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For well over a decade, it was fairly easy to understand the trajectory of the broadband industry. In the residential market, cable companies snagged all the growth while telcos shrank as customers abandoned DSL. Other technologies like fiber or fixed wireless gained customers but were a blip on the national scale. In the business market, a dozen large companies competed fiercely for large business customers while smaller businesses were stuck with the same technologies used to deliver home broadband. There was no suspense in predicting where the industry was headed from year to year.
But the broadband industry is now in total turmoil. Within a short time, cable companies have stopped growing. Currently, all of the industry growth among big ISPs comes from FWA cellular wireless. Last-mile fiber networks are being built across the country. WISPs finally have the radios and enough spectrum to be serious competitors.
When I talk about trajectory, I’m not talking about predicting 2024. The challenge is to guess where the industry is headed over the next five years. Who will be the winners and losers over that time? The easiest way for me to think about this is to look at each industry segment.
Let me start with the cable companies. You can’t have this conversation without first acknowledging that Comcast and Charter together have over 50% of all broadband customers in the United States today. That puts a big target on their backs because they have the customers that everybody else is chasing. The cable companies have clearly lost the perception war—the general public seems to have accepted that fiber is better than coax. The cable companies got blindsided by the pandemic when millions of people suddenly cared about upload bandwidth, and a lot of people got a bad taste for the cable companies. The companies are now scrambling to implement mid-split technology to boost upload speeds to 100-200 Mbps. Most are talking about implementing DOCSIS 4.0 much earlier than they had originally planned. The big unknown is if these two upgrades will be enough to turn public perception. Cable companies don’t help their case by having the highest broadband rates in most markets, which continue to increase each year. The one advantage the big cable companies have is aggressive bundling with low-price cellular.
Fiber overbuilders are now everywhere. Big fiber overbuilders like AT&T talk about achieving a 30% penetration rate in a few years and reaching 40% after 4-5 years. But the telcos also have to overcome a public perception problem since they did such a poor job of customer service over the last decade while pushing the clearly obsolete DSL. Smaller fiber overbuilders don’t have this history and are aiming higher, and have penetration rate goals of 50% and beyond. Fiber gains don’t only come from cable customers; and a lot of fiber gains are from converting the remaining DSL customers. In five years it’s not hard to believe that fiber will have half of the customers in neighborhoods with fiber.
The big unknown is FWA cellular wireless. Already today, this product has picked up all of the industry growth over the last 18 months, and that trend looks to continue for a while. It’s a real mystery where the carriers are getting most of the growth. I can tell by looking at detailed speed test data that a lot of the growth is coming in rural areas where customers within two miles of a cell tower finally have a solid and fast broadband product faster than 100 Mbps. Any gains in cities are probably coming from customers who care most about price—FWA is much cheaper than cable broadband. But over the long run, this technology faces challenges. In rural markets, FWA will compete against faster WISPs and with fiber networks that will be built by BEAD grants. The wildcard for the industry will be the impact of using C-Band spectrum. That is supposedly going to at least triple the speeds—again within relatively short distances from towers. But FWA technology has a big long-term constraint in that cellular networks were never designed to deliver steady-use home broadband. While carriers might love this new income, one would think they are not going to be dumb enough to endanger their cellular customer satisfaction, which is their real source of revenue.
WISPs have a rosier future through the combination of better radios that minimize interference and the use of new spectrum, particularly 6 GHz, which can mean gigabit speeds in ideal circumstances. It’s really hard to predict the trajectory of this sector. In many rural areas, WISPs will be competing against fiber networks funded by grants and operated by highly popular ILECs and cooperatives. But in other markets, WISPs might become the virtual monopoly provider if they can win the broadband grants. That makes it hard to judge the overall trajectory in rural markets. WISPs will always face challenges in urban markets where they can’t serve more than a small percentage of homes and where frequency interference is rampant.
We can’t forget satellite broadband. Starlink has done well by bringing broadband where nobody else would—but that is also going to change due to the rural grants. Starlink’s prices are already a barrier for many potential users. The big unknown in the industry is what Jeff Bezos and Amazon will do. The company finally launched test satellites and might be aggressive with non-traditional bundling and affordable prices.
All of this competition will be happening in an environment where households will use 20% more bandwidth each year. Any technology that has overall bandwidth constraints will eventually feel this pinch. This will affect FWA cellular and satellite broadband the most but can hit any ISP that hasn’t built a robust enough network.
What does all of this mean in five years?
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