5G Factor: 5G FWA Gaining

Disclosure: The Futurum Group is a research and advisory firm that engages or has engaged in research, analysis, and advisory services with many technology companies, including those mentioned in this article. The author does not hold any equity positions with any company mentioned in this article.

Analysis and opinions expressed herein are specific to the analyst individually and data and other information that might have been provided for validation, not those of The Futurum Group as a whole.

Transcript:

Ron Westfall: Hello and welcome everyone to the 5G Factor. I’m Ron Westfall, Research Director here at the Futurum Group, and I’m joined here today by my distinguished colleague, Todd R Weiss, our Team Analyst who focuses on key areas such as 5G naturally as well as telecommunications. And today we will be honing in on the major 5G ecosystem developments that have quite simply caught our eye and got our attention.

Todd R Weiss: Absolutely.

Ron Westfall: And so, Todd, welcome back to the 5G Factor. Thanks for joining today. How have you been bearing up between our episodes?

Todd R Weiss: Well, thanks Ron. It’s great to be back with you. I’m always looking forward to these visits with you here on the 5G Factor.

Ron Westfall: Well, right on. So let’s keep the momentum going. And today I think we are going to be visiting a topic that is top of mind for many of the decision makers. Quite simply, it’s fixed wireless access or FWA technology that is uniquely enabled by 5G. And so I’m definitely looking forward to our conversation here. And to provide a level set, let’s take a snapshot as to what some of the key 5G FWA numbers are at Q3, 2023. So this is a relatively fresh take on fresh data.

Todd R Weiss: This is a really growing area, so it’ll be interesting to see what’s happening.

Ron Westfall: Well, yes. Yeah, I think that’s understood. And we’ll talk about some of the reasons why it will continue to grow at least over the next two years. But also we have to look at some of the limitation factors. And so we’re definitely going to be diving into that.

Todd R Weiss: Sure.

Ron Westfall: And over the past year, as we’ve seen, both T-Mobile and Verizon here in the US have basically accounted for 101% of the approximately three point 625,000 million net broadband additions in the US. And that data point’s coming from LRG. And so as a result, that makes T-Mobile the fastest growing internet provider in the US, a trend that basically started about two years ago. And as a result, there is now a lot more ecosystem of attention being directed to the FWA space. Combined T-Mobile and Verizon added about 940,000 FWA internet subscribers in Q3 alone. So these are pretty impressive figures.

Todd R Weiss: Oh, yeah.

Ron Westfall: 940 K indicates that we’re continuing that growth pattern. It’s not just simply a one-off, if you will.

Todd R Weiss: Absolutely.

Ron Westfall: Exactly. And so what both T-Mobile and Verizon have managed to do is make FWA based home internet service a relatively easy installation. And that I think is understood because of the growth numbers, first of all, but also it’s addressing I think a real market need. And we’ll talk a little more about this. First of all, hard to reach remote areas plus digital divide factors and so forth. And I think another important factor though is that it’s a bundle that is being served to these customers. And that’s very important because a majority of these service bundlings are being extended to people who already have the mobile service, the regular smartphone mobile service.

Todd R Weiss: Cellular. Cellular service, yeah, yeah.

Ron Westfall: Exactly. Exactly. From both the operators. And so looking forward a bit more, Verizon’s FWA goal is to serve 4 million to 5 million customers by the end of 2025. And so as a result, it’s now counting almost 2.7 million FWA customers. So you can see there’s ambition here, that this is something that is an attainable goal, but it’s also robust. And so that’s encouraging I think for the overall 5G market, at least in the US. But also I think it’s going to help what has been referred to in the past as intermodal competition, more competition between FWA services provided by mobile operators versus say cable offerings and various fiber offerings out there.

Todd R Weiss: Right.

Ron Westfall: It’s also important to note that 35% of the net additions for Verizon are non-residential. And so this is something that is being broadly distributed a fair amount. So we know that sure, a consumer in a remote area would be interested in the service, but also it’s important that small businesses are now onboarding onto this. And as we know, even the quality of service requirements could be more stringent for that type of offering.

