing for cable broadband additions to slow, and it seems like every quarter there is another call that the impact could be even greater than expected. Analysts have already modified their forecasts for the bigger operators, with some expecting full-year 2022 additions to be nearly one-third of those of the peak year of 2020. Now, with the added pressure of increased fiber buildouts by telcos like AT&T and Verizon Communications, aggressive pricing, the near disappearance of digital subscriber line customers — once a top feeding ground for cable broadband — and sluggish new household formation, that impact could be even worse.

On the telco side, Venkateshwar believes that fixed wireless offerings from Verizon and T-Mobile could have greater unit growth “than the entire cable industry” during the quarter. 

Charter Communications chief financial officer Jessica Fischer pointed to another potential pitfall for cable at the Credit Suisse Communications conference in June, telling the audience that about 60,000 to 70,000 broadband subscribers that had been part of the Federal Communications Commission’s Emergency Broadband Benefit program did not make the transition to the fed’s new broadband subsidy offering, the Affordable Connectivity Program. While Fischer said she believes broadband is a growth business and still expects Charter to add subscribers in Q2, it has caused analysts some pause. 

Venkateshwar, who had earlier predicted Charter would add about 100,000 broadband customers in Q2, now believes they will add none, adding that the gap between it and No 1 cable operator Comcast could be bigger than usual. 

In his note, Venkateshwar wrote that while Q2 is generally seasonal as students leave college and residents move to summer homes, “the slowdown being seen intra quarter goes beyond seasonality impacts.” 

“Charter talked down broadband sub growth for Q2 due to the impact of the rollover from old subsidy programs into new programs in late Q1, and the company’s consumer broadband net adds may tip into negative growth in the quarter,” Venkateshwar wrote. “This is difficult to explain without assuming continued structural impacts on gross adds due to competition as well as broader market saturation.”

The Barclays analyst expects Comcast to add about 74,000 broadband customers in the quarter (down from 354,000 last year), while Altice USA should lose about 20,000 high-speed internet subscribers in the period, compared to zero additions in the same period last year.

While telcos seem to have an advantage given their increased fiber deployment, Venkateshwar wrote that their efforts have been largely tactical, adding that there isn’t much visibility as to the long-term trends. And any big dropoff in cable broadband could lead operators to focus more heavily on wireless, which wouldn’t be good news for telcos. 

“Longer-term, it is tough to see how either industry ends up benefiting from the ongoing convergence in wireless/wireline offerings,” Venkateshwar wrote. “The end state of this process is likely to be potentially more M&A; however, with capital costs rising and a tougher regulatory environment, this may not be available as a solution for a while.” ▪️

Total global revenue for the broadband access equipment market was $4.4 billion in the first quarter, up 14% and fueled by fiber and fixed wireless access projects, according to a study by the Dell’Oro Group.    

“Despite all the challenges with supply chains, logistics, and labor, service providers continue to invest heavily to expand their fiber broadband networks, particularly in North America,” Dell’Oro Group Vice President, Broadband Access and Home Networking Jeff Heynen said in a press release. “Many of these deployments are to deliver multi-gig services, as operators look to stay one step ahead of their competitors.”

Also: Equipment, Worker Shortage Could Delay Fiber Buildout 

In its 1Q 2022 Broadband Access and Home Networking quarterly report, Dell’Oro found that total cable access concentrator revenue increased 5% year-over-year to about $257 million as solid growth in Distributed Access Architecture (DAA) deployments help offset declines in traditional CCAP licenses. Total fixed wireless CPE unit shipments reached 3.8 million units in the quarter, with 5G Sub-6GHz units showing the fastest growth.

Also: It’s Time to Take Frontier Communications’ Fiber Plans Seriously 

Telco and cable operators across the country have stepped up fiber and fixed wireless deployments, especially as federal funding has emerged to help finance buildouts in rural areas. In addition, Altice USA said earlier this year it would accelerate its fiber-to-the-home build, expanding the technology to 6.5 million homes by 2025. AT&T has plans to pass 30 million additional homes with fiber by 2025 and Frontier Communications said it would extend its fiber network to 10 million homes by 2025,  while other smaller operators like TDS Telecommunications -- which plans to nearly double its total service addresses from 1.4 million to 2.2 million over the next five years, mainly through fiber expansion -- Shentel and MetroNet have all expressed plans to step up buildouts to bring faster speeds and greater capacity to broadband customers.  ■ 

Fixed wireless access broadband could add more than 10 million subscribers in the next five years, driven by programs geared toward rural markets, according to a report by Wells Fargo telecom and media analysts Eric Luebchow and Steven Cahall.

