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Can Cellphones Capture the Broadband Market?

Linda Hardesty wrote an interesting article in FierceNetwork that asks the question, “What if, in ten years, young people don’t subscribe to fixed broadband at all?” Her story is based on a U.K. research group that predicts that within ten years, there will be a lot of young people who will never have subscribed to a landline broadband product. It appears that cellular networks already satisfy the broadband needs of many people in the U.K., and if we believe the industry hype about 6G, cellular networks will get even faster in the future. It’s an interesting question that seems to be raised every few years by those who think wireless is the future.

The article asks if the same might be true for the U.S. It’s not an obvious answer. As the article points out, young people in both countries seem to be satisfied with watching videos on the small cellphone screen. There is not much question that Gen-Z spends even more time on the cellphone than Millennials.

However, there are some big fundamental differences between the two markets. One big difference today is that there are cellular carriers in the U.K. that offer unlimited usage cell phone plans. There is nothing like that today in the U.S. Verizon and AT&T cellular plans have a data cap of around 25 gigabytes, where customers must pay more to use more data. T-Mobile’s plans are marketed as unlimited, but at around 50 gigabytes, the speeds are throttled to be largely useless. Most cellular plans also ration the amount of cellular data that can be used when tethered to a computer or other device. While cellphone users might adapt to video on a small screen, they still want to connect to other devices for doing work or intense gaming.

Current U.S. cell phone plans are not aimed at satisfying average home broadband usage. The U.S. national average monthly home broadband usage is 641 gigabytes per month per OpenVault, and that means that most folks won’t be satisfied with using only a restrictive cell phone plan data and nothing else. It also seems likely that the average household usage will continue to grow for the foreseeable future as we migrate more of our lives online.

It’s easy to forget that while young folks in the U.S. use cell phones a lot, most of the usage happens when using WiFi on somebody’s landline broadband connection. Cell phone users benefit when parents, schools, offices, restaurants, and neighbors give them free access to unlimited data. Most cellphone users would burn through the monthly cellular data cap in a hurry if they never connected to WiFi.

But this question raises an interesting question if U.S. carriers might change their cellular packages to provide unlimited data if there is enough demand for the product. Interestingly, that’s exactly what cellular companies are doing when they sell FWA home broadband from a cell tower. People who subscribe to FWA are connecting broadband to computers, TVs, and game boxes and using a lot more bandwidth than used by cellular customers. The FWA plans are largely unlimited, although T-Mobile recently put a 1.2 terabyte data cap on its FWA product.

It would be a giant shift for cellular networks to begin supporting large numbers of customers using unlimited data. Cellular networks were designed to make large numbers of relatively short-duration connections and to be able to hand connections to neighboring cell sites as customers roam. Cell carriers today only allow FWA with the caveat that the carrier can throttle home broadband usage as needed to protect cellphone demand. Providing unlimited usage to large numbers of customers would likely mean a new electronics strategy and probably a lot more cost. For most cell sites, the biggest recurring cost is bandwidth, and a lot of cellular backhaul is leased from others at prices that are not controlled by cellular companies.

U.S. cellular companies have planted the seed of offering unlimited data with the introduction of FWA. There are now millions of customers enjoying unlimited broadband provided by cell towers. It’s not hard to imagine that cellular companies will eventually bundle unlimited cellphone data plans for FWA customers.

The future of wireless technology can go in many directions. One trend to watch is the expansion of free outdoor WiFi, which makes it easier to stick with a cellphone. Both the landline broadband and cellular industries seem to be reaching a point of full market penetration, and it’s impossible to predict how the carriers will react to slower market growth. They could retract and only spend capital in locations where new revenues support the spending—or they could go on a mad marketing tear to snag as many customers as possible from other carriers.

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By Doug Dawson, President at CCG Consulting

Dawson has worked in the telecom industry since 1978 and has both a consulting and operational background. He and CCG specialize in helping clients launch new broadband markets, develop new products, and finance new ventures.

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