Todd R Weiss: Sure.

Ron Westfall: So this is something that’s proving that FWA has true metal in terms of meeting subscriber needs, both consumer and a business. And the same thing probably for T-Mobile, although T-Mobile doesn’t break out its data in terms of residential business customers at this point. But we can anticipate that hopefully they’ll do that perhaps in the future. But also we know that many of T-Mobile’s FWA customers are also small businesses. And initially people thought, okay, FWA was only a competitive threat to legacy DSL services because again, it can offer more bandwidth than a legacy DSL service. Plus it can quite simply reach customers that have not been reached by anything that’s post DSL. But as we’ve seen based on say, recon analytics data, there’s about 12,000 or so FWA customers that within say the net additions that we just addressed, certainly on the Verizon side, 18% of them have never had home broadband before.

Todd R Weiss: Wow, that’s a lot.

Ron Westfall: It is. It is. And so what this is indicating is that it’s not just about the mobile providers adding on a new service to an existing customer or simply reaching customers that are DSL. It’s actually in effect garnishing or preempting a cable operator or an independent fiber competitor to reach these same customers. So this is good news in terms of competition for new customers, but also for the overall FWA market as well as the overall 5G market. And so with that, Todd, what from your perspective is standing out about these gains that 5G FWA is making?

Todd R Weiss: Well, as we were talking about earlier, the 5G FWA market has been slower in getting deployed and slower in getting picked up by consumers and users, business users, than anybody expected. But it’s taken time for people to understand what this is all about and businesses to understand what it’s all about. So I think all that makes sense. And Verizon and T-Mobile, they’re only about two years into this marketplace. So I think that that’s part of the reason that we’re seeing these numbers growing, but that they haven’t boomed. They’re also because it’s still a small market, 18% pickup, that’s not been a lot of churn yet. So we haven’t seen them going from company to company. As we see in so many other parts of the 5G business with smartphones and devices and things. There’s always churn. One company’s always trying to get the customers of the other vice, and it goes on and on and on. Notably, I thought, AT&T is getting in this game in addition to T-Mobile and Verizon. What did we see? We saw they added about 25,000 AT&T internet air subscribers in the third quarter of 2023, which, okay, that’s a small number, but that’s something. It shows something. It’s worth observing that T-Mobile doesn’t have the kind of landline operations that the other two have. And AT&T is placing a heavy emphasis on fiber, which it’s deploying all over the place.

Ron Westfall: Yes. So clearly AT&T is diversifying its offerings. It’s, I guess you can say, hedging bets a bit, but more importantly, it’s just showing that FWA is proving itself. And that is I think one motivation for AT&T.

Todd R Weiss: I also want to add one thing. It also makes sense because T-Mobile never had a landline business. Both AT&T and Verizon did. So they approach it in a different way. They can approach these things in a different way in terms of their landline customers of the past to having new offerings for them, things like that. There are still landline customers out there, but even these companies want to bring them into 5G and to mobile. And I mean, I’m sure they’d love to not think about their landline operations at some point.

Ron Westfall: Well, yeah, I think those are valid observations. And for T-Mobile, it’s also important to note that it’s not a native part of their organic portfolio. However, they are working with resellers to deliver a T-Mobile fiber type service, and they’re planning to continue on that path into the foreseeable future. Now, there’s always going to be speculation that, okay, T-Mobile will acquire a company that has a sizable fiber footprint, but they’re holding off on that so far. And it doesn’t look like that’s something that’s going to happen anytime really soon. But as we know, people are free to speculate.

Todd R Weiss: Sure.

Ron Westfall: And so we’ll see if something does materialize further out. And on that, go ahead, Todd.

Todd R Weiss: No, I was going to say, and fiber is still growing. That’s not maxed out in any way possible at this point. So there’s still risks inherent in that, but there’s a great business in fiber that’s expanding all over as services expand.