In their report, the analysts predict that total broadband subscriber additions will accelerate to 4.5-to-5 million annually in 2023 and 2024, fueled mainly by FWA and fiber overbuilds. Over the next five years, Luebchow and Cahall predict FWA will rise from 7.1 million total subscribers at the end of 2021 to 17.6 million in 2027. That growth will come at the expense of cable operators, who the analysts predict will watch their market share erode quickly over the next few years. 

While fixed wireless has been around for awhile, Luebchow and Cahall expect competition to heat up significantly in the next three years as federally funded programs spur both wireless and fiber build outs for broadband. In their report, they estimate that FWA would capture 60% of net additions through 2024. Then momentum shifts to fiber overbuilders as new inventory comes on the market. 

“In total, we expect +50 [million] new premises to be connected with fiber through 2027 that will reach [two-thirds] of addressable locations,” Luebchow and Cahall wrote. “The competitive dynamics will make the net add story increasingly difficult for the cable players, as we project cable’s share of industry net adds will fall to ~30-35% in 2023 and beyond (vs. ~94% on average the past three years).”

Wells Fargo estimated that fiber builds passed about 50 million homes in 2021 and would more than double that pace to 102 million by 2027. 

While there has been some concern around the lack of a labor force to build fiber networks the analysts believe that is less of a factor with bigger telcos. 

Initially, Luebchow and Cahall see FWA as being the biggest disruptor, mainly because of its low price -- in some cases as much as 50% lower than wireline broadband offerings -- and adding about 5 million new customers in 2022 and 2023. Fiber will take hold in 2024 and beyond, about the time that many of the build out projects started in the past few years will be completed. While that includes some cable operators -- Altice USA plans to pass 6.5 million homes with fiber by 2025 and Charter and Comcast have extended their fiber reach by about 1 million homes per year over the past few years -- Luebchow and Cahall don’t believe it is enough to reverse the coming share shift.

“The net impact is cable players will have to face stiffer competition within their footprints, and they threaten to be crowded out of a secular story that only has room for [about] 3-5 million net adds per year,” they wrote, adding they expect cable’s share of broadband net additions to drop from 87% in 2021 to 30% to 40% by 2027. 

Cable has punched back by bundling broadband and wireless phone service -- Comcast and Charter are both pairing high-speed data service with mobile offerings at a discount. 

T-Mobile and Verizon Communications have been most aggressive on the fixed wireless front, adding 532,000 FWA customers in Q1, according to Leichtman Research Group.  But so far, most cable companies claim they haven’t seen much impact from the service, which for the most part has been concentrated on less populated areas and has targeted business customers like food trucks and construction trailers. 

At the MoffettNathanson Media & Communications Summit May 18, Comcast Cable CEO Dave Watson said so far, FWA hasn’t been a major competitive factor, but that the company is keeping a close eye on the service.

“It doesn't mean that it's not competitive. It doesn't mean that we're going to take it lightly. We're not,” Watson said at the conference, adding that fixed wireless has some issues around speed and latency. T-Mobile advertises FWA speeds between 33 Megabits per second and 182 Mbps, while Verizon FWA service can range from 300 Mbps to 1 gigabit per second. Watson added that two-thirds of Comcast broadband customers take 300 Mbps and higher.

“We're coming from a position of strength in regards to network performance and WiFi performance in the household and we're not going to stop,” Watson said at the conference. 

In their report, Luebchow and Cahall noted that FWA speeds are lower than cable, but they are more than adequate for the most popular applications like streaming video.

“FWA should not be dismissed and will be a viable competitive threat, particularly in rural areas and for customers that prioritize a lower price vs. higher speeds,” the analysts wrote.  ■ 

We've heard leading cable executives say over and over again the last few years that the wireless industry simply doesn't have the network capacity to compete for U.S. home broadband marketshare in a 5G world that's soon going to be usurped by cable's "10G" technology push.

But based on Leichtman Research Group's latest quarterly home broadband customer growth tracker, which factored in fixed wireless access (FWA) from wireless companies Verizon and T-Mobile for the first time, MSOs should probably be concerned. 

As LRG reveals, the two wireless companies added a combined 532,000 customers in Q1 for their new, largely 5G-enabled FWA home broadband services. The eight largest U.S. cable companies, meanwhile, added just 482,830 customers. That's 454,153 less than they added in the first quarter of 2021. 

