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13 September 2021

US cable operators feel two-edged sword of fixed wireless access

Fixed wireless access (FWA) is seen as both threat and opportunity by traditional cable operators that expanded into broadband from pay-TV. On the one hand, fixed wireless access allows mobile operators to invade the cable companies’ patch as broadband providers in more populated, mostly urban, areas. At the same time, it allows them to expand their footprint into rural areas more affordably than by building out their hybrid fiber-coax (HFC) infrastructures.

This dichotomy shows up most clearly in the USA, where cable operators were first to feel the heat of pay-TV cord-cutting and the shift to subscription VOD providers such as Netflix, from around 2010, and pushed hard into fixed broadband to make up for lost revenues. Now, the likes of Comcast and Charter have been starting to lose broadband subscribers around the margins to MNOs coming in with fixed wireless access. The big three MNOs, Verizon, AT&T and T-Mobile, are all riding on FWA to expand into household broadband provision, often combining that with the mobile offering at attractive tariffs.

But now Mediacom, the country’s fifth largest operator with 1.5m consumer and business subscribers, is fighting back by launching an fixed wireless access service over both 4G and 5G, with aims to bring in 500,000 new subscribers over the next few years. The operator actually debuted the service, called Bolt, in July using 3.5 GHz CBRS spectrum it acquired in the auction of September 2020.

Based on that trial, it looks like Mediacom will offer several service tiers ranging from 25Mbps download for $60 per month to 100Mbps for $100 per month, although that may change. This is delivered from radios on fiber-connected signal towers to beam wireless signals to antennas mounted on the exterior of a consumer’s home, using Ericsson equipment. According to Ericsson, the service will reach up to nine miles (14.4 kilometers) from each tower in rural areas.

“This technology will be a game-changer for the new communities that Mediacom is trying to reach,” said Per Wahlen, head of business development for Ericsson North America. “Connecting rural America has been a significant national challenge over the past decade, and our Ericsson solutions will quickly extend the reach of Mediacom’s broadband services and close the digital divide in numerous underserved rural areas.”

This enthusiasm seems shared by other second-tier US cablecos such as Cable One and Shentel, as well as midsized or regional telcos like Windstream and VTX1 Companies, all of which purchased spectrum. Similarly, the CBRS auction attracted some smaller mobile operators such as Viaero, Nextlink Internet, Watch Communications and US Cellular, looking either to enhance existing services or branch out into fixed wireless access themselves.

Surprisingly, at first sight the enthusiasm for FWA does not appear to be shared by the top-tier US cable companies, notably Comcast and Charter, even though both purchased CBRS spectrum in the auction. The reservations were spelt out by Charter CEO Tom Rutledge at an investor event, in which he contended that the ROI offered by FWA was far smaller than for traditional mobile.

The argument was that, while monthly ARPU was roughly the same for both at around $50, the amount of data consumed by FWA was as much as 70 times greater, because it was filling in for fixed broadband serving high definition to big screens in many cases. He reckoned it was around 10GB per month for mobile and 700GB per month for FWA, which would therefore exert a much greater toll on radio spectrum and backhaul. While these figures might not be quite correct, they are in the right ballpark, noting Ericsson’s calculation that North American smartphone users consume on average around 12GB per month, or did during 2020. Estimates for fixed broadband consumption now are certainly up around 500GB a month in the USA, extrapolating from various 2020 figures.

However, we would contend these two figures will converge in any case in the 5G era as more people access high speed services over mobile networks, which may in return reduce the toll over fixed broadband.

Fixed wireless access will then kick in as an adjunct to mobile, while for cable operators it will provide access to new revenues, sometimes becoming MVNOs themselves. Indeed, some US cable companies are looking to wireless over their CBRS spectrum to carry their mobile customers’ traffic, thereby paying less to their big MVNO wholesale partners, often either Verizon, AT&T and T-Mobile.

There is admittedly another factor at play in the USA, the Rural Digital Opportunity Fund (RDOF), which is distorting the broadband field in the country. The fund was set up by the Federal Communications Commission (FCC) to close the digital divide by investing $20.4bn over 10 years in national broadband. The money is being allocated in two phases, with the bulk of $16bn coming in phase one to embrace areas currently unserved, or at any rate very poorly served, for broadband. Then the remaining $4.4bn, along with any phase one money still unspent, will cover areas currently partially served by broadband, including rural areas where either availability is patchy or speeds short of current expectations or requirements for say remote working.

This fund has naturally attracted the big cable companies and encouraged them to deploy fiber in areas where that could not be justified without the effective subsidy. Charter, for example, now plans to use fiber, rather than FWA, for building its network out into rural areas, bearing in mind those comments about the traffic generated by full broadband to the home. That fund therefore is tilting Tier 1 cablecos away from FWA.