Ron Westfall: Right. And built into it, and we touched on it briefly, is this is helping digital divide, quite simply customers that are very hard to reach in rural areas and remote areas. And it’s not exclusive to that. It can also be applicable to what can be called gaps in coverage or limitations in getting, say, a fiber build for various reasons. It could be something as basic as a small lake or a stream, but it’s in a suburban park. So quite simply the operators are going to use the technology that works the best and that customers will be well satisfied with, and I think is going to be an ongoing trend line here when it comes to 5G FWA services. And with that, now let’s look further into the equipment that’s being used for the FWA deployments. And I think we have to provide a little foregrounding here. As we know, the first 5G deployments used mid band spectrum. And so tapping into that spectrum for FWA related capabilities also allowed minimization of the intricacy of the deployment itself because it’s already spectrum that’s been allocated to the operator. They’re familiar with how to use it. And plus it allowed the operators to basically target low hanging fruit and get some revenue streams running right off of, for example, their 5G investments.

Todd R Weiss: Right.

Ron Westfall: And basically 5G mid band can enable up to 100 megabits or more, again, depending on the environment. And that is in today’s market, suitable for most applications. And as a result, in fact, according to GSMA intelligence, over 90 fixed broadband service providers across 48 countries have already launched the 5G FWA services. So at least they’re dipping their toe into the FWA pool. And we already touched on the US market, which is further along than some other markets, but we’ll definitely be revisiting this and seeing how much progress is being made, certainly across the globe in terms of FWA offerings. And while there’s been a good deal of success with the initial FWA deployments, we also have to be aware of some of the concerns that come with the technology, especially as it starts scaling on a more wide basis. And so for many mobile subscribers, bandwidth intensive applications such as 4K video streaming and cloud claiming are more prevalent on a traditional mobile device. So as FWA service uptake begins to exceed say the top 15% of that pool user experience can start deteriorating across the board. And given that existing mobile users and FWA subscribers are basically competing for the same limited spectrum and bandwidth resources. So what does that mean? Well, let’s provide solutions that can address this so that there’s not any longer the win-win scenario becoming a no-win scenario for both mobile users and FWA users. And as we know, the cable operators are hopping on this to create some FUD about adopting an FWA service.

Todd R Weiss: Let me add something.

Ron Westfall: Sure.

Todd R Weiss: Let me add something. Two things come to mind. One is that yes, but there’s also education that’s going to be needed here. Nobody knows what FWA is, whether they’re business people or consumers. So for the industry to throw around this term means nothing. What they need to do is they need to make it work, make it reliable, make it have capacity in all these cases, and then they’ll see it grow when they give it some name or some service or some… It’s like fiber is today’s cable. Cable was there. Wireless was there. Fiber is the new super, super fast thing, and that’s still coming on. My neighborhood just got it. We’re in a rural area and they always want to come to the door and say, “Oh, we will give you way faster service.” It’s like, “Okay.” Now the next thing is this FWA stuff. It’s the next fast thing. It’s the next thing to bring service right to you wherever you are, even if you’re in a place that doesn’t get great connectivity in other ways. So all of these things, yeah, they come along, but they take some time, they take time for education, they take time for deployment. And then when they gel, boom, it’s going to go gangbusters, right?

Ron Westfall: Yes. And I think those are definitely important considerations. And to add to that point, it’s not a matter of, okay, just throw more capacity at it. That is simply densifying the cell deployments. And basically it’s a strategy that has been executed to tackle capacity in urban and densely populated areas, but when it comes to the rural and suburban areas, it’s not such an effective approach. So I think this is an opportunity now to drill down into how can this challenge be addressed effectively and naturally on a cost basis as well? And so you’re on a roll, Todd. What do you see out there in terms of what is a solution out there, approaches out there, that can help 5G FWA reach its full potential?

Todd R Weiss: Funny you ask. Well, our friends at Nokia are doing stuff with this.

Ron Westfall: All right, sure.