Overall, LRG said the 14 biggest U.S. providers of high-speed internet service added around 1.065 million subscribers in Q1, up slightly over the 1.02 million tacked on by the biggest ISPs during the first three months of 2020. So, the overall narrow acceleration of growth can be directly tied to the pro forma addition of the two FWA services. Leave them out and we're having a very different discussion about how the U.S. home broadband business is saturated, and growth is slowing way, way down.

Share of the U.S. broadband market has steadily grown to around 70% for U.S. cable operators in recent years, with their "DOCSIS 3.0"-enabled download speeds vastly superior to what could be delivered by legacy DSL services provided by AT&T and Verizon. Consumers, who began to stream HD and 4K video en masse over the past half decade, switched over to cable ISPs in droves. 

But now the "telcos," who've made major investments in fiber-to-the-home infrastructure, are growing their high-speed internet customer bases again. And the addition of FWA is further tacking onto that customer growth. Verizon, for example, just reported its biggest customer-growth quarter for broadband in a decade, adding 229,000 combined bill-paying souls. 

Of course, we've yet to see what kind of performance Verizon and T-Mobile can deliver with fixed 5G in a world where there's more mass-scale adoption. The cable folks might be right about a network capacity shortfall at some point. But for a lot of consumers in the inflationary here and now, the speed just might be enough to Netflix and chill, especially considering the highly competitive $50-a-month pricing for FWA service. 

T-Mobile's latest "Uncarrier" media event, taking place Wednesday, unveiled more bad news for the cable industry, which is watching its recent incendiary home broadband growth quickly decelerate. 

As it turns out, fixed wireless access -- poo-pooed by the large cable incumbents as a competitive non-factor -- might actually be ... a factor. 

And T-Mobile is ramping up the promotional assault, offering its "Magenta Max" unlimited wireless customers its 5G Home Internet FWA service for $20 off the usual cheap $50-a-month price. 

T-Mobile also said that non-Magenta Max 5G Home Internet customers will now be able to lock in that $50-a-month rate for as long as they're a subscriber. 

Of T-Mobile's nearly 109 million wireless customers, only 15% take Magenta Max, but the service tier now represents 50% of the company's new signups. 

T-Mobile said that it's FWA service is delivering average speeds of around 140 megabits per second nationwide, which is plenty fast enough for several users in different rooms of a home to stream 4K video at the same time. 

T-Mobile is further incentivizing its Magenta Max customers to switch to FWA by offering them a $50 rebate on streaming devices from Roku, Google and other major suppliers. It's also offering these customers 50% of virtual pay TV service YouTube TV for a year. These customers get the first month of service gratis. 

It's a bit of a reverse-switcheroo on the top U.S. cable operators, which have for several years enticed their home internet customers to also adopt their nascent wireless offerings with aggressive cross-promotions. 

Cable operators have dismissed FWA as not having the needed network capacity to compete in a world moving to a "10G" future. 

But in case they haven't noticed, inflation is trending right now, and the average monthly price in the U.S. for cable broadband now exceeds $70. 

Certainly, cable operators, which control 70% of the U.S. high-speed internet market, are facing diminished growth.

Comcast reported the addition of 262,000 broadband customers in the first quarter, which was just over half the 461,000 it added in the same period of 2021. Charter Communications added 185,000 HSI subscribers in Q1 vs. 355,000 a year prior. Altice USA lost 13,000 HSI users in the first quarter, citing East Coast competition from Verizon, a T-Mobile wireless rival with growing FWA might of its own. 

T-Mobile reported a gain of 348,000 FWA customers in the first quarter, upping its base to 948,000. Verizon reported last week that it tacked on 194,000 FWA subscribers in Q1. 

With Comcast expected to kick off the Q1 earnings season Thursday morning, analysts are expecting the broadband slowdown to continue throughout the year, with operators anticipated to report high-speed internet customer additions at about half the rate of last year.

Comcast is scheduled to report Q1 earnings on April 28 at 8:30 a.m., and Evercore ISI Group media analyst Vijay Jayant sees the nation’s largest cable operator reporting broadband additions of about 200,000 customers, or less than half the 423,000 they added in the same period last year. Other analysts, like Wells Fargo Securities' Steven Cahall and J.P. Morgan’s Phil Cusick, are in the same ballpark. Cusick expects Comcast to add about 180,000 broadband customers while Cahall predicts it will be a bit higher at 224,000 additions.

