- Even though there's a lot of excitement about BEAD now, how long will it last?
- Broadband subscriber growth in the U.S. is roughly equal to the number of new households per year
- Analyst Doug Dawson says that's the sign of a mature industry
There’s a huge amount of energy in the fiber broadband ecosystem right now driven largely by the Broadband Equity, Access & Deployment (BEAD) program. But as someone who’s covered telecommunications for three decades, I suspect that we’re nearing the peak of the hype cycle for broadband.
BEAD is set to infuse the U.S. broadband market with $42.5 billion in federal funds, and private investments are expected to more than double that. The money will start flowing from state broadband treasure-chests later this year, and 2025 will see a lot of BEAD awards and real projects breaking ground.
In a couple weeks, I'm heading to the Fiber Broadband Association (FBA) annual conference in Nashville, Tenn., which FBA is touting as its biggest-ever event. The fiber broadband vendor ecosystem is also robust, evidenced by the number of sponsors at this and similar events. And while some vendors have experienced a lull while we wait for BEAD projects to begin, everyone anticipates good revenues for the next few years as the industry embarks on an infrastructure build to close the digital divide – the likes of which we haven’t seen since the Rural Electrification Act of 1936.
Booms can be followed by busts
Over my career covering telecommunications, I’ve seen the rise and fall of several cycles, not the least of which was the dotcom bust of 2000. I started my career at a magazine called Cable World, where I covered programming of all the cable channels. In the 90s, cable channels were an exciting, new thing. Remember Bruce Springsteen’s song “57 Channels and Nothin On”? That was a time when 57 channels seemed like an enormous number.
But then the internet arrived and ushered in unlimited content. Eventually, cable became a mature industry whose heyday is long gone.
A few things have recently prompted me to think about this whole boom-bust thing. First, we’ve come off the year 2023, which was a rough one for the wireless industry in much of the Western world. It was the year when the 5G hype cycle collapsed into the trough of disillusionment. The big wireless carriers cut back on their capital expenditures and forecast lower revenues for the future, causing the finances of vendors Ericsson and Nokia to tank.
Secondly, I recently wrote an article about some futurists who speculate that the next generation of consumers won’t pay for home broadband when they can get Wi-Fi for free in so many places and watch endless video content on their mobile phones.
I don't totally agree with the premise of the futurists, and there were a lot of telecom industry folks on LinkedIn who scoffed at the idea and called it “nonsense.” But even if people still continue to pay for broadband, it could become more like a utility. For instance, we still pay for electricity, but the hype-cycle over electricity is long gone.
The third reason I started thinking about the potential bust of the broadband marketplace was a blog by long-time telecom analyst Doug Dawson.
Dawson noted that we’re gaining about one million new broadband customers per year in the U.S., which is roughly equal to the number of new households expected to be created during the year. “This is down from the two to three million new broadband subscribers added every year since 2017,” he wrote.
Fierce Network follows the earnings reports of the public fixed broadband providers. Both big cable companies Charter and Comcast have reported broadband subscriber losses for several quarters. We’re definitely seeing the decline of cable hybrid fiber coax (HFC) broadband. That’s clear.
However, companies that are deploying fiber-to-the-home (FTTH) are faring much better. For its first quarter 2024, Verizon reported total broadband net additions of 389,000 composed of 354,000 fixed wireless additions, 53,000 Fios net adds and a decrease of 18,000 DSL lines.
And for its Q1 2024, AT&T reported 252,000 fiber additions. AT&T CFO Pascal Desroches said then, “This is the 17th consecutive quarter with AT&T fiber net adds above 200,000."
But Dawson cautioned, “We are clearly approaching the point where households that can afford to buy home broadband probably have it – and that is the definition of a mature market.”
So, are we at the beginning of the end for broadband in the U.S.?
It's anyone's guess. There’s a lot of exciting activity around fiber broadband right now, driven by the BEAD program. But let’s face it: this program is designed to finally close the digital divide and reach the remaining locations in the country that aren’t yet served with speeds of at least 100/20 Mbps.
Once everyone has access to decent broadband, it’s just a matter of maintaining that infrastructure, much like the electric grid is maintained so that we can continue to receive what we take for granted.
But, one thing I’ve noticed over my years covering telecommunications is that the end of a hype cycle tends to come as a surprise. In this case, I wouldn’t be surprised if in a couple of years the excitement about broadband has waned. On the bright side, there’s always something new around the corner.
Op-eds from industry experts, analysts or our editorial staff are opinion pieces that do not represent the opinions of Fierce Network.