Focus on fixed wireless as broadband market shifts

"MediaTalk" is a podcast hosted by S&P Global Market Intelligence wherein the news and research staff take a deep dive into issues facing the evolving media landscape. The weekly podcast includes conversations with internal thought leaders alongside interviews with industry insiders and analysts.

Subscribe on Apple Podcasts and Spotify.

In this episode, "MediaTalk" host Mike Reynolds sits down again with S&P Global Market Intelligence Kagan analyst John Fletcher, who specializes in multichannel and broadband. With funding for a key federal subsidy having ended, cable operators and telcos both reported heavy fixed broadband subscriber losses in the second quarter, with further declines expected in the third quarter. At the same time, fixed wireless continues to drive subscriber growth for the broadband industry as a whole, especially when combined with subscriber additions from newer satellite services like Starlink. Will fixed wireless continue to gain share? What markets are seeing the most fixed wireless growth? And what do fixed wireless customers have to say about their experience with the service? Mike and John dial into these questions and more.

Featured experts:

John Fletcher, research analyst at S&P Global Market Intelligence Kagan.

Explore our full library of S&P Global Market Intelligence podcasts.

An edited transcript follows.

Mike Reynolds: Hi, I'm Mike Reynolds, a senior reporter covering the media industry with S&P Global Market Intelligence tech, media, and telecom news team. Welcome to "MediaTalk," a podcast hosted by S&P Global, where the news and research staff explore issues in the ever-evolving media landscape. Today, I'm joined by S&P Global Market Intelligence Kagan senior research analyst John Fletcher, who specializes in the multichannel distribution realm. How are you doing today, John?

John Fletcher: Hey Mike, thanks for having me back. I'm doing okay. I could complain, but I'm not going to. How are you doing?

Reynolds: I'm doing okay. John is going to assess the broadband business in the second quarter, which notched growth overall but reflected mixed results by its four segments. He's also going to talk about the addition of fixed wireless subscriber information to Kagan's regional MediaCensus data set. There's a lot of information there. John, can you give us an overall read on broadband's second-quarter performance?

Fletcher: Yeah. In a word, it was a bummer, but it was not unexpected. I think the key here is that the Affordable Connectivity Program expired in May, and that was a subsidy that Congress did not renew for broadband. It basically gave people $30 a month to pay for broadband. It didn't come back, but it's a one-time event. All in, the good news is broadband overall still grew total households thanks to strong growth in fixed wireless and satellite.

Reynolds: All right. The ACP, the Affordable Connectivity Program, was most felt by the cable broadband players — Comcast Corp., Charter Communications Inc. and Altice USA Inc. Why? What kind of damage did we see to their subscriber rolls?

Fletcher: Yeah. All in, the cable broadband space lost about 400,000 subscribers, which is an all-time high, unfortunately. But like I said, it was an anomaly with the loss of ACP. Telcos lost about 150,000, so all in, about half a million shrunk. But again, fixed wireless and satellite were strong enough to keep growing the entire business northward from there.

Reynolds: And the ACP impact is also expected to have an impact, maybe even more so, on the third quarter?

Fletcher: Yeah, it's Charter, Comcast, and I think Verizon Communications Inc. — they mentioned on earnings calls that the third quarter is going to be even worse for customers logging off due to the lack of ACP.

Reynolds: Anything the cable guys are doing to maybe stanch a bit of this broadband bleeding at this point?

Fletcher: It's a great question. These are operators; they deal with churn in a subscription business. So they've been dealing with churn their entire lives. I think the two things that pop up are they've added some lower-tier pricing for slower broadband speeds to keep some of these customers from leaving, and they're also, in terms of Comcast, Charter, and Altice, they're bundling some of their mobile phone services to try to keep these customers from leaving as well. One of them, I think Charter's, offering a free year of mobile service if they don't churn off.

Reynolds: That's a nice inducement. Just for the record, John, overall, despite the losses here, cable is by far the broadband leader by a number of lengths?

Fletcher: Yeah. I'm thinking maybe ACP has an impact of about 1 million subscription losses this year, so say they lose that. Cable itself would still own over 60% of the US broadband space. It's definitely not a good time, but it's also not catastrophic.