And they expect the sluggishness to continue throughout the first half of this year. Jayant is keeping his predictions consistent -- he expects Comcast to add another 200,000 broadband customers in Q2 -- but others see the slowdown getting even slower. Cusick predicts Comcast will add 155,000 broadband subscribers in Q2 and Cahall is in for 135,000 additions. 

All three of the analysts predicted a slower first half, followed by a stronger second half of the year. For Comcast, Jayant was most consistent, estimating it would add 200,000 broadband customers in Q3, 225,000 in Q4, ending the year with 825,000 broadband additions, about 30% less than the 1.2 million it reported in 2021. 

Cahall estimated that Comcast would end 2022 with 836,000 broadband additions -- 216,000 in Q3, 261,000 in Q4 -- while Cusick predicted Comcast would add 256,000 in Q3 and 230,000 in Q4 for a year end tally of 821,000 additions. 

Charter Communications, which is scheduled to report Q1 earnings on April 29, led all cable operators during the pandemic with 2.2 million broadband additions in 2020, falling to 1.2 million total additions in 2021 and is expected to dip even more in 2022. For the quarter, Cahall is most optimistic, predicting 186,000 residential additions, followed by Cusick (180,000) and Jayant (175,000). For the full year, Jayant estimates that Charter will add 775,000 residential broadband customers (a 35% growth decline), while Cahall predicts 741,000 additions and Cusick 710,000 additions.  

Lower move rates seem to be having the biggest overall impact on Charter (and Comcast for that matter), according to the analysts. Cusick noted that because Q1 is usually a seasonally better quarter, it is possible that Charter outperforms his estimates, but added he expected lower household completion and move rates to weigh on results. Jayant said the same for Comcast, adding that the low move churn environment creates “fewer ‘jump ball’ opportunities for gross adds.” 

Altice USA, which began an aggressive acceleration of the buildout of its broadband network last year after reporting a 3,000-subscriber decline in high-speed internet customers for the full year, is expected to be flat or slightly down for Q1 and Q2 according to the analysts. The second half is expected to be better -- they predict Q3 additions to be between 10,000 and 16,0000, with Q4 even better at 10,000 to 22,000 more customers.

The slowdown in broadband additions has been widespread. Last week, telcos AT&T and Verizon reported 289,000 fiber additions and 294,000 broadband additions respectively. AT&T’s fiber net gain was erased by the loss of 307,000 U-verse and other advanced broadband subscribers and 17,000 digital subscriber line customers cut their ties to the company during the quarter. While wireline broadband performance was sluggish, telcos made up for it with big gains in fixed wireless -- Verizon added 194,000 FWA customers in the period, 2.5 times its additions in Q4 2021. T-Mobile said it added 338,000 fixed wireless customers in Q1, up from 224,000 additions in Q4 and 93,000 in Q1 2021.

Cahall sees the telcos, especially with fixed wireless, making an even bigger impact down the road. In a research note, Cahall wrote he expects cable broadband growth to slow to an average of 2.4% per year from 2020 to 2025 (down from 4.6% between 2017 and 2019), while fiber and fixed wireless is expected to average 12.3% and 19.6% annual growth, respectively, from 2020 to 2025. The result is that Cahall expects cable’s broadband market share to dip from 65% in 2020 to 63% in 2025, with fiber growing to 19% from 12% and fixed wireless to 11% from 5% in the same time frame.

“In short, the threat of fiber/fixed wireless is real, and its impact should only intensify as time advances,” Cahall wrote. ■

Verizon Communications reported 194,000 net additions for its new fixed wireless access service (FWA), driving the wireless company to its best home broadband quarter in a decade, with a total of 229,000 high-speed internet customer adds. 

“And this is not a one-off. You can see from the current broadband trends that the demand for fixed wireless is extremely high and growing,” Verizon CEO Hans Vestberg told equity analysts during the company's quarterly earnings call last week. 

The FWA growth exceeded analysts’ consensus forecasts and represented strong growth over the 78,000 FWA subscribers added in the fourth quarter of 2021, as well as the 17,000 tacked on in the first quarter of last year. 

Driven by proliferation of its C-band network, Verizon predicts it will be able to offer 5G FWA service to 50 million households and 14 million businesses by the end of 2025.

Led by Verizon and T-Mobile, the wireless industry is trying to claw back home broadband market share amassed over the last decade by cable companies, which now control around 70% of the U.S. high-speed internet market. 

Vestberg, though, said Verizon experienced “record low levels of churn” for its legacy Fios wireline broadband products, which added 35,000 customer net additions in Q1.

Meanwhile, Verizon's Fios TV business continues to whittle away, losing another 78,000 customers from January to March. 

