Fixed Wireless Subscriber Growth Boosts Broadband Competition

Verizon posted strong subscriber growth for its fixed wireless services in Q4 2021, showing the increasing competitiveness of fixed wireless offerings in the home broadband market. This growth also shows the potential for fixed wireless providers to reach rural and other unserved areas as they deploy more mid-band spectrum.

Light Reading Senior Editor Jeff Baumgartner reports that Verizon added 78,000 fixed wireless subscribers last quarter, beating both expectations as well as its previous record quarterly increase of 55,000 (Q3 2021), and bringing its total fixed wireless subscribers to 228,000. Verizon also added more fixed wireless subscribers last quarter than it added in FiOS subscribers (51,000).

Credit: James T. M. Towill

Notably, Verizon CEO Hans Vestberg said new fixed wireless subscribers are generally new Verizon customers and come from areas served by cable and DSL providers. This is direct evidence of fixed wireless competing for home broadband subscriptions in served markets, even if it is so far at a small scale. Broadband customers benefit from this boost to market-based competition.

Free State Foundation Director of Policy Studies Seth Cooper recently highlighted an Accenture report about the potential for fixed wireless to boost competition, availability, and service quality in rural America. That report recommended clearing more mid-band spectrum in the 3 GHz range to make high speed rural fixed wireless a widespread reality. We will be looking to see if Verizon's and other fixed wireless services make a significant play for subscribers in rural and other unserved areas as the company begins deploying C-Band spectrum and other mid-band frequencies awarded in future auctions.

Consumer Survey Reveals That the Number of U.S. Homes with Broadband Access Continues to Rise

Consumer research conducted recently by the Leichtman Research Group (LRG) confirms two trends: one, that the number of Americans with broadband Internet access at home continues to grow; and two, that in 2020 the amount of time spent online has increased dramatically.

The FCC in April released the 2020 Broadband Deployment Report. As Free State Foundation Director of Policy Studies and Senior Fellow Seth L. Cooper highlighted in a May 11 Perspectives from FSF Scholars, the report showed that 94.4 percent of the U.S. population had access to broadband at the end of 2018. A recent telephone survey demonstrates that the number of consumers subscribing to broadband is similarly large and still expanding.

In a December 28 press release, LRG reports that 86 percent of U.S. households currently subscribe to Internet access service, the vast majority of which – 97 percent – meets or exceeds the FCC's definition of "broadband" (that is, 25 Mbps downstream and 3 Mbps upstream). That is a 5 percent increase over just 5 years. An additional 7 percent access the Internet on a smartphone.

LRG also found that, no doubt in response to the COVID-19 public health crisis, Americans are spending substantially more time online: 5.3 hours per day in 2020 versus 3.7 hours a day in 2019. Fortunately, U.S. broadband infrastructure has taken this heightened demand in stride. Thanks to the FCC's light-touch regulatory oversight, broadband network operators have made the private investments required to respond to competitive challenges and unforeseeable increases in demand.

Broadband Providers Rising to the Challenge

There has been due recognition, at least by most people and policymakers, that broadband Internet providers have responded in an admirable fashion to keep American connected during the COVID-19 pandemic - despite the substantial increase in network traffic caused by the lockdowns and changes in everyday life.

 

To some extent, the ability of broadband providers to maintain, or exceed, their quality of service standards despite the major traffic increases is attributable to the robustness of their broadband networks, which, in turn, is attributable to almost $2 trillion dollars of private investment in these networks since 2000. But it is also attributable to extraordinary efforts undertaken by the people who are charged with operating the networks.

To be sure, there are examples of this extraordinary effort among all the major broadband providers and smaller ones as well. But, by way of example, here is a Comcast COVID-19 Report, "How Our People Met the Challenge Despite Unparalleled Disruption," that is worth reviewing. To the extent it is sometimes overlooked, the report brings home the human effort involved in ensuring that Comcast's broadband service has remained robust.

It's worth remembering - and appreciating - this dedication as we get through and beyond the pandemic.

There's more work to do in closing remaining digital divides. But this won't be accomplished without free market-oriented policies, the application of American ingenuity, and the ongoing dedication of employees of broadband providers of the kind evidenced in the Comcast report.