Reynolds: I gotcha. You'd also mentioned that ACP also impacted telcos' wireline broadband offerings.

Fletcher: Yeah. The big two, AT&T Inc. and Verizon, both noted some challenges related to ACP. And then the overall space in general is also impacted by lower move activity, which, with high interest rates, people aren't moving from house to house as much. So, that's impacted as well. And while this is happening, DSL still continues to shrink, but fiber is still being built out. They're not slowing down their fiber deployments because of this.

Reynolds: It was a good quarter for the satellite players overall. Space Exploration Technologies Corp.'s Starlink, and on the other side, maybe some mixed results for EchoStar Corp.'s HughesNet.

Fletcher: Yeah, there are two growth stories in broadband right now. One of them is Starlink. They're doing really well in the US with growth right now. Between Starlink and fixed wireless, the whole space, the tide is still rising for everyone, despite the recent challenges that they're having.

Reynolds: All right. And HughesNet, I think, improved gross ads? But they've been on a downspin for a while.

Fletcher: Yeah. The legacy satellite providers have satellites that are more like tens of thousands of miles up in the sky versus hundreds of miles up in the sky with the low earth orbit satellites that Starlink and some of these other newer companies are using. The latency and the speeds just aren't there, and they're having a hard time keeping up with the changes in the marketplace for sure.

Reynolds: I gotcha. That brings us to fixed wireless, which has been the growth technology for the sector. The second quarter reached new heights.

Fletcher: Keeps going up. I'm always watching things flatline or decline in multichannel and broadband, but I get excited to do fixed wireless because it's still going up and to the right. It's very nice.

Reynolds: And again, in this sense, the phone companies are in there, right? This is Verizon, AT&T and T-Mobile US Inc.

Fletcher: Yes. So, Verizon and T-Mobile launched in 2020. In 2022, they gave a growth forecast for fixed wireless. Verizon said it would have about 4.5 million by the end of next year. They're already at 4 million right now. And T-Mobile also forecast in '22 they were going to hit about 7.5 million subscribers at the end of '25. They ended last quarter with about 5.6 million. Both of their forecasts they gave two years ago, which everyone was skeptical about, to be honest, but they're going to probably hit or surpass them. Those are the two big horses in the race. AT&T came out guns blazing about three or four quarters ago with their AT&T Internet Air program, which is their version of fixed wireless.

Reynolds: But they've slowed down a bit?

Fletcher: No, they're still growing. It's just coming from a smaller base. AT&T has had a 4G fixed wireless business forever. But now they're really pushing and marketing their fixed wireless version. T-Mobile and Verizon were doing this four or five years ago, and AT&T just started about a year ago. So, they're showing the strongest growth of all the players right now.

Reynolds: John, Kagan did a recent survey on satisfaction levels, and T-Mobile was setting the pace here, right?

Fletcher: Yeah. Fixed wireless. People love fixed wireless. And as someone who's moved out onto the other side of the digital divide, I see why, because when there's only one or two games in town and you have one of them, you're pretty happy with it just to have it at all. But I think another thing is a lot of these smaller fixed wireless operators, they're very regional-focused. So when you call up, there's not a call center somewhere to pick up the phone. It's a person who lives within a few miles of you. So you have really satisfied customers from these smaller fixed wireless operators. And then for the bigger operators, you also have just people happy to have broadband where they don't have fiber or DSL options at all.

Reynolds: In terms of, I'm going to keep things going in the fixed wireless way now, and I think it speaks to what you just mentioned about the local operators. Kagan MediaCensus broadband datasets now include information about fixed wireless broadband customers — a lot of information, as I mentioned. John, can you talk about this in terms of what kind of information is now available about fixed wireless or broadband subscribers?

Fletcher: Yeah. So I'm in charge of the national numbers, which, by the way, hit about almost 13 million for fixed wireless in June. Our MediaCensus team looks at broadband data that I look at nationally, but they look at it on the Census-block level, which is to think of where you live and think of the three blocks near you. That's how granular this data goes.

Reynolds: Really? Okay.