Overall, Verizon reported total revenue of $33.6 billion in the first quarter, up 2.1% year over year. ▪️

With the start of the first-quarter earnings season about 10 days away, J.P. Morgan media and telecom analyst Phil Cusick expects total broadband customer additions to continue to slow, but said a boost from some fixed wireless access providers will make what could have been a really bad quarter a little better.

Comcast is expected to kick off the 2022 earnings season on April 28,  when it reports Q1 results, followed by Charter Communications on April 29.  

In a research note, Cusick estimated total broadband additions of about 674,000 in Q1, a 32% decline from the prior year. But the analyst noted it could have been worse -- his Q1 estimates include 274,000 fixed wireless access (FWA) additions from T-Mobile. Without those FWA customers, total broadband additions would be down 56% in the period. 

Cusick blamed the overall broadband slowdown on sluggish cable growth, weak housing growth (moves are down 17% for the year, according to U.S. Postal Service data), and the loss of about 5 million consumers with access via the Keep Americans Connected COVID-19 program since 2020.  

Cable operators will continue to see sluggish broadband growth in Q1. Cusick estimates that total cable broadband additions will fall 51% to 445,000 in the period from 910,000 in Q1 2021. For the full year, he expects cable operators to add about 1.78 million broadband customers, down from 2.64 million additions in 2021.

Overall, Cusick expects total broadband additions of 2.94 million, a 4% decrease from 3.07 million additions in 2021. Fixed wireless is expected to add about 1.77 million new customers in 2022, down from 2.55 million in the prior year.

But Cusick still expects cable to attract about 66% of new broadband additions -- FWA is in second place with 39% -- mainly because in many areas, cable is the best choice for reliable high-speed connection.

Comcast and Charter are expected to add about 180,000 residential broadband subscribers each, compared to the 448,000 and 334,000 broadband customers, respectively, they added in Q1 2021. 

Analyst: No Sign of a Cable Slump

In his research note, Cusick explained that he hasn’t taken down his overall cable broadband estimates -- unlike some of his colleagues -- not because he believes cable MSOs will do better, but because he hasn’t seen any evidence they will do much worse. 

“Typical seasonality would be for 1Q to be stronger, and most cable commentary in 4Q was that the business improved through 4Q until omicron hit,” Cusick wrote “[W]ith no useful commentary from the companies, aside from consistently denying that FWA is impacting, we prefer to leave our estimates unchanged than reflexively lower the bar due to bullish FWA commentary from [T-Mobile and Verizon].”

Low housing moves and increased pricing will also most likely help boost cable margins, the analyst continued, adding that Charter repurchased about $3.7 billion of its shares during Q1, usually an indication of strong cash-flow growth despite slower subscriber additions. 

For other operators, Cusick sees flat broadband subscriber adds at Altice USA in Q1, and about 11,000 additions at Cable One.

On the telco side, Cusick predicted AT&T would lose about 10,000 broadband customers (15,000 IP additions offset by 25,000 digital subscriber line losses). Verizon Communications should add about 45,000 consumer wireline broadband subscribers (65,000 Fios Internet additions offset by 20,000 DSL losses), he said. Frontier Communications, which emerged from bankruptcy last year and has an aggressive fiber buildout strategy underway, should be well-positioned for growth, according to Cusick. The analyst predicted that Frontier will add 15,000 broadband customers in Q1 (46,000 fiber adds offset by 32,000 DSL losses).

Legacy video losses are expected to be about 1.5 million in Q1, down from 1.67 million in the prior year, but the improvement is more due to waning satellite TV losses. Cusick expects DirecTV/Dish to shed a collective 575,000 customers in Q1 (compared to losses of 750,000 in Q1 2021), while he predicts cable operators to lose 872,000 video subscribers, 5% worse than the prior year. 

Comcast’s video losses are expected to rise to 435,000 from 404,000 in the prior year, mainly because of a price increase that took effect in January. Charter’s video losses are expected to be slightly better in the quarter -- 150,000 compared to 156,000 in Q1 2021 -- reflecting slowing move activity. For the full year, legacy video losses are expected to be 5.3 million, better than the 5.8 million shed in 2021. 

Virtual multichannel video programming distributors (vMVPDs) such as Hulu Plus Live TV, YouTube TV and Sling TV are expected to add about 23,000 customers in Q1 (better than a loss of 92,000 subscribers in Q1 2021). For the year, vMVPDs should add about 1.4 million video customers, about even with the prior year. ▪️

While Comcast CEO Brian Roberts told investors Monday that the cable industry has little to worry about from emerging fixed wireless access (FWA) services, he may want to look again.