Online Video Is Driving Internet Traffic Growth

On June 6, 2016, Cisco released its annual Visual Network Index (VNI): Forecast and Methodology, 2015-2020. Consistent with Cisco’s latest Mobile Data Traffic Update, which I highlighted in a February 2016 blog, this new index projects the global growth of Internet traffic and devices on all broadband technologies as opposed to just mobile.

Here are some of the key findings:

• Global Internet traffic will increase nearly threefold over the next five years and will have increased nearly 100-fold from 2005 to 2020.

• Smartphone traffic will exceed PC traffic by 2020. In 2015, PCs accounted for 53 percent of total Internet traffic, but by 2020 PCs will account for only 29 percent of traffic. Smartphones will account for 30 percent of total Internet traffic in 2020, up from 8 percent in 2015.

• Traffic from wireless and mobile devices will comprise two-thirds of total Internet traffic by 2020.

• Global Internet traffic in 2020 will be equivalent to 95 times the volume of the entire global Internet in 2005.

• The number of devices connected to broadband networks will be three times as high as the global population in 2020. There will be 3.4 networked devices per capita by 2020, up from 2.2 networked devices per capita in 2015

The proliferation of video applications is by far the biggest driving force behind the increases in Internet traffic over the past several years and will continue to be for the next five years as connections increase and networks expand. On a global level, video traffic is projected to comprise 79 percent of Internet traffic in 2020. This is an increase of 16 percentage points from 2015 (63 percent).

While the United States certainly has been a leader in the amount of growth in connections and traffic, Cisco projects the rest of the world will have tremendous growth over the next five years. For the U.S. to continue to lead with respect to broadband deployment and innovation in broadband technologies, it is important that the FCC and state and local agencies remove unnecessary and burdensome regulatory barriers that stifle investment and innovation in broadband networks. Additionally, for continued growth in mobile broadband innovation, the FCC needs to allocate more licensed and unlicensed spectrum to meet the increasing consumer demand for advanced services and devices.

New Cisco Report Projects Huge Increases in Mobile Traffic and Connections

On February 3, Cisco released its annual Visual Network Index (VNI) Forecast Report: Mobile Data Traffic Update, 2014-2019. Although there are several key findings that were made clear by the Vice President of Global Technology Policy Dr. Robert Pepper and the Vice President of Service Provider Marketing Doug Webster, who presented the report, I certainly recommend exploring the global, regional, and national findings on Cisco’s helpful interactive website. (See FSF blog on last year’s report here.)

Video applications are by far the biggest driving force behind the increases in mobile traffic for the past several years and will continue to be for the next five years as connections increase and networks expand. On a global level, video is projected to comprise 72 percent of mobile data in 2019, an increase of 17 percentage points from 2014 (55 percent). While the United States has certainly been a leader in the growth of mobile connections and traffic, the report projects the rest of the world will have tremendous growth over the next five years. 

Some key finding regarding the growth of mobile connections and traffic throughout the world:

• Almost half a billion (497 million) mobile devices and connections were added in 2014.
• Mobile network (cellular) connection speeds grew 20 percent in 2014.
• Average smartphone usage grew 45 percent in 2014.
• Global mobile data traffic will increase nearly tenfold between 2014 and 2019.
• By 2019, 4G will be 26 percent of connections, but 68 percent of total traffic.
• The average smartphone will generate 4.0 GB of traffic per month by 2019, a fivefold increase over the 2014 average of 819 MB per month.

As you can see from the two graphs below, the global growth of mobile traffic and devices is projected to be enormous over the next five years.

Cisco Forecasts 24.3 Exabytes per Month of Mobile Data Traffic by 2019

One of the many innovations in broadband technologies and applications is the ability to compress data for high bandwidth applications. This innovative tool expands the consumer base of applications by allowing users to get the same great experience while using less data, ultimately making less advanced networks more useful. Embedded within the methodology of the Cisco report is a 7 percent compression rate over each year of the projection. This speaks volumes to the projected growth in mobile traffic if we also expect applications to get smaller overtime (all else equal).

Global Mobile Devices and Connections Growth

Here are some of the key findings for the United States:

• 40.7 million smartphones were added to the mobile network in 2014.
• Mobile data traffic will grow 7-fold from 2014 to 2019.
• Mobile traffic per user will reach 11,510 megabytes per month by 2019, up from 1,960 megabytes per month in 2014, a compound annual growth rate of 41%.
• There will be 290.1 million (86% of the United States' population) mobile users by 2019, up from 268.5 million in 2014, a compound annual growth rate of 1.6%.
• Mobile data traffic in 2014 was equivalent to 32x the volume of U.S. mobile traffic five years earlier (in 2009).

