S&P Global
Market Intelligence
Fixed wireless to shine in 2018 thanks to 5G, cost savings
EXCLUSIVE
Friday, 06 April 2018 7:29 AM ET
By Sarah Barry James, Staff Writer, SPGlobal
The year 2018 is turning out to be a big one for fixed wireless, a technology that allows operators to go the last mile — or even the last 100 feet — to connect a home or business to the network without using fiber.
Although fixed wireless has been around for several years, more operators are entering the market, especially as the technology improves and new spectrum becomes available. Verizon Communications Inc., for instance, is set to launch wireless residential broadband services in a handful of U.S. markets later this year, the company’s first use case for next-generation 5G technology. Small operators like Starry Inc., a technology company backed by
Aereo founder Chet Kanojia that uses fixed wireless technology to deliver gigabit-capable broadband, is set to expand to more than a dozen new markets in 2018.
“The planets are aligning in an unusually consistent pattern right now,” Jimmy Schaeffler, chairman and chief service officer of the media and telecom consulting The Carmel Group, said in an interview. The firm cited favorable spectrum regulation, insatiable consumer demand for broadband, global 5G standards being set and new entrants and use cases coming into the market as key drivers of growth.
The Carmel Group estimated at the end of 2017 that the total number of subscribers for the U.S. fixed wireless broadband industry is set to reach 8.1 million in 2021, up from 4.0 million in 2016. The group expects core industry revenues to more than double within the same time frame, rising to $5.2 billion in 2021, up from $2.3 billion in 2013. Part of the growth in fixed wireless has to do with its lower costs versus fixed broadband.
“It’s more economical because you’re not digging up streets, you’re not burying cable or burying fiber,” Rise Broadband co-founder and Chief Development Officer Jeff Kohler said, noting, “The cost to outfit a tower to provide service to 50, 100, 200 households is not very expensive.”
Rise is the nation’s largest fixed-wireless broadband provider, serving nearly 200,000 customers in rural and suburban parts of more than a dozen states. Kohler estimated that the network cost per subscriber for Rise is roughly $250; whereas for fiber-to-the-home deployment in the areas served by Rise, “You are probably talking about a couple thousand bucks,” he said.
Schaeffler estimated in his 2017 report that in terms of capital expenditures per residential subscriber, the cost for fiber is about 7x that of fixed wireless, whereas cable is 4.5x more.
Also helping to keep costs in check is Rise’s reliance on unlicensed midband spectrum, primarily in the 5 GHz band. Starry similarly leverages unlicensed spectrum, but uses millimeter wave spectrum in the 37 GHz band. Oppenheimer analyst Tim Horan noted in a recent research report that avoiding “a bad capital structure by leveraging unlicensed spectrum instead of costly licensed spectrum” is one of Starry’s key tenets.
Meanwhile, fixed wireless is catching up with current fixed broadband offerings.
Kagan analyst Jeff Heynen said in the past, fixed wireless has acted like “a mobile service that has been adapted to support fixed line replacement,” meaning it came with the speeds and caps associated with traditional wireless. “But now with 5G and Starry and others, that’s a pure wireless offering with bandwidth caps where, like with your fixed service, 90% of customers aren’t ever going to come near those caps,” Heynen said. Kagan is a media research group within S&P Global Market Intelligence.
Kohler said Rise offers speeds up to 100 Mbps to the home. “Sometimes we have a 250 GB or a 350 GB or a 450 GB data cap on that but our average customer uses 125 GB a month. So there’s plenty of room for the heavier user,” he said.
Starry, meanwhile, offers up to 200 Mbps speeds and does not have any data caps.
Despite all the advancements, fixed wireless might not be a true substitution for fixed broadband, at least not currently, according to Heynen, noting the industry will have to wait to see how the 5G fixed wireless deployments from Verizon and even Starry perform later this year. “In that case certainly you can think of fixed wireless as being a substitute and there will be some substitution that occurs,” he said. Kohler noted the technology continues to be limited by “the laws of physics.” “You may have 100 homes around your tower that want your service but because of trees or hills or whatever is, you may be only able to connect say 70% of those. It’s not the perfect solution because you are not wiring up and down the street able to connect every time,” he said.
The other factor, according to Heynen, is that fixed broadband services are continuing to improve, making them a moving target. “This is why cable providers are spending so much on DOCSIS 3.1,” Heynen said, pointing to the “Full Duplex” enhancement to the DOCSIS 3.1 standard that promises to eventually offer symmetrical 10 Gbps speeds. In Full Duplex communication, the upstream and downstream traffic concurrently use the same spectrum, doubling the efficiency of spectrum use.
“They are not thinking about 1 Gbps anymore. If they are only thinking about 1 Gig, then they will lose customers to fixed wireless. They are thinking about 10 Gbps,” Heynen said.
The Starry Beam, or network node, communicates to Starry Point, or antennae, located within a 2 kilometer radius using millimeter waves.