While Leitchman Research Group released figures Monday suggesting that the top seven cable operators controlled around 95% of the net home broadband additions in 2021, a closer look at LRG's data suggests the wireless giants made significant progress in reanimating their previously moribund home internet business. 

Last year, the telco industry added 148,000 high-speed internet users vs. just 39.5 million net adds in 2020. Factor out the still heavy losses of DSL customers, and subscribers using other older internet technologies, and the telco sector's growth numbers look much better. 

Telcos added a net of 1.8 million fiber customers in 2021, with AT&T (120,000 net broadband customers) returning to the black and Verizon also up over 2020 (+236,000 vs. +173,000).

Meanwhile, Leichtman's tally leaves out fixed wireless gains by T-Mobile (+546,000) and Verizon (+173,000). In all, the three top wireless companies -- T-Mobile, Verizon and AT&T -- added more than 1 million home internet customers in 2021, combining fiber with FWA.

Cable operators still controlled 70% of the U.S. home internet market last year and added 2.8 million net customers in 2021. However, that is significantly less than the 4,819,371 customers they added in the pandemic year of 2020.

“The top broadband providers added significantly fewer subscribers in 2021 than in 2020, but the net adds in 2021 were higher than in each year from 2016-2019," said Bruce Leichtman, president and principal analyst for LRG in a statement. ■

Verizon is turning to a middling mid-1990s Jim Carrey comedy movie to spark sales of its hot new fixed wireless product, commissioning the actor to reanimate "Cable Guy" for a Super Bowl ad.

The 15-second spot, at the 9:16 mark of the Verizon video below showcasing the wireless company's numerous Super Bowl-related marketing activities this coming Sunday, reveals a leery woman approaching her front door after a knock from a man who identifies himself simply as, "cable guy!"

"Your internet will never be the same," said Diego Scotti, executive VP and chief marketing officer at Verizon, introducing the spot on LinkedIn Monday. 

Verizon reported an impressive 78,000 new signups of its new fixed wireless access (FWA) service in Q4, upping the customer base for the fledgling service to 228,000.

Verizon and T-Mobile are aggressively marketing FWA products in an effort to pull back some of cable's high-speed internet market share in the U.S., which currently stands at around 70%. 

Verizon said it spent $80 million upgrading its network in and around Raymond James Stadium in Tampa, Fla., the site of last year's Super Bowl. It's unclear how much the wireless giant will spend in and around SoFi Stadium in Los Angeles on Sunday. Prices for a 30-second spot on NBC are reportedly going for $6 million, up 9% over the 2021 game. 

As for The Cable Guy, it was directed by Ben Stiller and starred Matthew Broderick as a heart-broken young man whose problems are further compounded when he gets a tech visit from his cable company. The movie scored an aggregated 53% among critics and grossed just over $100 million at the global box office. ■

T-Mobile CEO Mike Sievert described his company's fixed wireless access (FWA) home internet product as being "mainstream" and "ready for its prime time moment" Wednesday, after revealing that the nascent service finished 2021 with 646,000 customers, up from only around 100,000 in one year. 

"The majority of our customers come from suburban and urban markets, and the majority of those are coming from cable and fiber, and other things," added Dow Draper, executive VP of emerging products for T-Mobile, speaking alongside Sievert during the wireless company's Q4 earnings call. 

"We're half the price in a lot of cases against cable companies when you add in their fees and all the different charges they have. Also, it's simplistic. We don't have price hikes. I mean, customers are generally very unhappy with the cable industry," Draper added. 

T-Mobile is currently promoting its 5G Home Internet service for $50 a month to existing customers in markets including Los Angeles, touting that everything associated with the product, including the 5G gateway, comes without any additional fees or "hidden costs." 

Currently, cable operators control around 70% of the wireline broadband market in the U.S. 

However, Bloomberg published new data on Wednesday suggesting that 22% of the 3.7 million new broadband customers signed up by U.S. telecom companies in 2021 were FWA subscribers. T-Mobile accounted for the largest portion of those 819,000 FWA signups, but Verizon's nascent FWA service factored in, as well. 

For their part, equity analysts have for the most part dismissed the notion that wireless companies can make a more significant dent in cable's wireline internet dominance with FWA, citing a lack of network capacity as one of the reasons.

Sievert, however, claimed that T-Mobile FWA users are consumer 300-400 gigabytes of data per month, with a portion of the based even exceeding 1 terabyte of monthly usage. 