North America, and predominately the United States, has been a global leader in the development of mobile broadband. North America had 39.1 percent of all global 4G connections in 2014 and that percentage is projected to increase to 42.4 percent by 2019.

The United States’ leadership in the ongoing development of mobile broadband, devices, and content applications is the result of many economic and institutional factors. However, it should not go unnoticed that a light-touch regulatory environment has helped entrepreneurs spur investment in new products and services through the process of “permissionless innovation.” As laptops, tablets, phablets, and smartphones have morphed into each other and become substitutes, competition between them has increased, reducing the price and increasing the quantity demanded by consumers. This increase in consumer demand has created more network development, expansion, and application accessibility.

Additionally, because video currently comprises 55 percent of mobile data, strong intellectual property rights have also played a pivotal role, allowing for a growing number of brands in mobile devices and new video content. It is important for artists, innovators, and service providers to have secure copyrights and patent rights in order to incentivize returns on creation and investment. The prospect of profitable returns invites new entrants into the market, which ultimately leads to more investment and lower prices for consumers.

This report provides very important information for policymakers. It is essential that the FCC not take for granted the way in which the development and deployment of mobile networks and technologies has benefited consumers. As the report recommends, more licensed and unlicensed spectrum is needed to help meet the constantly growing consumer demand for advanced services and devices. Understanding of the extent of mobile data growth and the resulting need for additional spectrum will be crucial for promoting future U.S. leadership in mobile broadband – as will be the need for the government to avoid imposing burdensome regulatory requirements in a market which is indisputably competitive.

No, the US Is Not Behind Europe!

This is a very well done blog by Richard Bennett responding to arguments that the U.S. is behind other countries with respect to broadband. I won't try to summarize because it's short, but well worth a read.

Positive Wireless Policy Takeaways from the FCC's T-Mobile/MetroPCS Order

On March 12, the proposed T-Mobile/MetroPCS merger was approved by an order of the FCC's Wireless Telecommunications and International Bureaus. The U.S. Department of Justice previously cleared the merger. Whether the T-Mobile/MetroPCS goes through will be up to MetroPCS's shareholders at their April 12 meeting. 

Wireless mergers can create economies of scale and scope that benefit consumer welfare. This includes enabling more efficient use of spectrum and broader access to next-generation wireless networks with greater reliability and speeds. But merger review proceedings beset by delays or prone to saddle proposed deals with extraneous conditions based on ad hoc criteria can diminish promised public benefits.

Whatever MetroPCS's shareholders ultimately decide, the FCC' T-Mobile/MetroPCS proceeding avoided delay and uncertainty problems that plagued prior major merger reviews. The T-Mobile/MetroPCS Order therefore offers some positive takeaways that the FCC should seek to repeat when it reviews future mergers.

First, the FCC acted on the proposed merger in a timely manner. The FCC has a self-imposed 180 day shot clock for issuing a ruling on proposed mergers. And the agency has exceeded its deadline in numerous reviews of major telecommunications transactions. Excluding FCC clock stoppages, the CenturyLink/Qwest Order took 294 days, the Frontier/Verizon Order took 283, the Harbinger/SkyTerra Order took 329, and the 323 AT&T/Centenniel Order took 323.

The T-Mobile/MetroPCS Order was issued 137 days after applications were filed. And the agency rejected calls to extend its deliberations to 180 days, noting that "where possible, applications will be granted as expeditiously as possible." With the FCC's adoption of the Verizon/CableCo Orders 180 days after applications were filed and the AT&T/WCLS Licensees Order issued after 109 days, perhaps one can be optimistic that future FCC merger reviews will be conducted more expeditiously, too.

Second, the FCC's analysis took seriously the benefits of next-generation wireless broadband networks to wireless competition and innovation. Even if the FCC has consistently recognized the benefits of next-generation broadband networks such as LTE in theory, in practice federal agencies have not always been so resolute. The Wireless Telecommunication's 2011 memorandum opposing the ill-fated AT&T/T-Mobile merger, for instance, simply brushed aside any boost in LTE deployment that would have likely resulted from that merger. For that matter, DOJ's legal complaint challenging the AT&T/T-Mobile merger essentially ignored the critical role of LTE network deployment for the future of wireless.