Fletcher: Yes, we can give you estimates of who's using broadband in that area. And then we can go to ZIP code, go to county, go to DMA®, go to state. And I've been working on this team for over a year to get this data to that state. We just launched it, I think, about a month ago. So it's been a process in the works. This is our first stab at it, and we're still tweaking and improving it as we go. But we really hope it's going to help our clients figure out the competitive landscape on a more local scale.

Reynolds: And this, John, is on a quarterly basis going back a decade now, right? To 2014?

Fletcher: That's right. The MediaCensus team wanted to go all the way back to 2014, and going forward, every quarter we're going to have updates to this data set.

Reynolds: As you guys put this all together over this past year, now that it's here, a couple of things that may have surprised you in terms of the information that's available?

Fletcher: Yeah, fixed wireless is very rural-heavy, and that didn't surprise us. That's where its history is. That's where it was created itself, in rural areas where the tier 1 operators had never bothered to reach because the return on investment wasn't there. But one thing we're noticing is that it doesn't mean that there aren't fixed wireless customers in the suburbs or urban areas as well. They're having some progress in those areas as well, which is a little bit of a surprise. But for B2B fixed wireless, say you and I own a local Target or a Walmart, and we want our store to have broadband. We could have fixed broadband, but they're going to have to get a permit to dig up the parking lot and install it. It might take weeks. It's going to be pretty expensive. Or we could put an antenna on top of our building. We can have broadband using fixed wireless in a day or two. It's a lot cheaper and a lot quicker. So, there are interesting examples where fixed wireless is coming in and getting growth in areas and ways that weren't so obvious a few years ago.

Reynolds: As you mentioned, a lot of small operators in the physically larger states, Texas and California, I guess they have a lot more operators there than some of the smaller places like Rhode Island and Connecticut.

Fletcher: Yeah, I was looking at the data, and if you look at New York state, for example, it is the fourth-largest state by population of all 50 states. But that state ranks 36 by operating fixed wireless providers. I think a lot of the reason is because just about half the population lives in New York City.

Reynolds: Sure.

Fletcher: There are just fiber lines in every wall and DSL lines everywhere there. That was interesting to me. You have more geographically spread-out states having a lot more fixed wireless operators than areas where populations are dense, like in the city, for example.

Reynolds: Yeah, I was surprised. I saw some of the rankings, and our neighboring state of New Jersey, I think, only has six operators, even though I think it's 11th on the population scale, only seven behind us here in New York.

Fletcher: Yeah, the geographically smaller states we noticed just had fewer operators. Where population density is higher, the return on investment to build out fiber and cable lines makes a lot more sense. So they have more options for broadband in those areas.

Reynolds: And I guess this is probably not a surprise. Alaska, obviously the largest state by geography, not so many people live up there, and fixed wireless operators are few and far between.

Fletcher: Yeah, it's an anomaly of a state. It's so huge, and the mountains are so large, with a lot of trees and a lot of challenges with line of sight in a market like that for sure.

Reynolds: Anything else here in terms of the data that I haven't touched on that you found interesting?

Fletcher: No, I think we covered it all. It was something we were working on for a while to get this granular of a data set for our clients, and we're very excited to have it. I think the plan is to add Starlink in the next couple of years here. It's another thing we're working on.

Reynolds: I gotcha. And are you going under the sea, John? We have breakdowns for Atlantis or maybe the moon 20 years, 30 years from now?

Fletcher: Sure. If people start asking for it, we'll add it to our queue.

Reynolds: All right. That concludes this episode of "MediaTalk." I just wanted to thank John for spending a lot of time talking about the broadband industry's second-quarter performance and Kagan's new enhanced data collection in this space. Thank you, John.

Fletcher: My pleasure. Thank you, Mike.

Reynolds: This is Mike Reynolds, and thanks to all of you for listening. We'll catch up soon on the next edition of "MediaTalk."

Gain access to our full news & research coverage and the industry-specific data that informs our insights

S&P Global Commodity Insights produces content for distribution on S&P Capital IQThis article was published by S&P Global Market Intelligence and not by S&P Global Ratings, which is a separately managed division of S&P Global.

This article was published by S&P Global Market Intelligence and not by S&P Global Ratings, which is a separately managed division of S&P Global.

451 Research is a technology research group within S&P Global Market Intelligence. For more about the group, please refer to the 451 Research overview and contact page.