Despite Americans using significantly more data over fixed networks than mobile, a new Mobile Experts report quantifies how consumers put a premium on the value they ascribe to mobile service.
While not a new notion, the report from Mobile Experts on the state of Fixed Mobile Convergence in the U.S. market puts figures to the idea of this so-called “mobility premium” and forecasts the trend of fixed mobile convergence.
It found that the average U.S. household consumes over 11 times more data over fixed networks versus mobile access. However, when the study compared service revenue generated from actual GB delivered, it found that consumers place roughly 20x more value on mobile broadband than fixed in terms of what they’re willing to pay for monthly plans. For a more detailed break down, see the report.
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Mobile Experts Principal Analyst Kyung Mun said that even though most consumers spend the majority of time indoors in a stationary environment, the data captures how people are willing to spend more on the idea of being able to consume data while on the go.
“It’s kind of like an insurance plan,” he told Fierce. When users are at home connectivity is almost considered a given, but when out and about consumers want to ensure they’re not left without it. For example, if they were to get in an accident, Mun added.
Of course, mobile usage continues to increase as well. Ericsson’s latest Mobility Report found that in Q3 2021 alone, "mobile data traffic was more than all mobile traffic ever generated up until the end of 2016.” By the end of 2027, the forecast estimates total mobile network data traffic is likely to reach 370 EB.
Mun noted operators spend billions of dollars in capex to keep their networks up to snuff to handle data demands, as Mobile Experts detailed the competitive dynamics between fixed broadband and mobile operators as well as the trend of fixed mobile convergence (FMC).
Cable operators like Comcast and Charter hold the dominant share of fixed broadband connections, but they’re looking to expand in mobile with respective MVNO offerings. In Q3, cable MVNOs Altice USA, Charter and Comcast collectively gained 530,00 subscribers, ending the quarter with a total of 7.03 million mobile customers.
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“They’re slowly growing that base,” Mun said. “So they’re in essence, one can postulate that they’re setting up their ‘beachhead’ if you will on the wireless side.”
Mobile operators, meanwhile, are building out 5G networks and some like Verizon and T-Mobile are pushing more heavily into the fixed wireless space. As the Mobile Experts chart below shows, the leading carriers and cable operators dominate the percentage share of fixed and mobile broadband connections in the U.S. in their respective sectors.
“At this point, the dominant Fixed and Mobile operators have established ‘beach heads’ in each other’s ‘turfs’,” Mun said. “The fixed-mobile convergence (FMC) intensity will likely grow as each side gain[s] a more significant share over time.”
5G core underpins FMC
As for fixed mobile convergence, a concept that Mun said has been around for decades, Mobile Experts expects the trend of deeper integration of 5G network elements to grow gradually over the next few years, particularly leveraging 5G core networks as the so-called anchor.
In the LTE days, Mun noted the IMS network - which can be thought of as the application layer network - was used to tie mobile and fixed networks together. Now in the days of 5G, he said major global operators are leading a push to anchor the two access networks via the 5G core.
“5G core in the long-term becomes the anchor point to manage both fixed network services and mobile network services,” he commented.
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“We believe it’s a very long game between the fixed operators and the mobile operators, but at some point in the future we expect there will be a convergence,” Mun said, noting either from an M&A perspective or for those operators that have both fixed and mobile networks to converge the elements.
Right now, Verizon is using their 5G network both for mobile and to extend fixed wireless access (FWA) service. It disclosed adding 55,00 FWA customers in Q3 for a total of 150,000. Earlier this week, Verizon expanded its 5G FWA service to homes and businesses in Dayton, Ohio and Jacksonville, Florida.
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While Mun couldn’t speak to the carrier specifically, he said down the line one could imagine that the operator’s 5G core could become the control point even for its fixed Fios network.
Still, he believes the concept of fixed mobile convergence “is probably more applicable for AT&T at this point.”
That’s because AT&T has a bigger fixed network footprint and has been vocal about plans to expand their fiber footprint. AT&T expects to increase the number of homes passed with fiber to 16.5 million by the end of the year and currently has 5.7 million fiber customers.
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Mun said traditional telcos, such as AT&T, Lumen (formerly CenturyLink) and Frontier, aren’t as competitive as cable on the fixed side because they have networks utilizing legacy copper and DSL. But again, each have been making public statements about concerted fiber investments over the next few years.
Advantage for cable too
Even though mobile carriers are already building out massive 5G core networks, Mun believes it’s a trend that’s just as applicable for cable operators.
“Even for their MVNO business, it’s more advantageous for [cable MVNOs] to have their own 5G core over the long-term,” he said. “Because if you have your own 5G core you have a little more direct control over how you provision and direct traffic for their mobile subscribers, even though their base is very small today.”
It’s a long-term trend though, with Mun citing a 5 to 10-year timeline. The reason isn’t technology, which he categorized as a small part of the conversation, since open RAN, software-defined networking and virtualization trends help facilitate convergence by providing the opportunity to reconfigure when network elements are disaggregated and reconstituted, Mun said. Instead, he sees the timeframe as mostly driven by competitive dynamics and the regulatory environment, noting the current administration likely wouldn’t favor major market consolidation moves.
However, over time, as mobile carriers make more inroads in the fixed wireless market and cable operators introduce more disruptive pricing on the wireless side “that dynamic could certainly change,” Mun added.