For all the talk about how fixed wireless access service doesn’t represent a real threat to wireline broadband, wireline executives spend a lot of time talking about the wireless technology during earnings calls and investor conferences.
Impact: In the most recent earnings cycle and ensuing investor conferences that inevitably follow every round of quarterly earnings, executives from Charter, Comcast, AT&T, and Frontier all touched on why FWA seemingly doesn’t represent a threat to their business models. Since last year, cable executives have consistently downplayed any sort of impact from FWA on their broadband numbers, while Frontier typically takes aim at cable operators to promote its fiber network.
For its part, AT&T tends to describe FWA as a niche product whenever it’s questioned about whether it will join wireless competitors T-Mobile and Verizon in the 5G FWA business. Anti-fixed wireless comments by cable operators may be why FWA marketing has increasingly targeted cable broadband, including a recent T-Mobile Super Bowl LVI TV spot featuring actor John Travolta and “Scrubs” stars Zach Braff and Donald Faison that included a visual of a “Specfinity” truck.
Fourth quarter and fully-year 2022 data from Leichtman Research Group tells a different story about FWA’s impact on the broadband market, however. In its research, LRC found that FWA made up 90% of all broadband net additions last year, with impressive subscriber gains each quarter. T-Mobile closed 2022 with more than 2.6 million FWA customers, while Verizon counted nearly 1.5 million subscribers on its rolls. Whether both providers can keep up the strong pace remains a question mark, especially now that T-Mobile’s subscriber gains started to show cracks in the second half of 2022. The carrier’s FWA net additions increased by just 3.2% in Q3 after surging in each of the previous six quarters dating back to the beginning of 2021. Then the wheels really fell off in Q4 when net adds actually fell by 9.3% sequentially, although T-Mobile still added 524,000 new FWA customers in the quarter. Verizon ramped up its 5G FWA machine after T-Mobile and has less nationwide coverage so it’s still gaining subscribers at a rapid clip (262,000 in Q4), although one has to wonder if its numbers will soon start to slow down too.
But the FWA subscriber gains haven’t stopped the critiques from the wireline side and may have actually caused them to increase. At a recent Morgan Stanley investor conference, Comcast President Mike Cavanagh said that despite the buzz around fixed wireless, the cable operator will continue pursuing its strategy of cultivating high-end customers and delivering a quality broadband product rather than chasing what he called “lower-end users” who may have been enticed to try FWA. Nor does Cavanagh believe FWA will be able to keep up with customer speed and bandwidth demands in the long term, pointing out that nearly a third of Comcast’s customers have signed up for speeds of 1 Gig or higher while the number of devices on its network have doubled in the last few years.
Charter CEO Chris Winfrey offered comments similar to Cavanagh’s a day later at the same conference. Not only did he downplay the success of fixed wireless, he described it as a cheap wireless substitute for wireline broadband and called the technology an inferior product to what cable offers its customers. But even as he made those comments, he also allowed that FWA has been able to capture subscribers at the “lower end of the market.” Both Cavanagh and Winfrey seem fairly certain that the capacity constraints they believe are inherent with fixed wireless will ultimately be the technology’s undoing. At the very least, capacity issues could slow FWA growth if they occur, although both T-Mobile and Verizon claim to have plenty of capacity to support their mobile and fixed wireless products.
Following AT&T’s Q4 earnings last month, CFO Pascal Desroches joined the anti-FWA party, making his own less than flattering comments about the technology at a Deutsche Bank investor conference. He called the technology “not a great product” and predicted customers will not stick with FWA once its limitations become more apparent. With AT&T’s intense focus on deploying multi-gigabit fiber, Desroches said the company views FWA more as a niche product for use in specific cases as a replacement for legacy copper service in places where it doesn’t plan to deploy fiber within a 12 to 24 month timeframe. But he reiterated that the company doesn’t consider FWA a long-term solution. Desroches’s comments are most interesting when taken in light of AT&T CEO John Stankey’s statement during the company’s Q4 earnings that it would be rolling out a new FWA product later this year.
Frontier CEO Nick Jeffery’s most recent comments on FWA came during the company’s earnings and seem more benign than those of his counterparts, although he did describe the technology as economically self-limiting. Like AT&T, Frontier has been heavily focused on its extensive fiber buildout strategy and the company’s executive team doesn’t think FWA can compete with the speeds and capacity offered by multi-gigabit fiber. However, Jeffery has acknowledged more than once that Frontier has lost some of its legacy copper subscribers to FWA, which he said is nibbling around the edges of its network targeting DSL customers.
To recap, wireline providers don’t think FWA will ever be much of a threat to their broadband business. But wireline executives also can’t stop talking about FWA. To be fair, they are asked about the wireless technology at every appearance they make, and what better way to make sure a new technology doesn’t pose a threat to your business model than to convince everyone that it’s a product with significant limitations. But T-Mobile and Verizon both have repeatedly said they’re on track to meet their FWA subscriber goals. Both sides of the wireline-FWA debate seem pretty certain that their position is the correct one but the only way to know for sure is to see how things play out over the next several years. It’s possible the two technologies will be able to co-exist alongside each other by targeting different segments of the broadband market.