Todd R Weiss: Nokia has just introduced what they call a next generation 5G fixed wireless broadband device to its FastMile product portfolio. In this portfolio is the Nokia FastMile 5G receiver and the Nokia FastMile 5G Gateway 7. Now the Nokia FastMile receiver is a 5G receiver with 10 DBI high gain antennas and 180 degree field of view. It has a flexible outdoor design. The receiver can be mounted on a window, a window grill, a pole, anywhere outside your place, and it often can be done without tools, so it can be easily installed. And it makes it cheaper to deploy the thing. You send it to somebody, you let them put it up, whether it’s a business or it can consumer address. And this FastMile receiver integrates into any home broadband network or can work with the Nokia wifi beacons outside the neighborhood to extend coverage throughout the home. Now, the Nokia FastMile 5G Gateway 7 takes the power and performance of the 5G network and distributes it throughout the home using mesh wifi. A lot of people love these mesh systems. You put a bunch of different units in the house and it basically covers it like a net. So those are very popular. And the wifi comes with high gain antennas with up to eight decibel gain and support speeds of up to seven gigabits per second using multilink operations, which is pretty fast. It also then Nokia uses its own software to help make all this work even better and manage it easily. So using 5G mm wave as a capacity overlay to serve nearby FWA subscribers can free up 5G mid bands for mobile users. So this can help break down the use of the mid band spectrums so that they can do more things with more users using the same amount of spectrum, which is what all these companies are trying to do is use the spectrum so that no one deteriorates their service, but they get to provide more services using those same things. Because different things have different demands on the spectrums, right?

Ron Westfall: That’s right.

Todd R Weiss: So that’s an important thing. And this can help in rural areas. It can compliment satellite. It can do so many different things by using sort of a mishmash of things. And I think that it also proves the viability of this MM wave for further distances where a clear line of sight is possible. That’s the other issue. Some systems require clear line of sight, anything inside the middle, if there’s a hill between you and where the service is or a mountain or a building, there’s issues. So all of these things are issues that they have to keep resolving and as they do, like we said, there’s going to be a demand in service, but this is still the getting to where they want to get to. And it takes some time, but it will be… I’m sure. I’m sure you agree too, it will get worked out at some point.

Ron Westfall: Yeah, no, those are excellent points, Todd. And yes, I think shining a light on Nokia’s offering is helpful. Naturally we’ll be visiting other offerings. And for us, this is a solution that’s standing out. One reason is that Nokia successfully implemented the millimeter wave approach for NBN in Australia, which is basically the national network down under. And so it’s using that overlay capability to really address this challenge of how could FWA be scaled more efficiently and cost effectively and also blending that millimeter wave investment into an ongoing push for a technology that’s proving successful and competitive for the operators out there. So this is, I think, definitely good news. And so we’ll see now how other suppliers will be able to take advantage of those type of capabilities.

Todd R Weiss: Sure.

Ron Westfall: And I think in terms of that perspective, it’s also useful to note how to consider A FWA service offering or how can it best be deployed. And I think we saw that Ericsson has provided thoughtful advice on how to select or consider deploying an FWA service. And as we know, FWA services are facing a lot of competition from fiber alternatives, and DOCSIS alternatives, and so forth. And so as a result, the operators, mostly the mobile operators, have two primary options to structure their tariffs for the FWA service. That’s speed based and best effort. Now, speed based tariffs showcase that the speed can appeal to end users who are seeking transparency and reliability in the service. Now, the marketed speeds for FWA follow similar patterns as local regulatory requirements for a fixed broadband service. And that makes sense because again, familiarity for the customer-

Todd R Weiss: Sure.

Ron Westfall: … and again, adhering to local regulatory mandates. In some cases, the operators are advertising average speeds and in some markets maximum speeds. So it is going to vary from locality to locality. We’ve seen this with regular cellular services and regular fixed services. Now, on the other hand, the best efforts tariff plans focus primarily on volume-based plans. That is the allowance of data usage of certain gigabits per month. And in some cases it can be unlimited, although we know that ultimately unlimited offerings have a shelf life because of the inherent physics of the spectrum allocated and so forth.

Todd R Weiss: Right.

