Cable operators struggled with subscriber losses and even fiber gains slipped in Q4 2023
Fierce FWA competition has been hampering cable especially
AT&T's launch of Internet Air could prolong the hit cable companies are taking from FWA
First, cable and fiber companies dismissed fixed wireless access (FWA) completely. Then, they passed it off as a temporary fad. Subscribers, they said, will return to their wireline providers when wireless bandwidth inevitably runs out. While that may still prove true in the long run, the team at New Street Research (NSR) indicated things aren’t exactly looking pretty in the short term.
Just to recap, Charter Communications and Comcast, the big two cable players in the U.S. (yes, yes, we know they have ‘fiber deep’ networks. Don’t @ us), lost 61,000 and 34,000 broadband subscribers respectively in Q4 2023. For all of 2023, Comcast lost 66,000 broadband subscribers while Charter eked out a gain of 155,000 customers. Meanwhile, CableOne ended the year with 960,500 residential data subscribers, down from 963,700 at the end of 2022.
During earnings, Charter CEO Chris Winfrey admitted broadband growth in its existing footprint in particular (i.e. where it mostly has cable rather than fiber assets) “has been challenging, driven by admittedly more persistent competition from fixed wireless and similar levels of wireline overbuild activity.” That included both FWA footprint expansion and aggressive marketing campaigns, he said.
New Street’s team led by Jonathan Chaplin noted that overall broadband industry growth rates have returned to pre-pandemic levels, with year on year growth rates hovering just a bit under 3%.
But it’s not all good news. Cable’s losses were worse than a year ago and fiber’s gains slipped by some 30,000 year on year.
“The bad news for Cable: there is no reason to assume that market growth improves from here. The relief, when it eventually comes, will come from FWA adds receding,” they added.
The firm originally predicted fixed wireless adds could start dipping at the end of 2023 or in early 2024. But that was before pro-fiber juggernaut AT&T jumped on the FWA bandwagon with Internet Air in Q3 2023.
Now, “we may not see a slowing in aggregate FWA adds, that is sufficient to drive a recovery in Cable adds, until much later in the year or even 2025,” the analysts wrote. Best case scenario is that FWA subscriber gains inclusive of AT&T stabilize in the first half of this year before starting to decline in late 2024.
AT&T advances
Until now, the FWA market has been dominated by T-Mobile and Verizon, with the former adding a total of 541,000 FWA subs in Q4 and the latter 375,000, according to NSR’s count in a separate note. Both operators appear to have already passed peak subscriber adds, having launched their services in 2020 and 2021, respectively.
AT&T ended 2023 with 93,000 Internet Air subs after launching in the back half of the year. NSR said based on early results, AT&T’s FWA trajectory looks a lot like T-Mobile’s.
While AT&T executives haven’t given much insight into the growth they expect, NSR predicted the company will add around 180,000 FWA subs per quarter over the next few quarters, with a peak expected to come in six to eight quarters.
This might seem low compared to T-Mobile’s blockbuster figures, but NSR explained. “first, AT&T has less excess capacity than T-Mobile and Verizon; second, they have always been skeptical of the FWA strategies of their peers. They will use FWA as a copper replacement in markets where they want to decommission the copper.”
Indeed, AT&T CEO John Stankey said during earnings the operator plans to use Internet Air “very, very actively in our transition away from legacy assets as we begin to shutter copper footprint.”
“I don't think you're ever going to see a scale of the kind of monthly numbers and quarterly numbers you see coming from some of our competitors, but it's a great tool,” he added.
Given AT&T has roughly 2 million miles of copper still in its network that it is aggressively trying to dismantle, FWA seems a sizable opportunity for the operator.
The outage
One thing that’s not factored into NSR’s forecast is AT&T’s hiccup, a cellular outage which left tens of thousands of customers in the U.S. and Canada stuck without service. It’s not entirely clear what caused the disruption, but given Internet Air runs on AT&T’s cellular network, it’s worth considering how it will play into AT&T’s efforts.
NSR’s Blair Levin noted that while the outage could trigger a reaction from state or federal officials, he ultimately concluded “we think the brand damage to [AT&T] will end up being more costly than anything the government chooses to do.”
Whether that carries over to Internet Air or just hits its wireless division remains to be seen. We’ll have an eye on things.