T-Mobile’s FWA taps unused mobile capacity, which has its limits

Both Verizon and T-Mobile have been making great progress with their home broadband offerings based on fixed wireless access (FWA) technology. The companies plan to leverage the unused capacity of their mobile networks to steal market share from cable and DSL companies.

When these carriers first started touting their FWA offerings it was largely positioned as a way to reach underserved areas. But the opportunity seems to have expanded.

Perhaps a statement by T-Mobile CEO Mike Sievert sums it up best. “A lot of our customers on home broadband are coming in suburban and even urban areas from cable, which is fascinating,” Sievert said during recent investor conference. “It’s not all just greenfield stuff where nobody has ever had an option before.”

Creating a new revenue stream from unused capacity in the network is a bit like finding unexpected money in your pocket.

In December the analysts at MoffettNathanson spoke with some T-Mobile executives who talked about their strategy of tapping unused capacity.

They explained that T-Mobile has identified a pool of about 30 million homes in the U.S. that are good potential candidates for FWA. These “addressable” homes are in areas where there’s excess mobile network capacity and good signal quality.

Within these addressable areas, T-Mobile places a cap on the number of FWA customers it will accommodate. Once it's sold FWA to the prescribed number of customers in a given area, that sector will then be closed to new customers until someone churns off.

“As sectors ‘fill up,’ the remaining demand will have to be matched to a smaller and smaller remaining ‘available’ footprint,'” wrote MoffettNathanson. “Growth will get awfully hard to come by after a time.”

The carriers will want to be very careful about not affecting the performance of the network for their mobile subscribers, which account for the lion’s share of their revenues and which provide much higher margins.

“No operator wants to risk their high-value mobile service experience for the benefit of a few incremental low-value fixed subscriptions,” wrote Moffett. The analyst firm says the revenue per bit from a mobile customer is 30x to 50x higher than that for fixed.

T-Mobile has guided for at least 7 million FWA subscribers by the end of 2025.

The Moffett analysts crunched a bunch of numbers related to projected data consumption, and they found that T-Mobile’s guidance for 7 million fixed broadband customers by 2025 would be the equivalent of adding 280 million new mobile customers. They questioned whether the massive increase in network demand along with the relatively paltry margins compared to mobile subscriptions was really worth all the hoopla around FWA.

But the analysts at LightShed counter: “Some might argue that data hungry home broadband applications will quickly use up the expensive spectrum resources of wireless operators. Maybe. But define quickly. 2 years? 4 years? And after achieving what share of the home broadband market?”

Both T-Mobile and Verizon have gone to great expense to improve their spectrum portfolios. T-Mobile purchased Sprint in a $26 billion deal, largely based on its desire to get Sprint’s 2.5 GHz spectrum. And Verizon spent $45 billion in 2021 to buy C-band spectrum.

“The management teams of wireless operators are on the hot seat to deliver on revenue growth expectations,” stated LightShed. “There will be a strong incentive to push wireless home subscriber growth in the near-term and worry about the network consequences later.”

FWA growth

By December 2021 T-Mobile had surpassed its year-end goal of reaching 500,000 FWA subscribers.

And at the end of the third quarter 2021, Verizon disclosed that it had a total of 150,000 FWA customers. Its 4G and 5G FWA passes about 15 million homes.

“We forecast that Verizon and T-Mobile will add 1.8 million wireless home broadband customers in 2022, more than doubling the 750,000 added in 2021,” wrote LightShed.

That isn’t too shabby.

“To put that growth in context, Comcast, Charter and Altice combined added 2.4 million broadband subscribers in 2021,” added LightShed. "Investors expect these three cable companies to add more than 2 million broadband subs in 2022, but even that reduced level of growth from recent years may prove to be too aggressive.”