Ron Westfall: Now, as a result, Ericsson is recommending the adoption of speed based tariffs. And I concur with that. And that is emphasizing the appeal of presenting up to speed values in contracts. And I think that’s something that is educational as we were talking about. But also quite simply, the recommendation is stemming from the fact that many end users out there or existing customers are simply more attracted to plans that clearly defy potential speeds and that align with their expectations. So really offers more built-in insurances as to what they’re buying and what to expect from the services. And from your perspective, Todd, what else is leaping out about the recommendations that Ericsson’s providing here?

Todd R Weiss: Well, I thought it’s essential to recognize that FWA falls within the domain of fixed broadcast services and speed based tariff plans are commonly offered for these kinds of things. So it shouldn’t be a shock, I don’t think. This type of plan is well understood by consumers and by businesses enabling service providers to monetize FWA as a broadband alternative. We’re all used to being told up to these kinds of speeds, and if there’s too much use, we may bump you down. I mean, we’ve been hearing this for 20 years, right?

Ron Westfall: Right.

Todd R Weiss: So I don’t think any of those things are unusual anymore. And Ericsson did a report, the Ericsson mobility report in June. They found that over one quarter of FWA service providers now offer such speed based tariff plans. They’re also called quality of service plans. So it’s standards, right? And the other three quarters are still best effort plans. We’re going to try to give you this with volume-based tariff plans with buckets of gigabytes per month. So one illustration of speed based pricing can be seen in a company called Amantel’s approach. Amantel utilized multiple speed tiers, and they precisely target and segment the market. Users then have the flexibility to choose from various maximum speeds that align with what they need. And then if you need more, there’s a premium high speed offer that you can tailor to professional streaming or high demand users who knows gaming whatever. Ultimately, understanding and strategically implementing speed based tariffs and FWA is going to significantly impact consumer engagement and targeted marketing and pricing flexibility. But these are things that I think people are used to, so they’re going to. It’s not going to be like a shock.

Ron Westfall: Right on. Yes, we would avoid that bill shock.

Todd R Weiss: Yeah, yeah, yeah. This’ll just be, okay, it’s like I’ve been used to forever.

Ron Westfall: Right on.

Todd R Weiss: And by embracing this approach and aligning with established industry practices, service providers can navigate the FWA landscape, make it work for them. I’m sure they’ll be able to make this a marketable business and expand it, and they’ll be able to compare it to what you have and what we can do now. People will look at those things carefully. So will businesses. Business and consumers will look at FDA offerings as they get more mature and more prevalent and will say, “Hey, let’s see if this is going to help us.” That’s how I sort of look at it.

Ron Westfall: Yeah, and I think from our discussion, we are seeing that FWA is help fueling new waves of innovation. And that is certainly including coming up with end user equipment that has better antenna design to better enable the scaling of FWA services, as well as using millimeter wave overlay to help improve the coverage and optimization of the spectrum in terms of making that FWA offering not only reliable, but also competitive and something that consumers will want to buy probably on a speed based tariff moving into the future. And so all these things are coming together and it’s definitely most encouraging from our view.

Todd R Weiss: Oh yeah, there’s so many cool things going on in 5G. Maybe we should do a podcast about it sometime.

Ron Westfall: Well, I’ll tell you what, we’ll definitely do a sequel to this.

Todd R Weiss: Okay. Let’s do that.

Ron Westfall: There definitely will be more FWA coverage coming forth. And that’s a great idea. And on that positive note, thank you again, Todd, for joining the webcast. And naturally, for our viewing audience out there, please make sure to reserve our channel on The Futurum Group and other channels out there that offer our podcast. And again, thank you everybody for joining today’s podcast. And on that note, have a good 5G day everyone.

Todd R Weiss: Thanks again for having me, Ron. See you next time.

Other insights from The Futurum Group:

T-Mobile Q3 2023: Industry Pacesetter for Revenue and Customer Growth

MWC23 LV: Nokia Debuts Network as Code To Spur App Innovation

Ericsson Brightens 5G SA Use Case Prospects with New Software Toolkit