But the T-Mobile/MetroPCS Order made the benefits of next-generation wireless broadband deployment a core focus, concluding: "we anticipate that the combination of T-Mobile USA and MetroPCS would enable the deployment of a substantial LTE network nationally that would enhance competition and provide important benefits for consumers. By merging the two companies, and their network assets and spectrum, we find that the resulting Newco would provide for a broader, deeper, and faster LTE deployment than either company could accomplish on its own." Because LTE networks have enhanced throughput and security features with lower latency and promise reduced costs per-megabit, they will serve as a platform for exponential economic growth and innovative opportunities.

Third, the FCC's analysis didn't treat static market indicators as outcome-definitive. The flipside to the T-Mobile/MetroPCS Order's recognition of the role of LTE network deployment is its more modest approach to static indicators such as market share snapshots and concentration estimates. The merger would result in the fifth largest wireless provider (MetroPCS) being combined with the fourth largest (T-Mobile), reducing the number of competing providers in some local areas. But the Order recognized that the combination would create efficiencies that benefit consumers, including reductions in roaming and therefore roaming charges, while improving network reliability for MetroPCS customers being migrated onto T-Mobile's network.

Even in static terms, the merger posed virtually zero potential threat to local competition. Regarding the first part of the FCC's spectrum screen, HHI concentration estimates were triggered by increases in just 19 cellular marketing areas (CMAs) out of 248 where the geographical footprints of both providers overlapped. And on a county-by-county basis, the HHI was triggered in no markets. For that matter, not a single market triggered the second part of the FCC's spectrum screen regarding spectrum aggregation. Post-merger, T-Mobile/MetroPCS would nowhere exceed the FCC's threshold of "one-third of the total spectrum suitable and available for the provision of mobile telephony/broadband services." Consumers in most instances would still have at least four national wireless providers to choose from, post-merger.

Fourth, the FCC's analysis didn't include ad hoc rationales for rejecting or placing conditions on the merger. Of course, the agency hasn't always been so disciplined in exercising its merger review authority. In its AT&T/Qualcomm Order, for example, the FCC departed from precedent by subjecting different spectrum bands considered suitable and available to separate analyses. And in light of that previously unannounced change in policy focus, the agency attached conditions to the transaction.  Also, the FCC staff memo opposing the AT&T/T-Mobile merger would have significantly reduced the baseline of suitable and available spectrum and declared that proposed merger harmful at least partly on that basis. Thankfully, the T-Mobile/MetroPCS Order contained no novel or surprise rationales for rejecting or conditioning the merger.

Fifth, the FCC declined to impose conditions on the merger that were extraneous or to its likely competitive effects. In other contexts, conditions seemingly unrelated to fulfilling the Communications Act or to protecting consumer welfare have been attached to mergers. In the AT&T/BellSouth Order, for instance, the FCC included a condition that overseas jobs be repatriated to the U.S., including some two-hundred jobs to the New Orleans area. It's difficult to justify conditions of that kind as remedies targeted narrowly to a specific harm likely arising from the merger.

Fortunately, the T-Mobile/MetroPCS Order rejected specious calls for conditions involving employment practices, market branding, and affordability. Concluded the Order: "[T]he proposed transaction would enhance the competitiveness of the combined provider, as the fourth largest nationwide service provider by allowing it to strengthen its network and expand its product line, thereby enabling increased employment and bolstering the long-term viability of the combined provider." The Order likewise stated that "ongoing repositioning by other service providers and the continued introduction of new service plan offerings in the mobile wireless marketplace would ensure continued access to affordable service options."

In sum, the FCC and its bureaus' Order approving T-Mobile/MetroPCS deserve credit for prompt decision-making, emphasis on LTE deployment benefits, avoidance of static market myopia, and rejection of conditions based on ad hoc rationales or otherwise extraneous to the merger. As a matter of administrative law, decisions by subordinate agency bodies like the Wireless Telecommunications and International Bureaus are not precedents that bind future FCC actions or authority. But for future merger reviews the FCC will hopefully follow the example it set for itself in the T-Mobile/MetroPCS proceeding.