One size, we know both from lore and from experience, doesn’t fit all. The same is true for access technologies. We’re reading stories about the rise of fiber, like this one that quotes Consolidated Communications saying “There are some mobile or temporary use cases where FWA is best, he says, but for the majority of customers, fiber is more cost-effective for Consolidated to deploy.” Just how true is that across an entire national service geography?
There are also stories like this one, saying that broadband in the US is worse, and more expensive, than it is in other countries. Many have a problem understanding why that would be the case, given the level of tech commitment in the US. Many wonder why we have, as the story suggests, 7% of the population who don’t have access to reliable broadband. I think the two questions I’ve asked here have a related answer.
Suppose we take a mile of fiber and air-drop it arbitrarily on some occupied landscape. In an urban area, that fiber could well pass hundreds of thousands of potential customers, and in a rural area it might miss everyone. The return on infrastructure investment would be high in the first case, and zero in the second. That alone says that there is no single answer to the question “What’s the best broadband technology to empower a given country.”
I’ve used “demand density” for decades to measure just how profitable broadband access would be, overall, for a country. Demand density explains how Singapore or Korea have such great, and inexpensive, broadband, compared to countries like the US, Canada, and Australia. Among a dozen sample countries, demand densities vary by a factor of 35 times. That mile of access fiber passes a lot more people in come countries than another! But most countries have multiple access providers, and many of those serve limited geographies rather than the country overall. What does breaking down a country do to our calculations?
Obviously, you could calculate demand density for any geography where the underlying data was available, which includes things like GDP, occupied area size, and road miles. I’ve done that for the US market, for each state and for AT&T and Verizon’s territories. AT&T serves a more rural territory, and that shows in their demand density, which is a seventh that of Verizon. That explains why Verizon has been pretty aggressive in Fios deployment, relative to its main competitor. On a state basis, things are even more dramatic; the highest state has almost 250 times the demand density of the lowest.
Returning to our fiber air-drop, we can see that for any given country, and any given operator territory within it, there would be a huge variation in demand density depending on where our fiber landed. That variation would be reflected in the business case for fiber access, or any other access technology. The more the variation, the less likely that something like universal fiber would be the best choice for the operator.
Another interesting point is that if you dig down even deeper, you find that almost every country has small areas, postal-zone-size, that have very high demand densities. Among industrial economies, the demand density of these high-density areas are fairly consistent and all are sufficient to justify fiber access. Similarly, they all have low-density areas where anything other than an RF technology is unlikely to be a practical broadband option.
This is important because how customers are distributed across the spectrum of demand density within an operator geography sets some policy constraints on the operators’ broadband planning. Sometimes regulators impose a mandate for consistent broadband, and sometimes it’s a matter of customer response. Would you want to offer super-fast, inexpensive, broadband to a fifth of your market, with the rest having substandard service that might actually cost more? Digital divides are more than abstract when your own deployment plans create and sustain them.
When we hear stories like the one I cited, it’s easy to extrapolate the fiber success to an operator’s entire geography, or even to a whole country (like the US, in this case). That’s a big mistake. When we consider issues like public policy relating to universal broadband at a given minimum speed or with a specific technology, that same kind of extension is another big mistake. One operator told me that they have customers whose 1 GB Internet connection would require running five miles or more of fiber to those customers alone. Will taxpayers consent to subsidize that kind of cost?
If we set the overall US demand density as 1.0, then my modeling suggests that where demand densities are roughly 5 or 6, you can make fiber/PON work on a decent scale. There are 12 states where that’s true. If we’re talking about 5G/FTTN hybrid broadband, a demand density greater than 2 would work, and roughly half the states could make that work on a large scale. With cellular broadband using mobile 5G technology, 47 states could provide decent service to a large percentage of the population.
These numbers show us a lot about what’s happened, and what’s happening, in the broadband access space. Verizon jumped ahead in fiber deployment because their geography generated a higher ROI. Countries like Japan, Korea, and much of Europe are “ahead” of the US in broadband for the same reason. Google targeted only select areas with their fiber, because those areas had decent demand density and the operator incumbent(s) in the geography, serving a larger area that included Google’s target, couldn’t do fiber through enough of that larger area to make it a wise decision.
Even municipal broadband and municipal partnerships with operators to deploy fiber can be explained here. A city has little pressure to deny its residents and businesses fiber broadband because they can’t provide that same service to other cities. Fiber broadband to high-demand-density pockets is likely to come about increasingly because technology improvements make cherry-picking high-demand-density areas profitable, as long as it doesn’t generate backlash from customers of the broadband provider who live outside those areas. And, of course, eventually our big telcos and cable companies are likely to see that new source of competition and take the risk of creating have-not customer angst.
Then there’s the competitive impact of 5G in any form. T-Mobile has just cut the price of its 5G-based wireline broadband alternative by about a quarter, and mobile operators could in theory use 5G to compete with the fixed broadband offerings of other operators. Wireless doesn’t require you trench vast quantities of fiber or cable in another territory; all you need is some nodes and/or towers, which of course mobile operators already have.
Consolidated may be right that for most of their customers, fiber is best, but that’s not the case for most customers overall. Fiber will be preferred where demand density is high, but it’s likely that 5G will be more transformational in fixed broadband applications because it’s more versatile across a wide range of demand densities. Operators with limited geographies may be able to deploy fiber to nearly all their customers, and niche fiber plays will surely spring up where densities are high, but universal broadband needs a solution we can apply broadly, and all the wishful thinking and hopeful publicity in the world isn’t going to turn fiber into that solution.