"I think some people are going to be surprised at how mainstream this [FWA] product really is," Sievert said. 

Verizon lost 68,000 Fios TV customers in the third quarter, finishing the three-month period ending Sept. 30 with only 3.6 million remaining linear pay TV users. 

Meanwhile, Fios Internet net adds came in at 98,000 compared to 139,000 in Q3 of 2020, with the Fios Internet base now standing at 6.49 million customers. 

However, for those tracking the wireline telecom business, these are probably no longer the most important data points.

Verizon, for the first time, disclosed its fixed wireless metrics, revealing that it has 150,000 "fixed wireless access" (FWA) customers, having added 55,000 net adds in the third quarter alone. 

That may not seem like much, but FWA customers accounted for around 43% of total Verizon broadband net additions in Q3, which also factored in the loss of DSL users. 

Was this the biggest growth quarter ever for Verizon's three-year-old fixed-wireless business? The company didn't say. 

"Much of our long-term growth is in fixed wireless access and mobile edge compute," Verizon Chairman and CEO Hans Vestberg told Wall Street analysts. 

"We are on track to meet our fixed wireless access household coverage targets with an expected 15 million homes passed by the end of the year between 4G and 5G. To date, 5G Home is in 57 markets and the 4G LTE Home in over 200 markets across all 50 states," Vestberg added. 

Charter Communications shares fell as much as 3.1% in early trading Monday after Bernstein media analyst Peter Supino downgraded his rating on the stock from “out-perform” to “market-perform,” citing competitive concerns and already-baked growth estimates in the share price.  

Charter shares were down as much as 3.7% ($27.53 per share) to $708.94 each in early trading Monday (July 12). The stock closed at $719.80 per share, down 2.3%, or $16.67 each on July 12.

In his report, Supino noted that he remains convinced of Charter’s “business plans, financial strategies and structural competitive position in most of the US,” adding that its growth trajectory in the medium term shouldn’t change.

But the analyst is worried about the growing competitive threat from T-Mobile and AT&T Fiber, as well as the possibility of a stricter regulatory environment. 

T-Mobile is aggressively rolling out fixed wireless high-speed internet access across the country, and expects to have 7 million to 8 million residential internet customers by 2025, implying 1.5 million additions per year.

Also Read: Analyst: After a Strong 2021, Cable’s Broadband Trajectory Could Reverse in 2022 

While several analysts, including Supino, have noted that fixed wireless is technologically inferior to cable broadband service, he sees it as carving out a niche in the market with customers that are looking for lower-cost, “good-enough” broadband access. 

“We believe the natural segmentation of the broadband market will provide more consumers with an opportunity to pay a lower price for ‘good enough’ broadband,” Supino wrote. “While the telco networks are absolutely constrained in terms of the number of residential customers they can serve, we believe the 5G technology and MHz expansions of mobile networks create a niche business opportunity for the ‘Big 3,’ led by T-Mobile as the first-mover on the more scalable, economical mid-bands.” 

AT&T’s recent plans to spin-off DirecTV with TPG and a separate merger between its WarnerMedia programming assets and Discovery Inc.,  will provide added financial stability to the phone company, Supino wrote. That should help AT&T Communications chief Jeff McElfresh achieve his stated goal of transforming AT & T into the country’s “premier broadband connectivity provider, period.” 

Other analysts have warned of a possible slowdown in the  broadband market, and Supino estimated that Charter, which added a record 2.1 million high-speed data customers in 2020, will see that growth slow substantially to 1.3 million in 2021 and 1 million in 2022. 

On the regulatory front, reports that Gigi Sohn, once a top adviser to former FCC chairman Tom Wheeler, is in the running to become the next chair of the agency, and the indecision around the long-term role of acting FCC chair Jessica Rosenworcel make the possibility that Sohn could ultimately lead the agency closer to reality. That, according to Supino, could mean that net neutrality and the reclassification of broadband as a Title II telecom service could rear its head once again. 

“As chairwoman, we think Sohn would probably pursue a form of broadband price regulation,” Supino wrote. “Were Sohn appointed, we would expect cable stocks to tumble. In such a scenario, we would expect Charter to decline more than Comcast given its much higher mix of EBITDA from internet service provision.”

Supino fully expected some backlash from the decision to downgrade Charter stock, and added that he expects the company to have strong cash flow and free cash flow growth in 2022 and beyond. But the potential volatility in the broadband segment is too great to ignore.  

“Charter's valuation multiples, while elevated, exist in a low interest rate, secular growth hungry world which has bid up nearly all valuations,” Supino wrote. “A seller of Charter who is in the business of managing stock portfolios must buy another stock … In the end, as is so often the case, our business model defines the decision. While we advise clients seeking to be right for the next 5 years and others focused on the next 5 months, Bernstein's price target horizon is 12 months. And on that horizon, we think Charter's stock looks ‘fair but full.’ For each unit of potential upside, we see about as much downside.”  

About 76% of global wireless bandwidth will be used for video delivery by 2025, according to the new annual Ericsson Mobility Report. The monthly use of 164 exabytes (equivalent to a billion gigabytes) compares to video's current level of 63% (33 EB) and reflects greater use of Fixed Wireless Access (FWA) and the continuing expansion of 5G technology, the report says. Ericsson's forecast expects 2.8 billion global 5G subscriptions by the end of 2025, compared to 190 million at the end of this year.

Ericsson's report acknowledges that it has "slightly decreased our 5G subscriptions forecast for 2020 and 2021 in North America," compared to previous estimates, although it offers no reasons other than "LTE will remain the dominant mobile access technology" for the next few years and "is projected to peak in 2022." Ericsson predicts that "5G subscription uptake is expected to be significantly faster than that of LTE" after its 2009 debut.

Video traffic in mobile networks will grow by around 30% annually during the next five years, Ericsson says, driven "by the increase of embedded video in many online applications, growth of video-on-demand (VOD) streaming services ... and viewing time per subscriber." It also cites "the evolution towards higher screen resolutions on smart devices" and "the increasing penetration of video-capable smart devices."

The growing impact of wireless video becomes even more significant when compared to the forecasts of exactly 10 years ago this month, when Cisco's Video Network Index for the year 2020 predicted that video would consume 79% of internet traffic -- almost entirely using wireline facilities.

The primary drivers for video traffic growth include the growing role of video in online content such as news, advertising and social media as well as video streaming and sharing services, according to Ericsson's analysis. It also cites:

• Changing user behavior

• Increased segment penetration, not just early adopters

• Evolving devices with larger screens and higher resolutions

• Increased network performance through evolved 4G deployments

• Emerging immersive media formats and applications, such as high definition and ultra HD, 360-degree video, augmented and virtual reality

The report also cites that decades-old visionary goal: "video being consumed anywhere, any time" (although it overlooked the "any device" trope).

Ericsson expects that video streaming via wireless networks will rely on higher resolution quality than the current 480p format.

"With smartphones and networks improving constantly, streaming in HD (720p) and Full HD (1080p) is becoming more common," the report says. "More immersive media formats and applications are expected to become a significant factor contributing to mobile data traffic growth, as 5G networks will provide the performance needed for a good user experience. For example, watching a streamed e-sports event in multi-view would consume about 7GB per hour, while a high-quality AR/VR stream with a media (bit) rate of 25Mbps would consume as much as 12GB per hour."

This year's forecast slightly ups the outlook that Ericsson predicted a year ago, when it expected 5G to account for 55% of North American mobile subscriptions by 2024.

Related: Ericsson Predicts Billion-plus Sub Boom in 5G

COVID-19 Impact

Ericsson's report begins with an examination of the role of networks and digital infrastructure during the COVID-19 pandemic, described by Fredrik Jejdling, Ericsson's executive VP and head of business area networks. He cites the impact of novel coronavirus starting early this year, including lockdown restrictions and new work-from-home "digital behaviors."

The report explains that, "in markets with limited penetration of fixed residential networks, the mobile data demand increase was especially high" and that in some markets "service providers made temporary changes to data plans [such as]... unlimited data for a certain period of time." The report also cites, "up to 90% increase in Voice over Wi-Fi (VoWiFi) calls for some service providers" and an "increase of 20% to 70% in voice due to more and longer calls. Data traffic increased due to more bidirectional and streaming services."

Expanded Role for Fixed Wireless Access

FWA connections are forecast to reach nearly 160 million by end of 2025 – totaling about 25% percent of global mobile network data traffic. At the end of 2019, global FWA data traffic was estimated to have been around 15% of the global total. It is now projected to grow nearly 8 fold to reach 53 exabytes in 2025, representing 25% of the global total mobile network data traffic.

"FWA delivered over 4G or 5G is an increasingly cost-efficient alternative for providing broadband," says the report, citing factors that are driving the FWA market, including growing demand for digital services and government-sponsored programs and subsidies in some countries.